General Mills : Q2 Press Release(opens in new window)

FOR IMMEDIATE RELEASE

December 21, 2021

GENERAL MILLS REPORTS FISCAL 2022 SECOND-QUARTER RESULTS

• Net sales increased 6 percent to $5.0 billion; organic net sales1 were up 5 percent
• Operating profit declined 13 percent to $800 million; constant-currency adjusted operating profit was down 6 percent, reflecting significant input cost inflation and elevated costs related to supply chain disruptions
• Diluted earnings per share (EPS) totaled $0.97, down 13 percent from the prior year; adjusted diluted EPS of $0.99 was down 7 percent in constant currency
• Company updates full-year fiscal 2022 outlook to reflect stronger net sales growth, higher costs, and the impact of the European Yoplait divestiture

• Please see Note 7 to the Consolidated Financial Statements below for reconciliation of this and other non-GAAP measures used in this release.

MINNEAPOLIS, Minn. - December 21, 2021 - General Mills (NYSE: GIS) today reported results for the second quarter ended November 28, 2021.

"We continued to compete effectively and execute well this quarter in a challenging operating environment," said General Mills Chairman and Chief Executive Officer Jeff Harmening. "In the face of an unprecedented combination of input cost inflation and supply chain disruptions, we're moving quickly to keep our trusted brands on store shelves for consumers while driving net price realization to protect our bottom line. As a result, we now expect to meet or exceed each of our financial targets for the year. We also advanced our portfolio reshaping efforts in the quarter, and we're more confident than ever that General Mills will emerge from the pandemic a stronger company better geared to generate profitable growth in line with our Accelerate strategy."

General Mills is executing its Accelerate strategy to drive sustainable, profitable growth and top-tier shareholder returns over the long term. The strategy focuses on four pillars to create competitive advantages and win: boldly building brands, relentlessly innovating, unleashing scale, and being a force for good. The company is prioritizing its core markets, global platforms, and local gem brands that have the best prospects for profitable growth and is committed to

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reshaping its portfolio with strategic acquisitions and divestitures, including its recent pet treats acquisition and European

Yoplait divestiture, to further enhance its growth profile.

General Mills expects changes in consumer behaviors driven by the COVID-19 pandemic will result in ongoing

elevated consumer demand for food at home, relative to pre-pandemic levels. These changes include more time spent

working from home and increased consumer appreciation for cooking and baking. In addition, an increase in the pet

population and further humanization and premiumization of pet food during the pandemic are expected to create tailwinds

for the pet food category. The company plans to capitalize on these opportunities, addressing evolving consumer needs

through its leading brands, innovation, and advantaged capabilities to generate profitable growth.

Second Quarter Results Summary

• Net sales increased 6 percent to $5.0 billion, including 1 point of favorable foreign currency exchange. Organic net sales increased 5 percent, reflecting 5 points of positive organic net price realization and mix.
• Gross margin was down 400 basis points to 32.5 percent of net sales, driven by higher input costs and unfavorable mark-to-market effects, partially offset by favorable net price realization and mix. Adjusted gross margin was down 330 basis points to 32.2 percent of net sales, driven by input cost inflation and higher other cost of goods sold, including elevated costs related to supply chain disruptions, partially offset by favorable net price realization and mix and Holistic Margin Management (HMM) cost savings.
• Operating profit of $800 million was down 13 percent, driven primarily by lower gross profit dollars and higher transaction costs and acquisition integration costs. Operating profit margin of 15.9 percent was down 350 basis points. Constant-currency adjusted operating profit declined 6 percent, driven by lower adjusted gross profit dollars, partially offset by lower adjusted selling, general, and administrative (SG&A) expenses. Adjusted operating profit margin decreased 200 basis points to 16.3 percent.
• Net earnings attributable to General Mills was down 13 percent to $597 million and diluted EPS was down 13 percent to $0.97, primarily reflecting lower operating profit. Adjusted diluted EPS of $0.99 was down 7 percent in constant currency, driven primarily by lower adjusted operating profit.
• On a 2-yearcompound growth basis, relative to pre-pandemic levels, second-quarter results included: net sales and organic net sales up 6 percent; operating profit down 1 percent and adjusted operating profit flat in constant currency; and diluted EPS and constant-currency adjusted diluted EPS each up 1 percent.

Six Month Results Summary

• Net sales increased 5 percent to $9.6 billion, including 1 point of favorable foreign currency exchange. Organic net sales increased 4 percent, reflecting 4 points of positive organic net price realization and mix.
• Gross margin was down 270 basis points to 33.8 percent of net sales, driven by higher input costs and unfavorable mark-to-market effects, partially offset by favorable net price realization and mix. Adjusted gross margin was down 250 basis points to 33.4 percent of net sales, driven by input cost inflation and higher other cost of goods sold, including elevated costs related to supply chain disruptions, partially offset by HMM cost savings and favorable net price realization and mix.
• Operating profit of $1.6 billion was down 7 percent, driven primarily by lower gross profit dollars and higher transaction costs and acquisition integration costs. Operating profit margin of 17.2 percent was down 230 basis

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points. Constant-currency adjusted operating profit declined 4 percent, driven by lower adjusted gross profit dollars, partially offset by lower adjusted SG&A expenses. Adjusted operating profit margin decreased 150 basis points to

• 17.2 percent.

• Net earnings attributable to General Mills was down 8 percent to $1.2 billion and diluted EPS was down 7 percent to $1.99, primarily reflecting lower operating profit. Adjusted diluted EPS of $1.98 was down 4 percent in constant currency, driven primarily by lower adjusted operating profit.
• On a 2-yearcompound growth basis, relative to pre-pandemic levels, six-month results included: net sales and organic net sales each up 6 percent; operating profit up 6 percent and adjusted operating profit up 4 percent in constant currency; diluted EPS up 5 percent and adjusted diluted EPS up 6 percent in constant currency.

Portfolio Reshaping

General Mills took important steps to further advance its portfolio reshaping efforts in the second quarter, in line with its

Accelerate strategy. On November 24, the company announced the conclusion of agreements to sell its European dough

businesses to Cérélia. These transactions, which are expected to close by the end of fiscal 2022 subject to competition

approvals, are not expected to have a material impact on adjusted diluted EPS. On November 30, the company completed

the sale of its European Yoplait operations to Sodiaal. The company estimates the European Yoplait transaction will

reduce fiscal 2022 adjusted operating profit and adjusted diluted EPS by approximately 1 percent. With these divestitures

and the pet treats acquisition that closed in the first quarter, General Mills is increasing its focus on its faster-growing

global platforms, enhancing its organic net sales growth rate, and improving its adjusted operating profit margin profile.

Operating Segment Results

Note: Tables may not foot due to rounding.

Components of Fiscal 2022 Reported Net Sales Growth

			Foreign	Reported
Second Quarter	Volume	Price/Mix	Exchange	Net Sales
North America Retail	(6) pts	7 pts	--	2%
Pet	14 pts	15 pts	--	29%
Convenience Stores & Foodservice	8 pts	15 pts	--	23%
Europe & Australia	(3) pts	1 pt	1 pt	(1)%
Asia & Latin America	(4) pts	6 pts	2 pts	5%
Total	(1) pt	7 pts	1 pt	6%
Six Months
North America Retail	(6) pts	5 pts	1 pt	Flat
Pet	13 pts	13 pts	--	27%
Convenience Stores & Foodservice	10 pts	13 pts	--	23%
Europe & Australia	(1) pt	--	3 pts	2%
Asia & Latin America	(5) pts	8 pts	3 pts	6%
Total	(1) pts	5 pts	1 pt	5%
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Components of Fiscal 2022 Organic Net Sales Growth

	Organic	Organic	Organic	Foreign	Acquisitions &	Reported
Second Quarter	Volume	Price/Mix	Net Sales	Exchange	Divestitures	Net Sales
North America Retail	(6) pts	7 pts	1%	--	--	2%
Pet	9 pts	4 pts	14%	--	15 pts	29%
Convenience Stores & Foodservice	8 pts	15 pts	23%	--	--	23%
Europe & Australia	(3) pts	1 pt	(2)%	1 pt	--	(1)%
Asia & Latin America	4 pts	1 pt	5%	2 pts	(2) pts	5%
Total	--	5 pts	5%	1 pt	1 pt	6%
Six Months
North America Retail	(6) pts	5 pts	(1)%	1 pt	--	Flat
Pet	10 pts	6 pts	16%	--	10 pts	27%
Convenience Stores & Foodservice	10 pts	13 pts	23%	--	--	23%
Europe & Australia	(1) pt	--	(1)%	3 pts	--	2%
Asia & Latin America	3 pts	3 pts	5%	3 pts	(2) pts	6%
Total	--	4 pts	4%	1 pt	1 pt	5%
Fiscal 2022 Segment Operating Profit Growth
Second Quarter	% Change as Reported	% Change in Constant Currency
North America Retail		(7)%		(8)%
Pet		10%		10%
Convenience Stores & Foodservice		20%		20%
Europe & Australia		(56)%		(61)%
Asia & Latin America		43%		40%
Total		(3)%		(4)%
Six Months
North America Retail		(9)%		(10)%
Pet		18%		18%
Convenience Stores & Foodservice		33%		33%
Europe & Australia		(31)%		(37)%
Asia & Latin America		17%		14%
Total		(3)%		(4)%

North America Retail Segment

Second-quarter net sales for General Mills' North America Retail segment increased 2 percent to $2.98 billion, driven by favorable net price realization and mix, partially offset by lower pound volume. Organic net sales increased 1 percent. On a 2-year compound growth basis, relative to pre-pandemic levels, second-quarter organic net sales were up 5 percent. Net sales were up 16 percent in U.S. Snacks, up 3 percent in U.S. Cereal, and up 1 percent in constant currency in Canada. U.S. Yogurt net sales essentially matched year-ago levels and U.S Meals & Baking net sales were down 4 percent. Segment operating profit of $649 million was down 7 percent as reported and down 8 percent in constant currency, driven primarily by higher input costs and lower volume, partially offset by favorable net price realization and mix and lower SG&A expenses. On a 2-year compound growth basis, segment operating profit was flat in constant currency.

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Through six months, North America Retail segment net sales were essentially in line with last year at $5.61 billion. Organic net sales were down 1 percent. On a 2-year compound growth basis, first-half organic net sales were up 5 percent. Segment operating profit of $1.27 billion was down 9 percent as reported and down 10 percent in constant currency, driven primarily by higher input costs and lower volume, partially offset by favorable net price realization and mix and lower SG&A expenses. On a 2-year compound growth basis, first-half segment operating profit was up 2 percent in constant currency.

Pet Segment

Second-quarter net sales for the Pet segment increased 29 percent to $593 million, driven by strong volume growth and favorable net price realization and mix, including a 15-point net sales benefit from the pet treats acquisition, which closed on July 6. Organic net sales were up 14 percent despite a difficult comparison to the prior-year period that benefited from an increase in retail inventory. On a 2-year compound growth basis, second-quarter organic net sales were up 16 percent. Segment operating profit increased 10 percent to $132 million, driven primarily by higher volume and favorable net price realization and mix, partially offset by higher input costs and higher SG&A expenses. Profit results in the quarter included a one-time inventory adjustment and other acquisition-related expenses totaling $11 million. On a 2-year compound growth basis, segment operating profit was up 28 percent.

Through six months, Pet segment net sales increased 27 percent to $1.08 billion, driven by positive contributions from volume growth and favorable net price realization and mix. Organic net sales were up 16 percent. On a 2-year compound growth basis, first-half organic net sales were up 14 percent. The Blue Buffalo brand drove strong year-to-date retail sales growth and market share gains in measured channels. In addition, retail sales for the recently acquired pet treat brands were up 22 percent in measured channels in the first half. Segment operating profit increased 18 percent to $247 million, driven primarily by favorable net price realization and mix and higher volume, partially offset by higher input costs and higher SG&A expenses. On a 2-year compound growth basis, first-half segment operating profit was up 24 percent.

Convenience Stores & Foodservice Segment

Second-quarter net sales for the Convenience Stores & Foodservice segment increased 23 percent to $541 million, reflecting ongoing recovery in key away-from-home food channels including schools, restaurants, lodging, and

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