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General Mills

(GIS) - Get General Mills Inc. Report

said results for its just-completed fiscal year will be better than it previously predicted, but warned that a higher tax rate and rising interest costs will hold down growth in the current year.

General Mills expects to earn $2.90 a share in the year ended May 28, 2006, up from its previous guidance of $2.80 to $2.85 a share. The estimate includes an accounting expense of 8 cents a share, and therefore might not be comparable to the Thomson First Call consensus estimate of $2.95 a share.

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"The stronger results reflect modestly above-target operating performance along with an approximately 3 cents per share benefit from a favorable tax adjustment realized in the fourth quarter of the year," General Mills said.

For the current fiscal year, General Mills sees operating profit rising by a percentage in the midsingle digits and sales rising in the low single digits. Analysts are forecasting earnings of $3.15 a share on sales of $11.95 billion in the period, according to First Call.

"Earnings per share growth from reported 2006 results will be restrained by the company's adoption of stock option expensing, effective as of the first quarter of fiscal 2007; an estimated $40 million increase in interest expense primarily due to higher rates; and an estimated 75 to 125 basis point increase in the company's effective tax rate," General Mills said.

The stock closed at $51.64 Wednesday.