reported net sales of $3.1 billion for the fourth quarter, a 7% increase over the prior year, but profits came up just short of Wall Street's estimates.
The company earned 62 cents a share in the quarter, falling a penny shy of the Thomson First Call consensus of 63 cents. The company also warned that next quarter will be a difficult comparison, since sales grew 16% in the first quarter of fiscal 2007.
Commodity and energy expenses were up for the latest fiscal year, with grain and dairy costs being the primary drivers. The company noted that it had experienced 4% inflation increases for 2007, but projects 5% for 2008. Commodity and energy expenses alone accounted for $115 million in 2007 but are expected to grow to $250 million in 2008.
Capital expenditures were $460 million in the just-completed year and are projected to climb to $575 million next year. "This is a one-year bump and will not be sustained," CFO Jim Lawrence said.
The product mix is the story for General Mills. Adjusting to consumer preferences for healthier lifestyles, the company has had good success with its whole-grain cereals and the Fiber One brand. Ken Powell, president and COO, said, "The Fiber One snack bars are off to a great start."
Reduced-sugar Yoplait for kids and lower-sodium Progresso soups are getting positive responses from consumers, General Mills said. The company is reducing trans-fats where it can, while adding vitamins, fiber and calcium.
Additionally, General Mills is changing its cereal box size and pricing. The Big G cereals had been sold in larger boxes with commensurate pricing. On a per-ounce basis, the cereal was cheaper. But consumers tend to buy cereal on the basis of price alone, so the boxes will get smaller to bring the prices down. It will cost $30 million to make this change, and the new packages began shipping on Monday.
The Minneapolis-based cereal maker increased consumer marketing by 16% in the quarter, similar to what its peers have done.
recently announced in its first-quarter results that it had increased advertising spending by a double-digit percent.
Earlier this week, General Mills lifted its quarterly dividend by 2 cents to 39 cents a share. Dividends paid in fiscal 2007 grew 7.5% to $1.44. The stock was trading down 60 cents on Thursday at $58.85.