General Mills has posted a 13% decline in operating profit in its fiscal 2022 Q2 results, after it grappled with soaring raw material prices and elevated costs related to supply chain disruptions.
The company missed Wall Street estimates for quarterly profit, according to Reuters – with the inflationary and supply cost pressures outstripping efforts to raise product prices.
However, the owner of Cheerios raised its full-year forecast for organic net sales, after seeing stronger-than-expected top-line growth in the first and second quarters.
The company now expects organic net sales to rise between 4% and 5% in fiscal 2022, compared with its previous forecast of a decline.
In its second-quarter results, General Mills recorded a 6% increase in net sales to $5 billion. Meanwhile, operating profit stood at $800 million.
The company’s biggest unit – North American retail – recorded a 2% net sales increase to $2.98 billion, with pricing actions offsetting lower pound volume.
The company’s convenience stores and foodservice segment increased its second-quarter net sales by 23%, reflecting ongoing recovery in key away-from-home food channels.
Second-quarter net sales for the Europe and Australia segment were down 1%, after the company was hit by declines in yogurt and dough. Last month, General Mills announced plans to sell its European dough businesses to Cérélia. Segment operating profit was down 56%, primarily driven by higher input costs and lower volume.
Meanwhile, second-quarter net sales for General Mills’ Asia and Latin America unit increased 5% to $450 million.
“We continued to compete effectively and execute well this quarter in a challenging operating environment,” said General Mills chairman and CEO, 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 realisation to protect our bottom line”.
He added: “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”.