General Mills 1Q Profit Jumps as Costs Fall

General Mills 1st-quarter profit rises on strong demand; food maker raises full-year outlook

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General Mills Inc., the maker of Cheerios and Yoplait yogurt, said Wednesday that its fiscal first-quarter profit surged 51 percent as ingredient costs fell and demand for its products remained strong.

The food maker said it doesn't expect costs for ingredients used in its products to rise in the near term — meaning some price stability for shoppers and continued profitability for the company and its investors.

"This market is working well, it's sustainable and so we're sticking with it," General Mills CEO Ken Powell said.

The Minneapolis-based company's results exceeded Wall Street expectations, and the company raised its outlook for the full year, sending shares up in trading Wednesday.

General Mills said earned $420.6 million, or $1.25 per share for the quarter that ended Aug. 30, up from $278.5 million, or 79 cents per share, a year earlier.

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Excluding an expense related to commodity positions, profit was $1.28 per share, well above the $1.03-per-share estimate of analysts polled by Thomson Reuters.

Sales volume remained strong, helped in part by consumers eating at home more often. Revenue for the quarter grew 1 percent to $3.52 billion with strong sales of cereal and Pillsbury products, which jumped 9 percent and 12 percent, respectively. Wall Street expected revenue of $3.49 billion.

Food makers, in general, are benefiting from lower costs for fuel and key ingredients such as wheat and corn. Commodity prices hit record highs last year and many companies raised their prices to cope. Now that those costs have fallen, companies that haven't cut their prices are seeing their profits rise.

Don Mulligan, the company's chief financial officer, said General Mills kept its price hikes modest as commodity costs soared and it never fully passed those cost increases on to customers. In the most recent quarter, its aggregate prices rose 1.5 to 2 percent — in line with or below competitors' increases, he said.