General Mills plans capacity expansions to support growth in companion animal segment
MINNEAPOLIS — On Sept. 21, General Mills announced its financial results for the three months ended Aug. 28, detailing pet segment sales of $580 million, up 19% from revenue in the pet segment. ‘last year. Strong growth in the company’s first-quarter fiscal 2023 companion animal business was attributed to favorable realization and net price mix.
Organic sales growth increased 14% and segment operating income increased 7% to $123 million, compared to the prior year. According to Kofi Bruce, Chief Financial Officer, General Mills’ pet segment gained market share in the wet cat food category during the first quarter, while market share declined for dry cat food and cat food. pet treats due to capacity constraints.
“While demand for Blue Buffalo remains strong, we continue to face capacity constraints in the business, which limit our ability to provide competitive customer service and drive volume growth,” Bruce said. “We gained market share in wet pet food in the first quarter, but capacity limitations prevented us from keeping pace with the dry food and treats category.”
Strategic investments will be made in the companion animal segment and in the company’s other operating segments to build brand strength and awareness, according to Jeff Harmening, president and CEO.
“For example, we are extending the strength of the Blue Buffalo core brand to our newly acquired Nudges, True Chews and Top Chews brands, which will help to significantly increase awareness of these differentiated products,” Harmening said.
Harmening also noted “significant capital investments” to build internal manufacturing capacity in several segments, including pet food. Bruce added that the company plans to add more co-packing capacity for pet treats in the last half of fiscal 2023, and significant capacity will be added to internal dry pet food operations. company of General Mills beginning in fiscal year 2024.
The company’s first-quarter earnings reflect several acquisitions and divestitures, including the acquisition of Tyson Foods’ pet treats business in the first quarter of last year, which resulted in net income from sales of 5 points in the first quarter of fiscal 2023. Factories also suffered $22 million in damages related to product loss from an international recall of Häagen-Dazs ice cream, which were excluded from adjusted operating results , the company said.
The supply chain remains very unpredictable. Coupled with rising costs and economic uncertainty, these persistent hurdles have sown instability among pet food and other commercial food manufacturers.
“The operating environment remains challenging and highly volatile,” Harmening said. “We continue to see high levels of inflation in our cost basket, including significant year-over-year increases in raw materials, labor, freight and fuel. Our full-year forecast for input cost inflation is now around 14% to 15% for fiscal 2023.”
Overall, General Mills reported net sales of $4.7 billion in the first quarter, up 4% from a year ago, along with operating profit of $1.1 billion. dollars, up 29% from a year ago. The company’s operating profit margin increased by 440 basis points to 23%.
“We continue to show strong performance in a highly volatile operating environment,” Harmening said. “Given the strength of our first quarter results and confidence in our ability to adapt to the continued volatility ahead, we are raising our full year outlook for net sales, profit and loss. ‘operating and growing EPS.’
General Mills now expects a 6% to 7% increase in organic net sales for its fiscal year 2023, compared to its previous projection of 4% to 5% growth. Adjusted operating income was also revised upwards and is now expected between flat and up 3%, compared to previous projections between a decline of 2% and an increase of 1%. Additionally, adjusted diluted earnings per share (EPS) are now expected to grow between 2% and 5%, up from previous estimates of between flat and up 3%.
“The changes we made to our organization a year ago are paying off by allowing us to adapt more quickly to the new challenges and opportunities we see every day,” Harmening concluded.
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