General Mills Board of Directors Declares Six Percent Dividend Increase

Full Year Highlights

• Net sales of $19.0 billion increased 5 percent from the prior year; organic net sales¹ were up 6 percent.
• Operating profit increased 11 percent to $3.5 billion; constant-currency adjusted operating profit was up 2 percent.
• Diluted earnings per share (EPS) of $4.42 were up 17 percent; adjusted diluted EPS of $3.94 increased 4 percent in constant currency.
• Operating cash flow increased 11 percent to $3.3 billion.

Fourth Quarter Highlights

• Net sales increased 8 percent to $4.9 billion; organic net sales increased 13 percent.
• Operating profit increased 85 percent to $1.0 billion; constant-currency adjusted operating profit increased 21 percent.
• Diluted EPS of $1.35 increased 98 percent; adjusted diluted EPS of $1.12 were up 23 percent in constant currency.

¹ Please see Note 7 to the Consolidated Financial Statements below for reconciliation of this and other non-GAAP measures used in this release.

General Mills (NYSE: GIS) today reported results for the fourth quarter and fiscal year ended May 29, 2022.

“Fiscal 2022 was another successful year for General Mills, marking the fourth consecutive year that we’ve delivered results that met or exceeded our targets for top and bottom-line growth and cash generation,” said General Mills Chairman and Chief Executive Officer Jeff Harmening. “I am proud of the way our team advanced our Accelerate strategy this year by executing well on our core business while taking significant steps to reshape our portfolio. Though significant inflation and supply chain disruptions put pressure on our margins, we responded quickly to address those challenges and keep our brands on shelf for our customers and consumers.

“We plan to build on our strong momentum in fiscal 2023 by continuing to compete effectively, investing in our brands and capabilities, and reshaping our portfolio. Importantly, our board reinforced its confidence in our performance and outlook by approving a six percent increase in our dividend, underlining our commitment to driving strong returns for General Mills shareholders over the long term.”

General Mills is executing its Accelerate strategy to drive sustainable, profitable growth and top-tier shareholder returns over the long term. The strategy focuses on four pillars to create competitive advantages and win: boldly building brands, relentlessly innovating, unleashing scale, and being a force for good. The company is prioritizing its core markets, global platforms, and local gem brands that have the best prospects for profitable growth and is committed to reshaping its portfolio with strategic acquisitions and divestitures, including seven transactions announced or completed in fiscal 2022, to further enhance its growth profile.

Fourth Quarter Results Summary

• Net sales increased 8 percent to $4.9 billion, including a 4-point net headwind from divestiture and acquisition activity and one point of unfavorable foreign currency exchange. Organic net sales increased 13 percent. Organic net price realization and mix added 14 points to organic net sales growth, driven by Strategic Revenue Management (SRM) actions put in place in response to significant input cost inflation including a 2-point benefit from index pricing on bakery flour in the North America Foodservice segment. Lower organic pound volume was a 2-point headwind to organic net sales growth.
• Gross margin was up 120 basis points to 36.2 percent of net sales, driven by favorable net price realization and mix and mark-to-market effects, partially offset by higher input costs. Adjusted gross margin was down 70 basis points to 33.8 percent of net sales, driven by double-digit input cost inflation, higher other cost of goods sold, and supply chain deleverage, partially offset by favorable net price realization and mix and Holistic Margin Management (HMM) cost savings.
• Operating profit of $1.0 billion was up 85 percent, driven primarily by higher gross profit dollars, lower restructuring charges, and divestiture gains, partially offset by unfavorable net investment activity. Operating profit margin of 20.8 percent was up 870 basis points. Constant-currency adjusted operating profit increased 21 percent, driven by higher adjusted gross profit dollars and lower adjusted selling, general, and administrative (SG&A) expenses. Adjusted operating profit margin increased 200 basis points to 18.3 percent.
• Net earnings attributable to General Mills were up 97 percent to $823 million and diluted EPS was up 98 percent to $1.35, driven primarily by higher operating profit and lower average diluted shares outstanding. Adjusted diluted EPS of $1.12 increased 23 percent in constant currency, driven primarily by higher adjusted operating profit and lower average diluted shares outstanding.

Full Year Results Summary

• Net sales increased 5 percent to $19.0 billion, including a 1-point net headwind from divestiture and acquisition activity. Organic net sales increased 6 percent. Organic net price realization and mix added 7 points to organic net sales growth, driven by SRM actions put in place in response to significant input cost inflation including a 1-point benefit from index pricing on bakery flour in the North America Foodservice segment. Lower organic pound volume was a 1-point headwind to organic net sales growth.
• Gross margin was down 190 basis points to 33.7 percent of net sales, driven by higher input costs, partially offset by favorable net price realization and mix. Adjusted gross margin was down 180 basis points to 33.0 percent of net sales, driven by 8 percent annual input cost inflation, higher other cost of goods sold, and supply chain deleverage, partially offset by favorable net price realization and mix and HMM cost savings.
• Operating profit of $3.5 billion was up 11 percent, driven primarily by gains on divestitures and lower restructuring charges, partially offset by unfavorable net investment activity. Operating profit margin of 18.3 percent was up 100 basis points. Constant-currency adjusted operating profit increased 2 percent, driven by lower adjusted SG&A expenses. Adjusted operating profit margin decreased 50 basis points to 16.9 percent.
• Net earnings attributable to General Mills were up 16 percent to $2.7 billion and diluted EPS was up 17 percent to $4.42, primarily reflecting higher operating profit, a lower effective tax rate, and lower average diluted shares outstanding. Adjusted diluted EPS of $3.94 was up 4 percent in constant currency, driven primarily by higher adjusted operating profit, lower net interest expense, and lower average diluted shares outstanding, partially offset by lower non-service benefit plan income.

Portfolio Reshaping

General Mills took important steps to advance its portfolio reshaping efforts during fiscal 2022, announcing or closing seven transactions that are expected to increase the company’s top- and bottom-line growth profile over the long term. These include the acquisition of the Nudges, True Chews, and Top Chews pet treats brands in North America, which closed in the first quarter of fiscal 2022; the divestiture of yogurt in Europe, which closed in the second quarter of fiscal 2022; a series of divestitures of dough in Europe and Israel, which closed between the third quarter of fiscal 2022 and the first quarter of fiscal 2023; the acquisition of the TNT Crust foodservice pizza crust business in North America, which closed in the first quarter of fiscal 2023; and the prospective divestiture of the Helper main meals and Suddenly Salad side dishes businesses in North America, which is expected to close in the first quarter of fiscal 2023.

Operating Segment Results

Note: Tables may not foot due to rounding.

North America Retail Segment

Fourth-quarter net sales for General Mills’ North America Retail segment increased 11 percent to $3.0 billion, driven by favorable net price realization and mix, partially offset by lower pound volume. Organic net sales were also up 11 percent. Net sales were up 18 percent in U.S. Snacks, up 14 percent in U.S. Meals & Baking Solutions, up 5 percent in U.S. Morning Foods, and down 1 percent in Canada. Segment operating profit of $764 million was up 18 percent as reported and in constant currency, driven primarily by favorable net price realization and mix, partially offset by higher input costs and lower volume.

For the full year, North America Retail segment net sales increased 3 percent to $11.6 billion. Net price realization and mix added 9 points to net sales growth, driven by SRM actions put in place in response to significant input cost inflation. Pound volume was a 6-point headwind to net sales growth. Organic net sales were also up 3 percent. Segment operating profit of $2.7 billion was down 1 percent as reported and in constant currency, driven primarily by higher input costs and lower volume, partially offset by favorable net price realization and mix and lower SG&A expenses.

Pet Segment

Fourth-quarter net sales for the Pet segment increased 37 percent to $610 million, driven by favorable net price realization and mix and pound volume growth. Net sales results in the quarter included a 15-point benefit from the pet treats acquisition. Organic net sales were up 22 percent. Segment operating profit increased 10 percent to $113 million, driven primarily by favorable net price realization and mix and higher volume, including benefits from the pet treats acquisition, partially offset by higher input costs and higher SG&A expenses.

For the full year, Pet segment net sales increased 30 percent to $2.3 billion. Net price realization and mix added 19 points to net sales growth, including 9 points of favorable mix from the pet treats acquisition and the impact of SRM actions put in place in response to input cost inflation. Pound volume added 11 points to net sales growth, including a 3- point benefit from the pet treats acquisition. Organic net sales were up 18 percent. Segment operating profit increased 13 percent to $471 million, driven primarily by favorable net price realization and mix and higher volume, including benefits from the pet treats acquisition, partially offset by higher input costs and higher SG&A expenses.

North America Foodservice Segment

Fourth-quarter net sales for the North America Foodservice segment increased 25 percent to $526 million, driven by favorable net price realization and mix, including a 16-point benefit from market index pricing on bakery flour, partially offset by lower pound volume. Organic net sales were also up 25 percent. Segment operating profit increased 23 percent to $81 million, driven by favorable net price realization and mix, partially offset by higher input costs and higher SG&A expenses.

For the full year, North America Foodservice net sales increased 24 percent to $1.8 billion. Net price realization and mix added 19 points to net sales growth, driven by 11 points from market index pricing on bakery flour and other SRM actions put in place in response to significant input cost inflation. Pound volume added 5 points to net sales growth. Organic net sales were also up 24 percent. Segment operating profit increased 26 percent to $256 million, driven by favorable net price realization and mix and higher volume, partially offset by higher input costs.

International Segment

Fourth-quarter net sales for the International segment were down 21 percent to $750 million, including a 25-point headwind from the divestitures of the European yogurt and dough businesses and 2 points of unfavorable foreign currency exchange. Organic net sales were up 6 percent. Segment operating profit of $76 million was up 36 percent as reported and up 40 percent in constant currency, driven primarily by favorable net price realization and mix and lower SG&A expenses, partially offset by lower volume, including the impact of the European yogurt and dough divestitures, and higher input costs.

For the full year, International net sales declined 9 percent to $3.3 billion, including a 12-point headwind from the divestitures of the European yogurt and dough businesses and 1 point of favorable foreign currency exchange. Organic net sales were up 2 percent, driven by favorable organic net price realization and mix. Segment operating profit of $232 million was down 2 percent as reported and down 4 percent in constant currency, driven primarily by higher input costs and lower volume, including the impact of the European yogurt and dough divestitures, partially offset by favorable net price realization and mix and lower SG&A expenses.

Joint Venture Summary

Fourth-quarter net sales for Cereal Partners Worldwide (CPW) essentially matched year-ago results in constant currency, driven by positive net price realization and mix, offset by lower volume. Constant-currency net sales increased 6 percent for Häagen-Dazs Japan (HDJ) in the quarter, driven by strong core performance and improved distribution. Combined after-tax earnings from joint ventures in the quarter were $20 million compared to $28 million a year ago, driven primarily by lower profit at CPW. For the full year, after-tax earnings from joint ventures decreased 5 percent to $112 million. On a 3-year compound growth basis, relative to pre-pandemic levels, after-tax earnings from joint ventures were up 16 percent.

Other Income Statement Items

Full-year unallocated corporate items totaled $403 million net expense compared to $212 million net expense a year ago. Excluding mark-to-market valuation effects and other items affecting comparability, unallocated corporate items totaled $445 million net expense this year compared to $428 million net expense last year.

The company recorded a net $194 million pre-tax gain on divestitures in fiscal 2022 compared to a $54 million loss a year ago (please see Note 2 below for more information on these items). Restructuring, impairment, and other exit costs totaled a $26 million net recovery this year compared to a $170 million expense a year ago (please see Note 3 below for more information on these charges).

Net interest expense in fiscal 2022 totaled $380 million compared to $420 million a year ago, driven primarily by lower average debt balances. The effective tax rate for fiscal 2022 was 18.3 percent compared to 22.0 percent last year (please see Note 6 below for more information on our effective tax rate). The adjusted effective tax rate was 20.9 percent compared to 21.1 percent a year ago.

Net earnings attributable to redeemable and non-controlling interests totaled $28 million in fiscal 2022 compared to $6 million a year ago, driven primarily by the loss on the sale of the Laticínios Carolina yogurt business in Brazil in fiscal 2021, partially offset by the sale of the company’s interests in Yoplait SAS, Yoplait Marques SNC, and Liberté Marques Sàrl in fiscal 2022.

Cash Flow Generation and Cash Returns

Fiscal 2022 cash provided by operating activities increased 11 percent to $3.3 billion, driven primarily by higher net earnings. Capital investments of $569 million were up 7 percent from a year ago. Full-year operating cash flow conversion was 121 percent of after-tax earnings and free cash flow conversion was 113 percent of adjusted after-tax earnings. Dividends paid essentially matched year-ago levels at $1.2 billion. General Mills repurchased approximately 14 million shares of common stock in fiscal 2022 for a total of $877 million compared to $301 million in share repurchases a year ago. Average diluted shares outstanding decreased 1 percent to 613 million.

Dividend Increase

The General Mills board of directors declared a quarterly dividend of $0.54 per share, payable August 1, 2022, to shareholders of record July 8, 2022. This represents a 6 percent increase from the previous quarterly rate of $0.51 per share. General Mills and its predecessor company have paid dividends without interruption for 123 years.

Fiscal 2023 Outlook

General Mills expects the largest factors impacting its performance in fiscal 2023 will be the economic health of consumers, the inflationary cost environment, and the frequency and severity of disruptions in the supply chain. The company anticipates double-digit inflation on its cost of goods sold in fiscal 2023 and is addressing inflation headwinds with HMM cost savings and net price realization generated through its SRM capability. The company is planning for volume elasticities to increase but remain below historical levels and supply chain disruptions to slowly moderate in fiscal 2023 compared to fiscal 2022 levels.

General Mills has announced a series of portfolio reshaping transactions over the past year that are expected to increase the company’s top- and bottom-line growth profile over the long term. The company estimates the net impact of these transactions will reduce fiscal 2023 adjusted operating profit growth and adjusted diluted EPS growth by approximately 3 percent each, driven by the impact of foregone operating profit and stranded costs related to the divested businesses, partially offset by incremental profit from the acquired businesses. The company expects the net proceeds from the divestitures will support an increased share repurchase plan in fiscal 2023, resulting in a 2 to 3 percent net reduction in its average diluted share count for the year, which is above its long-run target of a 1 to 2 percent annual net share count reduction.

With these assumptions in mind, General Mills outlined its key full-year fiscal 2023 financial targets:

• Organic net sales are expected to increase 4 to 5 percent.
• Adjusted operating profit is expected to range between down 2 percent and up 1 percent in constant currency from the base of $3.2 billion reported in fiscal 2022, including a 3-point net headwind from divestitures and acquisitions announced or closed in fiscal 2022.
• Adjusted diluted EPS are expected to range between flat and up 3 percent in constant currency from the base of $3.94 earned in fiscal 2022, including a 3-point net headwind from divestitures and acquisitions announced or closed in fiscal 2022.
• Free cash flow conversion is expected to be at least 90 percent of adjusted after-tax earnings.
• The net impact of divestitures, acquisitions, and foreign currency exchange is expected to reduce full-year reported net sales growth by approximately 3 percent, and foreign currency exchange is expected to reduce adjusted operating profit and adjusted diluted EPS growth by approximately 1 percent.

General Mills will issue pre-recorded management remarks today, June 29, 2022, at approximately 6:30 a.m. Central time (7:30 a.m. Eastern time) and will hold a live, webcasted question and answer session beginning at 8:00 a.m. Central time (9:00 a.m. Eastern time). The pre-recorded remarks and the webcast will be made available at www.generalmills.com/investors.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our current expectations and assumptions. These forward-looking statements, including the statements under the caption “Fiscal 2023 Outlook,” and statements made by Mr. Harmening, are subject to certain risks and uncertainties that could cause actual results to differ materially from the potential results discussed in the forward-looking statements. In particular, our predictions about future net sales and earnings could be affected by a variety of factors, including: the impact of the coronavirus (COVID-19) pandemic on our business, suppliers, consumers, customers, and employees; disruptions or inefficiencies in the supply chain, including any impact of the coronavirus (COVID-19) pandemic; competitive dynamics in the consumer foods industry and the markets for our products, including new product introductions, advertising activities, pricing actions, and promotional activities of our competitors; economic conditions, including changes in inflation rates, interest rates, tax rates, or the availability of capital; product development and innovation; consumer acceptance of new products and product improvements; consumer reaction to pricing actions and changes in promotion levels; acquisitions or dispositions of businesses or assets; changes in capital structure; changes in the legal and regulatory environment, including tax legislation, labeling and advertising regulations, and litigation; impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets, or changes in the useful lives of other intangible assets; changes in accounting standards and the impact of significant accounting estimates; product quality and safety issues, including recalls and product liability; changes in consumer demand for our products; effectiveness of advertising, marketing, and promotional programs; changes in consumer behavior, trends, and preferences, including weight loss trends; consumer perception of health-related issues, including obesity; consolidation in the retail environment; changes in purchasing and inventory levels of significant customers; fluctuations in the cost and availability of supply chain resources, including raw materials, packaging, energy, and transportation; effectiveness of restructuring and cost saving initiatives; volatility in the market value of derivatives used to manage price risk for certain commodities; benefit plan expenses due to changes in plan asset values and discount rates used to determine plan liabilities; failure or breach of our information technology systems; foreign economic conditions, including currency rate fluctuations; and political unrest in foreign markets and economic uncertainty due to terrorism or war. The company undertakes no obligation to publicly revise any forward-looking statement to reflect any future events or circumstances.

Significant Items Impacting Comparability

Several measures below are presented on an adjusted basis. The adjustments are either items resulting from infrequently occurring events or items that, in management’s judgement, significantly affect the year-to-year assessment of operating results.

The following are descriptions of significant items impacting comparability of our results.

Divestitures (gain) loss

Divestitures gain related to the sale of our interests in Yoplait SAS, Yoplait Marques SNC, and Liberté Marques Sàrl and the sale of our European dough businesses in fiscal 2022. Divestiture loss related to the sale of our Laticínios Carolina business in Brazil in fiscal 2021. Please see Note 2.

Transaction costs

Fiscal 2022 transaction costs relate primarily to the sale of our interests in Yoplait SAS, Yoplait Marques SNC, and Liberté Marques Sàrl, the sale of our European dough businesses, the definitive agreements to sell our Helper main meals and Suddenly Salad side dishes business, and the definitive agreement to acquire TNT Crust. Fiscal 2021 transaction costs related to the sale of our interests in Yoplait SAS, Yoplait Marques SNC, and Liberté Marques Sàrl and the acquisition of Tyson Foods’ pet treats business. Please see Note 2.

Non-income tax recovery

Recovery related to a Brazil indirect tax item recorded in fiscal 2022 and fiscal 2021. Please see Note 4.

Acquisition integration costs

Integration costs resulting from the acquisition of Tyson Foods’ pet treats business. Please see Note 4.

Investment activity, net

Valuation adjustments and the gain on sale of certain corporate investments in fiscal 2022 and fiscal 2021. Valuation adjustments and the loss on sale of certain corporate investments in fiscal 2020. Please see Note 4.

Mark-to-market effects

Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items. Please see Note 4.

Restructuring (recoveries) charges

Restructuring charges for International supply chain optimization actions and net restructuring recoveries for previously announced restructuring actions in fiscal 2022. Restructuring charges for previously announced restructuring actions in fiscal 2021 and fiscal 2020. Please see Note 3.

Product recall

Product recall adjustment recorded in fiscal 2021 related to a recall in our international Green Giant business in fiscal 2020. Please see Note 4.

CPW restructuring charges

CPW restructuring charges related to previously announced restructuring actions.

Tax items

Discrete tax benefit recognized in fiscal 2022 related to a release of a valuation allowance associated with our capital loss carryforwards expected to be used against future divestiture gains. Discrete tax item related to amendments to reorganize certain U.S. retiree health and welfare benefits plans in fiscal 2021. Discrete tax benefit related to the reorganization of certain wholly owned subsidiaries in fiscal 2020.

Adjusted Operating Profit Growth on a Constant-currency Basis

This measure is used in reporting to our Board of Directors and executive management and as a component of the measurement of our performance for incentive compensation purposes. We believe that this measure provides useful information to investors because it is the operating profit measure we use to evaluate operating profit performance on a comparable year-to-year basis. The measure is evaluated on a constant-currency basis by excluding the effect that foreign currency exchange rate fluctuations have on year-to-year comparability given the volatility in foreign currency exchange rates.

Our adjusted operating profit growth on a constant-currency basis is calculated as follows:

Adjusted Diluted EPS and Related Constant-currency Growth Rate

This measure is used in reporting to our Board of Directors and executive management. We believe that this measure provides useful information to investors because it is the profitability measure we use to evaluate earnings performance on a comparable year-to-year basis.

The reconciliation of our GAAP measure, diluted EPS, to adjusted diluted EPS and the related constant-currency growth rate follows:

Adjusted Earnings Comparisons as a Percent of Net Sales

We believe that these measures provide useful information to investors because they are important for assessing our adjusted earnings comparisons as a percent of net sales on a comparable year-to-year basis.

Our adjusted earnings comparisons as a percent of net sales are calculated as follows: