General Mills Financial Analysis Essay

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Pages: 5

General Mills - Generating Balanced Growth
From ready-to-eat cereal to convenient meals to wholesome snacks, General Mills is one of the biggest food products manufacturers and competes in growing food categories that are on-trend with consumer tastes around the world. The company markets many well-known brands, such as Haagen Daazs, Yoplait, Betty Crocker, Totinos, and Cheerios, among others. Main rivals include Kellogg, Kraft, Conagra Foods, and Sara Lee. General Mills sells its products in three segments: U.S. retail (63% of net sales), International (25% of net sales), and Bakeries and Foodservices (12% of net sales). In addition, General Mills sells cereals and ice cream through its Cereal Partners Worldwide and Haagen Daazs Japan
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It is important to note that sales growth has been mainly driven by volume growth with a slight component of net price increase and a favorable mix.
Segment Operating Profit has also maintained a sustainable growth. The slowdown during fiscal 2012 and drop of Gross Profit Margin is driven by high input-cost inflation as previously mentioned. Despite high costs, the company managed to increase segment operating profit to exceed $3bn for the first time in the company’s history.
General Mills has managed to generate strong levels of cash flow across the years. Over the most recent 5 years, the company operations have generated almost $10bn USD in cash. A significant portion of this cash has been returned to stockholders through dividends and shares repurchase. In addition, this cash is used to fund Capital expenditure.
In the most recent year, the company operations generated $2.4bn of cash compared to $1.5bn in the prior year. The major increase is driven by a favorable change in working capital supported by inventory reduction efforts, prepaid expenses, and other current assets.
Cash used by investing activities had a significant increase in fiscal 2012 that is mainly explained by the acquisition of international Yoplait ($1bn USD). General Mills invested in fiscal 2012 c. $700m USD in land, buildings and equipment, similar to previous years.
Cash used by financing activities includes a constant