General Mills increases cost savings targets

30-Jun-2016 - USA

General Mills, Inc. said it now expects its previously announced cost-reduction and organizational efficiency initiatives - including Projects Century, Catalyst, and Compass, as well as administrative cost reductions delivered through zero-based budgeting - to generate total annual savings of $600 million by fiscal 2018, up from the previous target of $500 million.

The company also announced it is undertaking further efforts to prioritize investments, reduce complexity, and streamline its operations to drive profitable sales growth. As a result, General Mills is increasing and accelerating its previous margin expansion target. The company now expects to achieve an adjusted operating profit margin of 20 percent by fiscal 2018, an increase of 400 basis points over fiscal 2015 levels.

Looking ahead for fiscal 2017, the company expects organic net sales growth ranging from flat to down 2 percent compared to 2016, but deliver a 6 to 8 percent increase in constant-currency total segment operating profit. Fiscal 2017 adjusted operating profit margin is expected to increase by approximately 150 basis points, with constant-currency adjusted earnings per share growing 6 to 8 percent from the base of $2.92 earned in fiscal 2016. The company estimates a 1-2 cent headwind to fiscal 2017 adjusted diluted earnings per share from currency translation, though this figure does not reflect recent fluctuations in the British pound.

Looking ahead to fiscal 2018, General Mills expects modest organic net sales growth and the full benefit of its margin expansion efforts will drive adjusted operating profit margin to 20 percent, resulting in a low double-digit constant-currency increase in adjusted earnings per share.

The company's strong earnings growth and cash generation performance was cited by the General Mills Board of Directors in declaring a quarterly dividend of $0.48 per share, payable August 1, 2016, to shareholders of record July 11, 2016. This represents a 4 percent increase from the previous quarterly rate of $0.46 per share. The new annualized dividend rate of $1.92 per share represents an increase of 8 percent over the annual dividend of $1.78 paid in fiscal 2016. (dpa)

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