General Mills has raised its target for savings and margin growth, after reporting better-than-expected profit figures for its last fiscal year.
For the year to 29 May 2016, operating profit jumped up 30.3% to $2.7bn, while underlying sales were flat (-6.6% to $16.6bn on a reported basis).
CEO Ken Powell noted: “We made important progress strengthening our business model and bringing our Consumer First strategy to life in our brands in fiscal 2016”.
Looking ahead, the group said it expects similar trends for the current fiscal year, with adjusted net profit expected to grow by 6%-8%, adjusted operating profit margin to grow by 150bps, and revenue likely to be flat to down 2%. General Mills also said it is positioned to return to sales growth in the longer term, noting: “Beyond 2018, we expect our focused, more profitable portfolio – aligned with our Consumer First strategy – to return to sustainable top line growth and to drive profit growth consistent with our long-term earnings model”.
The group will also speed up savings by 2018, saying it now expects savings of $600m (instead of $500m) through cost reductions, organisational efficiency and zero-based budgeting initiatives. It also expects an operating profit margin of 20% by 2018, which would be a 400bps jump from fiscal 2015. It aims to do that by optimising SKUs to simplify its business, and increasing the efficiency of commercial investments such as trade and consumer spending.