General Mills Inc. (GIS), the maker of Cheerios cereal, said third-quarter profit increased 18 percent as sales of yogurt and snacks advanced.
Net income in the period ended Feb. 27 rose to $392.1 million, or 59 cents a share, the Minneapolis-based company said today in a statement. Excluding the impact of commodity hedges, earnings were 56 cents, matching the average of estimates compiled by Bloomberg.
General Mills, which has the license to distribute Yoplait in the U.S., said sales in that division climbed 1 percent, while snack revenue advanced 14 percent. The company is in exclusive talks to buy half of the French yogurt maker from PAI Partners for 810 million euros ($1.15 billion) to expand the brand in developing countries.
“We view yogurt as an attractive category and see opportunity for Mills to leverage its existing sales and innovation capabilities to drive growth internationally,” Edward Aaron, an analyst at RBC Capital Markets, said in a report this week. The Denver-based analyst rates the shares “outperform.”
Industrywide, food makers face rising costs for raw ingredients like wheat and sugar, which has led General Mills Chief Executive Officer Ken Powell to raise prices on cereal. The company expects materials costs to rise as much as 5 percent this year, and possibly more in the next.
The shares fell 21 cents to $36.91 yesterday in New York Stock Exchange composite trading. They had added 3.7 percent this year before today.
General Mills also reaffirmed its fiscal 2011 profit forecast of $2.46 to $2.48 per share. Sales increased 1.6 percent to $3.65 billion, compared with the $3.69 billion analyst average.
Profit in the third quarter a year earlier was $332.5 million, or 48 cents a share.
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