General Mills, Inc. (NYSE:GIS) reported a mixed performance in its second-quarter fiscal 2024 results, exceeding earnings expectations while falling short of revenue estimates. Despite a 14% year-over-year increase in adjusted earnings per share to $1.25, the company faced a 2% decline in net sales, totaling $5,139.4 million. This dip was attributed to reduced pound volume, offset partially by positive net price realization and mix. The company’s organic net sales also saw a 2% decrease.

The adjusted gross margin expanded by 180 basis points to 35%, primarily due to cost savings from Holistic Margin Management (HMM), positive net price realization, and mix. However, increased input cost inflation and additional supply chain costs partially offset these gains. Adjusted operating profit reached $989 million, marking a 13% year-over-year increase on a constant-currency basis, with the operating profit margin expanding by 240 basis points to 19.3%.

In segmental performance, the North America Retail segment experienced a 2% decline in revenues, reaching $3,305 million, mainly due to decreased pound volume. The International segment, on the other hand, saw a 2% increase in revenues, totaling $683.1 million, driven by positive net price realization and mix. The Pet segment reported a 4% drop in revenues to $569.3 million, impacted by reduced pound volume. The North America Foodservice segment’s revenues remained flat at $582 million.

General Mills concluded the quarter with $593.8 million in cash and cash equivalents, $10,530.5 million in long-term debt, and total shareholders’ equity of $9,378.8 million. The company generated $1,495.8 million in cash from operating activities in the six months ended Nov 26, 2023, and paid dividends of $691 million.

Looking ahead, General Mills adjusted its fiscal 2024 outlook, citing the impact of slower volume recovery. It now anticipates organic net sales to be down 1% to flat year over year, compared to the earlier expectation of a 3-4% increase. Adjusted operating profit growth is expected at 4-5%, and adjusted EPS growth at 4-5%, reflecting lower organic sales growth. The company aims for a free cash flow conversion of at least 95% of adjusted after-tax earnings.

Despite these adjustments, General Mills’ shares have shown a modest 1.9% increase in the past three months, outperforming the industry’s flat performance.

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