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General Mills says it may hike prices again as profit rises 8%

September 20, 2007|From the Associated Press

MINNEAPOLIS — Charging more for Cheerios, Lucky Charms and Yoplait yogurt helped General Mills Inc. report an 8% increase in its fiscal first-quarter profit Wednesday. The food maker said more price increases could be on the way if ingredient and fuel prices kept rising.

"We are actively monitoring the need to pass along additional input cost pressures as they arise," Chairman and Chief Executive Steve Sanger said.

Golden Valley, Minn.-based General Mills announced in June that it would shrink its cereal boxes slightly to make them more like competitors'. Shoppers might have seen lower prices on each box, but the price for each ounce of cereal actually went up. General Mills raised prices for Yoplait in July, as well as for Green Giant vegetables and in its food-service division that supplies food products to cafeterias.

General Mills said it earned $288.9 million, or 81 cents a share, during the quarter that ended Aug. 26, up from $266.9 million, or 74 cents, a year ago. Revenue rose 7% to $3.07 billion.

Analysts surveyed by Thomson Financial were expecting 80 cents a share on revenue of $3 billion.

The company left its full-year earnings guidance unchanged at $3.39 to $3.43 a share.

Bank of America Equity Research analyst Edgar Roesch called the results "a solid performance with healthy sales, gross margin expansion and reinvestment in higher consumer marketing."

Inflation will put pressure on margins, he wrote in a research note. "However, General Mills appears well prepared to battle this inflation with price increases and efficiency gains -- a continuation from the company's successful productivity efforts last year."

Sales in General Mills' retail foods division grew 6% to $2.03 billion. Operating profit rose 6% to $473 million. Sales of Big G cereals rose 5%.

International sales grew 19% to $599 million, with help from currency fluctuations, which accounted for more than a third of the increase. Operating profit grew 27% to $71 million.

General Mills shares rose 18 cents to $58.85 on Wednesday.

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