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General Mills profit beats, company backs outlook

Boxes of Cheerios cereal, made by General Mills, sit on the shelf at a grocery store in Berkeley, Calif.

Justin Sullivan/Justin Sullivan/Getty Images

General Mills Inc. reported higher-than-expected quarterly earnings on Wednesday, helped by recent acquisitions and improving trends in the U.S. market, and the maker of Progresso soups and Cheerios cereal stood by its full-year outlook.

The company saw some benefits in the quarter from its acquisitions of Food Should Taste Good, Yoplait Ireland, Parampara Foods and Yoplait International.

General Mills, whose shares rose more than 2 per cent, said it expected further benefits in fiscal 2013, starting in the current second quarter, from its purchases of Yoplait Canada and Yoki Alimentos in Brazil.

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Chief executive officer Ken Powell said gross margins and volume trends had improved from the previous quarter.

"In our core U.S. market, we are seeing slow improvement in price and volume trends across our retail food categories," Mr. Powell said in a statement.

Net income rose to $548.9-million (U.S.), or 82 cents per share, in the first quarter ended on Aug. 26 from $405.6-million, or 61 cents per share, a year earlier.

Excluding a tax benefit and a gain from the higher valuation of certain commodity positions, earnings were 66 cents per share.

On that basis, analysts on average were expecting 62 cents, according to Thomson Reuters IBES.

Sales fell a little short of estimates, rising 5 per cent to $4.05-billion, while analysts were expecting $4.08-billion.

Volume increases contributed 9 percentage points of growth, but the value of the sales was reduced by the stronger U.S. dollar. General Mills also sold more lower-priced items.

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The company affirmed its full-year outlook, which calls for 2013 earnings of about $2.65 per share.

General Mills said earlier this year that it anticipated cost inflation of 2 per cent to 3 per cent in fiscal 2013. That would be much more modest than last year, when costs rose more than 10 per cent due to higher prices for a range of commodities, including fuel and grains.

With less cost pressure, General Mills had said it expected its prices to remain stable this year.

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