General Mills, Inc. (NYSE:GIS) Q2 2019 Earnings Conference Call - Final Transcript

Dec 19, 2018 • 08:30 am ET


General Mills, Inc. (NYSE:GIS) Q2 2019 Earnings Conference Call - Final Transcript


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Ladies and gentlemen, thank you for standing by, and welcome to the Second Quarter Fiscal 2019 Earnings Conference Call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-answer session. (Operator Instructions) As a reminder, today's conference is being recorded, Wednesday, December 19, 2018.

I would now like to turn the conference over to Jeff Siemon, Vice President, Investor Relations. Please go ahead, sir.

Jeff Siemon

Thanks, Jennifer, and good morning to everybody. I'm joined here this morning by Jeff Harmening, our Chairman and CEO; and Don Mulligan, our CFO. In addition, Jon Nudi, who leads North America Retail segment is joining us for the Q&A portion of the call.

And I'll turn the call over to them in a moment, but before I do, I'll cover a few housekeeping items. Our press release on second quarter results was issued over the wire services earlier this morning. And you can find the release and a copy of the slides that supplement our remarks this morning on our Investor Relations website (Forward-Looking Cautionary Statements).

And with that, I'll turn you over to my colleagues, beginning with Jeff.

Jeff Harmening

Thanks, Jeff, and good morning to everyone. I'll start this morning by offering some quick thoughts on our year-to-date performance. I'm pleased to say that our results through six months keep us on track to deliver our full year targets. Our cost and capital discipline drove profit growth ahead of our expectations in the first half of our fiscal year. Our job to do for the second half is very clear, and that is to accelerate our sales growth in our North America Retail and Pet segments while we maintain our cost discipline. And we're confident in the plans we have to do just that.

Now I'll turn it over to Don Mulligan to walk through our financial performance in the quarter. Then I'll come back to provide an update on our fiscal 2019 priorities and share a few highlights on our second half plans.

Don Mulligan

Thanks Jeff, and good morning everyone. Let's jump right in to our second quarter financial results on slide 5. Net sales of $4.4 billion increased 7% in constant currency, including contributions from the Blue Buffalo acquisition. Organic net sales declined 1%. Strong cost discipline and positive net price realization and mix helped drive margin expansion, resulting in adjusted operating profit of $765 million, up 8% in constant currency. And adjusted diluted EPS of $0.85 increased 2% in constant currency, driven by higher adjusted operating profit and a lower effective tax rate, partially offset by higher net interest expense and higher average diluted shares outstanding in the quarter.

Slide 6 shows the components of net sales growth in the quarter. Organic net sales were down 1% driven by lower contributions from pound volume, partially offset by positive net price realization and mix across all segments. Foreign currency translation resulted in a 2 point headwind in net sales and Blue Buffalo added 8 points to net sales.