General Mills misses quarterly profit estimates due to supply chain issues and inflation

General Mills Inc Cheerios and Honey Nut Cheerios are displayed on the shelf of a Whole Foods Market store in Venice, California, United States, March 17, 2018. REUTERS / Lisa Baertlein

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Dec.21 (Reuters) – General Mills Inc (GIS.N) missed Wall Street estimates for quarterly profits on Tuesday as cereal maker Cheerios grappled with soaring commodity prices and rising costs transport and labor.

Shares of the Minneapolis, Minnesota-based company are down about 4% in pre-market trading.

Prolonged supply chain disruptions and the shortage of truck drivers in the United States have forced packaged food manufacturers to incur higher costs, pushing up the prices of ingredients like wheat, corn and edible oils which have already squeezed the sector’s margins.

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To alleviate some of the cost pressures, General Mills, like its peers Kraft Heinz Co (KHC.O) and Campbell Soup Co, increased the prices of its products.

However, inflation and increased supply costs during the quarter exceeded General Mills’ efforts to increase product prices, CEO Jeff Harmening said in his prepared remarks, adding that the current environment is also “Hard as I have seen it in my 27+ years in the Industry.”

The company said it has taken new pricing measures that will take effect in the current quarter, adding that it expects further price increases in the second half of the year.

Dough maker Pillsbury also raised its sales forecast for the year as a whole, betting on strong demand for its cereals and baked goods as well as pet food, which contributed to a rise net sales of 6% in the current quarter.

The company now expects organic net sales to increase between 4% and 5% in fiscal 2022. It previously expected annual organic sales to be in the upper end of a declining range of 1% to 3%.

Second-quarter net sales of $ 5.02 billion exceeded estimates by $ 4.84 billion, according to Refinitiv IBES.

Excluding items, General Mills gained 99 cents per share in the three months ended Nov. 28, with analysts’ estimate missing of $ 1.05 per share.

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Report by Deborah Sophia in Bengaluru; Editing by Krishna Chandra Eluri

Our Standards: Thomson Reuters Trust Principles.

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