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General Mills (NYSE:GIS) Is Ready to Feast on the Competition


The company's aggressive overseas expansion and new product launches are starting to pay off.

Acquisitions Help Broaden General Mills' Customer Base

Still, there was a lot for investors to like in the company's latest results, which it reported Tuesday.

In its fiscal 2013 first quarter, which ended August 26, 2012, General Mills' sales rose 5.3% from a year ago, to $4.05 billion. Net earnings rose 35.3%, to $548.9 million, or $0.82 per share.

Excluding unusual items, earnings rose to $0.66 from $0.64. That topped the consensus estimate of $0.62, though sales were just shy of the $4.08 billion the Street was expecting.

Acquisitions were a big reason for those gains, mainly its purchase of Yoplait International last year, which pushed up General Mills' international sales by 27%. Sales fell 1% in the U.S. and 2% at the Bakeries and Foodservice segment.

Purchases like Yoplait are a big part of the company's plan to offset sluggish growth in the U.S. by expanding overseas. Thanks to this strategy, the U.S. accounted for 61.6% of General Mills' retail sales in the latest quarter, down from 65.2% a year earlier.

In the previous quarter, the company bought Food Should Taste Good (a natural snack food company based in Massachusetts), Yoplait Ireland, and Indian spice and sauce maker Parampara Foods. In May, it added leading Brazilian snack food company Yoki for $875 million.

General Mills' big overseas expansion isn't without risk, particularly in light of slowing economic growth in some developing countries, including India. It also increases the company's exposure to fluctuating exchange rates, which can have a big impact on its overseas sales.

However, General Mills is being careful with its purchases, and mainly targeting well-known companies-like Yoplait and Yoki-that tie into its current products and give it distribution networks it can use to sell more of its other foods in these markets.
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