General Mills Inc reported lower-than-expected quarterly earnings as ingredient costs rose and U.S. sales of its ready-to-eat meals and frozen foods fell, and it said full-year profit could come in at the low end of its forecast.
The company said sales in its U.S. retail business, its largest by revenue, fell 1 percent in the second quarter.
The frozen food business includes Green Giant frozen vegetables and the ready-to-eat meals business includes Cheerios cereals and Progresso soup.
U.S. retail operating profit fell 6 percent in the quarter ended November 24 as energy and dairy costs rose.
"The period included the highest quarterly input cost inflation we expect to see this fiscal year," Chief Executive Ken Powell said in a statement.
Powell also said food and beverage industry sales in the United States and other developed markets slowed a bit during the quarter.
General Mills, which also makes Betty Crocker dessert mixes and Yoplait yoghurt, has been facing increasing competition from cheaper private label foods as consumers look for discounts amid lingering economic uncertainty.
The company, on a conference call with analysts on Wednesday, reaffirmed its 2014 sales growth forecast and said it expected mid to high single-digit growth in operating profit in the back half of the year.
It maintained its adjusted profit forecast of $2.87-$2.90 per share for the year ending May, but said the impact of foreign currency could be greater than previously expected.
The possible devaluation of the Venezuelan bolivar was likely to reduce earnings to the low end of its forecast range, the company said.
Net income rose to $550 million, or 84 cents per share, in the second quarter, from $541.6 million, or 82 cents per share, a year earlier.
Excluding items, the company earned 83 cents per share.
Net sales at the company, which also owns Old El-Paso Mexican foods and Haagen-Dazs ice creams, fell slightly to $4.88 billion.
Analysts on average had expected earnings of 88 cents per share on revenue of $4.94 billion, according to Thomson Reuters I/B/E/S.
The Minneapolis, Minnesota-based company's shares closed marginally higher at $49.73 on the New York Stock Exchange on Wednesday.
