General Mills Inc. (NYSE:GIS)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes displayed fluctuations throughout the analyzed period. After an initial decline from approximately 2.22 billion in 2014 to around 1.62 billion in 2015, there was a recovery phase reaching near 2.08 billion by 2017. This was followed by a slight decrease in 2018 before an increase to approximately 2.27 billion in 2019, indicating variability but a generally positive recovery trend towards the end of the period.

Cost of Capital

The cost of capital demonstrated relative stability with minor fluctuations. It started at approximately 10.34% in 2014, slightly decreasing in 2015, then increased to 10.83% in 2016. In subsequent years, the cost steadily declined, reaching its lowest point of 8.78% in 2018 before a minor increase to 9.4% in 2019. This downward trend in later years suggests improved capital efficiency or changes in market conditions reducing financing costs.

Invested Capital

Invested capital generally showed a declining trend from 2014 through 2016, decreasing from about 19.36 billion to roughly 18.40 billion. However, a significant increase occurred in 2018, with invested capital rising sharply to over 27.6 billion and maintaining a similar level in 2019. This substantial growth in invested capital in the later years could indicate major capital expenditures, acquisitions, or strategic investments aiming at expansion or restructuring.

Economic Profit

The economic profit data revealed considerable volatility and predominantly negative outcomes during the period. The initial year showed a positive economic profit of approximately 218 million. However, this turned sharply negative in 2015 to about -363 million, then fluctuated, turning slightly positive in 2016 and 2017 but never reaching prior positive levels. Thereafter, the economic profit again became deeply negative in 2018 and 2019. This pattern indicates challenges in generating returns exceeding the cost of capital, particularly in the latter half of the period.

Summary Insights

Overall, while net operating profit after taxes displayed some recovery and growth by 2019, this did not consistently translate into positive economic profit, largely impacted by variations in cost of capital and substantial increases in invested capital. The sharp expansion in invested capital amid declining or negative economic profit suggests potential inefficiencies or a lag in realizing returns from recent investments. These dynamics warrant further analysis to assess long-term value creation and capital allocation effectiveness.

The financial data shows the annual performance of the company over a six-year period from 2014 to 2019. Two key metrics are presented: net earnings attributable to the company and net operating profit after taxes (NOPAT).

Net Earnings Attributable to the Company

The net earnings exhibit fluctuations throughout the period. Starting from $1,824,400 thousand in 2014, there is a notable decline to $1,221,300 thousand in 2015. This is followed by a recovery phase where net earnings increase to $1,697,400 thousand in 2016 but then slightly dip to $1,657,500 thousand in 2017. The peak is observed in 2018 at $2,131,000 thousand, representing the highest net earnings in this timeframe. However, the following year, 2019, shows a decline to $1,752,700 thousand, reflecting a decrease of approximately 17.8% from the previous year’s peak.

Net Operating Profit After Taxes (NOPAT)

NOPAT also shows variability but with a generally increasing trend. It begins at $2,219,325 thousand in 2014 and declines in 2015 to $1,616,844 thousand, mirroring the net earnings pattern. Thereafter, NOPAT steadily recovers and increases, reaching $2,029,941 thousand in 2016 and continuing its ascent with minor fluctuation to $2,079,159 thousand in 2017 and $1,920,512 thousand in 2018. The highest value is recorded in 2019 at $2,274,308 thousand, representing a strong recovery and the highest operational efficiency in terms of post-tax profits over the period.

Overall, both net earnings and NOPAT show an initial decline from 2014 to 2015, likely indicating a challenging year or adverse conditions. Despite this, the company demonstrates resilience with a recovery phase from 2016 onward. Net earnings reach their peak in 2018 but experience a downturn in 2019. Conversely, NOPAT recovers more robustly, peaking in 2019 and displaying stronger operational profitability relative to net earnings. This divergence in the final year may suggest changes in non-operating items, tax impacts, or other factors affecting net earnings differently than operating profit.

The financial data reveals a fluctuating trend in the income taxes and cash operating taxes over the six-year period.

Income Taxes

Income taxes decreased significantly from 883,300 thousand US dollars in May 2014 to 586,800 thousand US dollars in May 2015, representing a notable reduction.

Subsequently, there was an increase to 755,200 thousand US dollars in May 2016, followed by a decline to 655,200 thousand US dollars in May 2017.

In May 2018, income taxes declined sharply to 57,300 thousand US dollars, marking the lowest point in the period analyzed, before rising to 367,800 thousand US dollars in May 2019.

Cash Operating Taxes

Cash operating taxes exhibited a more stable but variable trend, starting at 821,360 thousand US dollars in May 2014 and decreasing to 676,323 thousand US dollars in May 2015.

There was a slight increase to 745,707 thousand US dollars in May 2016, followed by a decrease to 579,670 thousand US dollars in May 2017.

The value rose again to 674,791 thousand US dollars in May 2018 before declining sharply to 383,900 thousand US dollars in May 2019.

Overall, both income taxes and cash operating taxes show substantial volatility over the years. Income taxes show a steep decline around 2018, while cash operating taxes, although variable, remain generally higher than income taxes except for 2018. The trends suggest potential changes in tax obligations or tax planning strategies impacting these financial items during the examined period.

Total Reported Debt & Leases

The total reported debt and leases showed a fluctuating trend over the six-year period. Initially, there was a moderate increase from approximately $9.13 billion in 2014 to $9.58 billion in 2015, followed by a decline to about $8.79 billion in 2016. In 2017, the debt level rose again to roughly $9.93 billion. A significant increase occurred in 2018, reaching approximately $16.32 billion, the highest level in the period analyzed. This peak was followed by a slight reduction to $14.93 billion in 2019, indicating a partial deleveraging but maintaining a relatively high debt position compared to earlier years.

Stockholders’ Equity

Stockholders’ equity experienced a downward trajectory between 2014 and 2017, decreasing from approximately $6.53 billion to around $4.33 billion. This decline suggests a reduction in the net value attributable to shareholders during this period. However, equity started to recover in 2018, increasing notably to $6.14 billion, and continued to grow in 2019, reaching about $7.05 billion. The recovery indicates a strengthening of the company’s equity base in the latter years analyzed.

Invested Capital

Invested capital exhibited relative stability from 2014 to 2017, ranging between approximately $18.4 billion and $19.4 billion. In 2018 there was a marked increase to roughly $27.61 billion, which was sustained in 2019 with a slight decrease to $27.38 billion. This sharp increase in invested capital parallels the rise in total reported debt and leases during the same period, suggesting significant capital allocation or asset acquisition financed largely through debt.

Overall Analysis

The financial data indicates that the company increased its leverage significantly in 2018 and maintained a higher debt load in 2019 relative to the earlier years. This period also coincides with a substantial jump in invested capital, signaling possibly intensified investment activity or expansion. Meanwhile, stockholders’ equity contracted from 2014 through 2017 but recovered afterward, possibly reflecting improved profitability or capital injections. The trends suggest a strategic phase of investment funded by increased debt, with signs of balance sheet strengthening towards the end of the period.

Economic Profit

The economic profit exhibits significant volatility over the six-year period. Initially, there is a positive economic profit of 217,935 thousand US dollars in 2014, followed by a sharp decline to a negative value of -362,893 thousand US dollars in 2015. A recovery is observed in 2016 and 2017 with positive values of 36,706 and 168,268 thousand US dollars, respectively. However, the trend reverses again in 2018 and 2019, with economic profit turning negative at -502,321 and -298,654 thousand US dollars. This pattern indicates fluctuating profitability and challenges in consistently generating returns above the cost of capital.

Invested Capital

Invested capital remains relatively stable from 2014 to 2017, fluctuating around 18.4 to 19.3 billion US dollars. In 2018, there is a substantial increase to 27.6 billion US dollars, which maintains near this elevated level in 2019 at approximately 27.4 billion US dollars. This sharp rise suggests significant investment or acquisition activity during this period, potentially impacting other financial metrics.

Economic Spread Ratio

The economic spread ratio mirrors the volatility seen in economic profit. It begins positively at 1.13% in 2014, plunges to a negative -1.89% in 2015, and modestly recovers to a low positive 0.2% in 2016 and 0.89% in 2017. In 2018 and 2019, the ratio falls back into negative territory at -1.82% and -1.09%, respectively. This ratio's fluctuations denote varying levels of return relative to invested capital, with frequent periods where the returns do not sufficiently cover the associated costs of investment.

Net Sales Trend

Net sales demonstrated a downward trajectory from 2014 to 2017, declining from approximately $17.91 billion to $15.62 billion. This decline was followed by a modest recovery in 2018 and 2019, where sales increased to around $15.74 billion and $16.87 billion, respectively. Overall, despite the partial recovery towards the end of the period, net sales ended lower than the initial 2014 value.

Economic Profit Trend

Economic profit exhibited significant volatility throughout the period. The margin started positive in 2014 at about $218 million but deteriorated sharply to a negative $363 million in 2015. This was followed by a rebound to a positive $37 million in 2016 and further improvement to approximately $168 million in 2017. However, the trend reversed again with substantial declines in 2018 and 2019, resulting in negative economic profits of around $502 million and $299 million, respectively. The data suggest periods of both recovery and decline, with the latter years marked by notable losses.

Economic Profit Margin Analysis

The economic profit margin mirrored the fluctuations seen in economic profit values. It began positively at 1.22% in 2014 but dropped to -2.06% in 2015, indicating reduced profitability relative to sales. A slight recovery occurred in 2016 and 2017, reaching 0.22% and 1.08% respectively, showing improved efficiency in generating economic profit. Nevertheless, a sharp downturn was observed in 2018 and 2019, with margins falling to -3.19% and -1.77%, reflecting declining profitability and increased economic losses in those years.

Overall Observations

The data reflect a challenging financial environment characterized by fluctuations in sales and profitability. The initial period saw weakening sales and profitability metrics, followed by a transient recovery in the mid-period. The later years, however, experienced significant economic profit declines despite some recovery in net sales, indicating potential increases in costs, inefficiencies, or other adverse factors impacting profitability. The persistent negative economic profit margins in the last two years suggest the need for strategic reassessment to improve economic returns.