General Mills Inc. (NYSE:GIS)

The analysis of the annual financial data reveals several key trends in the company's performance over the examined period.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibits fluctuations throughout the years, starting at approximately 2.22 billion US dollars in 2014, declining to roughly 1.62 billion in 2015, then recovering to about 2.03 billion in 2016 and maintaining near that level in 2017. There is a slight decline in 2018 to around 1.92 billion, followed by an increase to approximately 2.27 billion in 2019. This pattern indicates variability in operating performance with a general upward recovery towards the end of the period.

Cost of Capital

The cost of capital shows a gradual downward trend from 10.42% in 2014 to a low of 8.85% in 2018, before rising slightly to 9.47% in 2019. This suggests improvements in the company’s financing cost or risk profile over most of the period, with a moderate increase in the final year considered.

Invested Capital

Invested capital remains relatively stable in the range of approximately 18.4 to 19.4 billion US dollars from 2014 through 2017. However, there is a significant increase in 2018 to about 27.6 billion, which persists at a similar level in 2019. This sharp rise points to a major investment or accumulation of assets during the later years, reflecting a strategic shift or expansion.

Economic Profit

Economic profit shows pronounced volatility. It begins with a positive value of approximately 201 million US dollars in 2014, plunges to a negative 380 million in 2015, recovers marginally with a small positive economic profit in 2016, and improves further to about 152 million in 2017. Subsequently, it declines sharply to negative values again—approximately -522 million in 2018 and -320 million in 2019. This pattern highlights challenges in generating returns above the cost of capital, especially in the latter years, despite increased invested capital.

Overall, the company demonstrates fluctuating profitability and efficiency in capital usage. The increase in invested capital in the latter years coincides with negative economic profits, suggesting that the new investments have not yet generated returns exceeding their cost of capital. Meanwhile, the gradual reduction in the cost of capital up to 2018 indicates potentially improved financial conditions, though this advantage diminishes slightly in 2019. The company’s operating profit trends reflect recovery phases interspersed with declines, emphasizing a need for close monitoring of investments and profitability drivers.

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.

Over the six-year period under review, the economic profit of the entity exhibited considerable volatility. Starting with a positive economic profit of approximately $201 million, the figure sharply declined into negative territory by the following year, registering a loss of roughly $380 million. A modest recovery was observed in the third year, with economic profit returning to a positive but relatively low value. The upward trend continued into the fourth year, reaching about $152 million. However, the last two years saw the economic profit dropping again, first with a significant negative figure close to $522 million, and then a slightly lesser loss of around $320 million.

The invested capital demonstrated a generally increasing trajectory. It began at approximately $19.36 billion and fluctuated slightly downward in the following years, reaching a low near $18.40 billion in the third year. Subsequently, a significant increase was observed in the fifth and sixth years, with invested capital rising sharply to exceed $27.3 billion. This substantial increase suggests a marked expansion or investment phase during the latter years.

Examining the economic spread ratio, which reflects the efficiency of invested capital in generating economic profit, a similar pattern of fluctuation is evident. Initially, the ratio was positive at around 1.04%. It then swung to a negative value of nearly -1.97% in the second year, indicating diminished returns relative to invested capital. A slight positive ratio was recorded in the third year, followed by a more substantial positive figure of 0.8% in the fourth year. However, the ratio again descended into negative territory in the final two years, reaching -1.89% and -1.17% respectively. These negative spreads align with the periods of negative economic profit, highlighting challenges in generating value above the cost of capital during those times.

In summary, the data reflect a cycle of fluctuating profitability, with economic profit and economic spread ratio alternating between positive and negative values. Despite the volatility in returns, the invested capital has generally expanded, particularly in the most recent years, which may indicate strategic investments aimed at growth, though these have not consistently translated into positive economic profits.

Net Sales

Net sales demonstrated a fluctuating trend over the six-year period. Starting at approximately 17.91 billion USD, the figure declined consistently over the next three years to reach a low of around 15.62 billion USD by May 2017. Following this decline, net sales slightly recovered to about 15.74 billion USD in May 2018 and showed a stronger increase to approximately 16.87 billion USD by May 2019. This pattern indicates a dip in revenue mid-period with partial recovery in the most recent years.

Economic Profit

The economic profit exhibited significant volatility throughout the analyzed timeframe. Initial economic profit was positive at roughly 201 million USD in 2014 but shifted markedly negative in 2015, reaching nearly -380 million USD. A modest recovery occurred in 2016 and 2017, with economic profits of approximately 19 million USD and 152 million USD respectively. However, this improvement reversed dramatically in 2018 and 2019, with economic profits declining sharply to negative 522 million USD and negative 320 million USD. The data suggests considerable challenges in generating value beyond the cost of capital in more recent years.

Economic Profit Margin

The economic profit margin mirrored the volatility of absolute economic profit. Beginning with a positive margin of 1.12% in 2014, it dropped to -2.16% in 2015. The margin then edged back into positive territory in 2016 at 0.12%, and improved further to 0.97% in 2017. Nonetheless, this positive trend did not sustain, as margins deteriorated to -3.32% in 2018 and -1.90% in 2019. The margin pattern reinforces that profitability relative to sales has been unstable, with recent years experiencing negative returns on the company's economic activities.

Overall Insights

The data reveals a period of declining sales followed by a partial rebound. Economic profit and profit margins have displayed pronounced fluctuations, highlighting a struggle to maintain consistent value creation. Despite some recovery phases, the negative economic profit and margins in the latter years reflect pressures on profitability and economic efficiency. These trends may indicate operational challenges, market conditions, or increased costs impacting financial performance.