General Mills Inc. (NYSE:GIS)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes shows some variability but generally exhibits an increasing trend over the period analyzed. It started at approximately 2.22 billion US dollars in 2014, declined notably in 2015 to around 1.62 billion, then recovered and increased steadily to reach about 2.27 billion by 2019. This indicates improved profitability after a temporary downturn in 2015.

Cost of Capital

The cost of capital declined overall during the period, starting at approximately 10.43% in 2014 and decreasing to around 9.48% in 2019. The rate experienced fluctuations, with a peak near 10.93% in 2016 and a low of 8.85% in 2018. The downward trend in the cost of capital suggests potentially lower financing costs or reduced risk perceptions over time.

Invested Capital

Invested capital remained relatively stable from 2014 to 2017, fluctuating slightly between approximately 18.4 billion and 19.4 billion US dollars. However, a significant increase occurred in 2018, spiking to about 27.6 billion, and remained at a similar level (~27.4 billion) in 2019. This sharp increase indicates substantial capital deployment or acquisition activities during 2018, maintaining the higher asset base afterward.

Economic Profit

Economic profit demonstrated considerable volatility throughout the period. It began positively in 2014 with approximately 199 million US dollars but dropped sharply to a negative value of about -382 million in 2015. In 2016 and 2017, economic profit returned to positive territory, though at a reduced level compared to 2014. However, in 2018 and 2019, economic profit again fell deeply negative, reaching approximately -524 million and -322 million, respectively. These negative figures during latter years, despite increased NOPAT, suggest that the returns on invested capital did not surpass the cost of capital, likely reflecting the impact of the increased invested capital base.

Overall Analysis

The data reveal an increase in profitability after an initial dip, coupled with a general reduction in the cost of capital. However, the sharp increase in invested capital since 2018 has not translated into corresponding economic profit improvements. Instead, economic profit turned significantly negative, indicating that the company may be facing challenges in generating returns above its cost of capital on the expanded capital base. This pattern underscores the importance of assessing capital deployment efficiency and the nature of recent investments or acquisitions.

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 exhibited significant fluctuations over the six-year period. Initially, a positive value of approximately $199 million was recorded, followed by a substantial decline into negative territory around -$382 million in 2015. A recovery occurred in 2016 and 2017, with economic profit reaching positive values of about $17 million and $150 million, respectively. However, the subsequent years saw a sharp reversal, with economic profit falling to -$524 million in 2018 and remaining negative at approximately -$322 million in 2019. This volatility indicates instability in the company’s ability to generate returns above its cost of capital during this timeframe.

Invested Capital

The invested capital showed a relatively stable trend from 2014 through 2017, fluctuating slightly around the $18 billion to $19 billion mark. A notable increase occurred in 2018, where invested capital jumped significantly to over $27.6 billion, maintaining a similar level into 2019 with approximately $27.4 billion. This marked increase suggests either significant capital investment or acquisition activity within these years, reflecting a possible strategic expansion or restructuring of the company’s asset base.

Economic Spread Ratio

The economic spread ratio, representing the difference between return on invested capital and cost of capital as a percentage, mirrored the pattern observed in economic profit. It started positively at 1.03% in 2014, declined sharply to -1.98% in 2015, and showed marginal positive improvement to 0.09% and 0.79% in the following two years. The metric then decreased again to negative values of -1.9% in 2018 and -1.18% in 2019. This trend highlights the company's challenges in sustaining returns above its capital costs, reinforcing the insights gained from the economic profit analysis.

Net Sales

The net sales figures indicate a downward trend from 2014 to 2017, decreasing from 17,909,600 thousand US dollars to 15,619,800 thousand US dollars. However, in 2018 and 2019, a slight recovery is observed, with net sales increasing to 15,740,400 thousand and then to 16,865,200 thousand US dollars, respectively. Overall, net sales show a decline over the six-year period, with some stabilization and modest growth towards the end.

Economic Profit

The economic profit exhibits significant volatility throughout the period. It starts at a positive 198,911 thousand US dollars in 2014, followed by a sharp decline to a negative 381,833 thousand US dollars in 2015. The figure recovers somewhat in 2016 and 2017, reaching positive levels of 17,450 thousand and 149,981 thousand US dollars. However, 2018 and 2019 again show negative economic profits of -524,064 thousand and -322,225 thousand US dollars. This pattern suggests fluctuations in profitability, with challenges evident particularly in 2015 and the last two years analyzed.

Economic Profit Margin

The economic profit margin mirrors the trends seen in economic profit, showing a positive margin of 1.11% in 2014, followed by a significant drop to -2.17% in 2015. Margins improve slightly in 2016 (0.11%) and 2017 (0.96%) but deteriorate again in 2018 and 2019 to -3.33% and -1.91%. This volatility reflects changes in the company's ability to generate returns above its cost of capital, with periods of both margin expansion and contraction.