General Mills Inc. (NYSE:GIS)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes exhibits fluctuation throughout the period. It initially decreases significantly from approximately 2.22 billion in 2014 to about 1.62 billion in 2015. Following this decline, the NOPAT recovers, showing growth in 2016 and 2017, reaching approximately 2.08 billion. After a slight downturn in 2018 to around 1.92 billion, it rises again in 2019 to approximately 2.27 billion, the highest recorded in the observed timeframe.

Invested Capital

Invested capital remains relatively stable between 2014 and 2017, fluctuating modestly near the 19 billion mark. However, there is a notable increase in invested capital starting in 2018, surging significantly to about 27.6 billion and holding steady near 27.4 billion in 2019. This sharp rise indicates a substantial capital investment or acquisition during this period.

Return on Invested Capital (ROIC)

The return on invested capital shows a downward trend over the six-year period. Beginning at a strong 11.46% in 2014, ROIC declines sharply to 8.4% in 2015 but partially recovers to just under 11.03% in 2016 and 10.95% in 2017. Subsequently, it experiences a steep decline to 6.96% in 2018, with a slight improvement to 8.3% in 2019. The decrease in ROIC in the latter years coincides with the substantial increase in invested capital, suggesting that the additional investments have not yet resulted in proportionally higher returns.

The analysis of the financial ratios over the six-year period reveals several noteworthy trends and fluctuations.

Operating Profit Margin (OPM)

The operating profit margin exhibits variability, starting at 16.98% in 2014, declining sharply to 13.01% in 2015, then recovering to a peak of 17.02% in 2017. Following this peak, it undergoes a gradual decline to 15.76% by 2019. This pattern suggests intermittent challenges impacting operational efficiency, with a recovery phase that does not fully sustain the peak profitability observed in 2017.

Turnover of Capital (TO)

The turnover of capital shows a steady decrease from 0.92 in 2014 to a low of 0.57 in 2018, with a marginal improvement to 0.62 in 2019. This decline indicates a reduction in the efficiency with which capital is utilized to generate revenue, possibly reflecting increased capital investment without commensurate growth in turnover.

1 – Effective Cash Tax Rate (CTR)

This metric oscillates over the period, beginning at 72.99% in 2014, dropping slightly in 2015 to 70.51%, then increasing to 78.2% in 2017. Thereafter, it decreases to 74% in 2018 before experiencing a significant rise to 85.56% in 2019. The elevated level in 2019 indicates increased cash tax paid relative to earnings, which may affect net profitability.

Return on Invested Capital (ROIC)

The return on invested capital follows a generally declining trajectory. From 11.46% in 2014, it drops to 8.4% in 2015, recovers somewhat in 2016 and 2017 to above 10%, but then declines sharply to 6.96% in 2018 before a slight rebound to 8.3% in 2019. This trend suggests diminishing returns on investments, indicating potential challenges in maintaining investment efficiency or profitability.

Overall, the data depict a scenario of mixed operational performance with fluctuating profit margins and declining capital turnover. Despite some recovery phases, both the effective tax burden and returns on invested capital indicate increased pressure on profitability and efficiency towards the latter years. This combination may signal the need for strategic review to address capital utilization and tax management moving forward.

Net Operating Profit Before Taxes (NOPBT)

Over the six-year period, net operating profit before taxes experienced fluctuations. Initially, there was a decline from approximately 3.04 billion USD in 2014 to about 2.29 billion USD in 2015. This was followed by a recovery in 2016, reaching roughly 2.77 billion USD. The figures then slightly decreased and stabilized around 2.59 to 2.66 billion USD in the subsequent years through 2019, indicating a general trend of stabilization after initial volatility.

Net Sales

Net sales showed a downward trend from 2014 to 2017, decreasing from approximately 17.91 billion USD to 15.62 billion USD. In 2018, sales stabilized slightly at around 15.74 billion USD before rising again to approximately 16.87 billion USD in 2019. This suggests an initial contraction in sales followed by a modest recovery towards the end of the period.

Operating Profit Margin (OPM)

The operating profit margin exhibited a notable drop from 16.98% in 2014 to 13.01% in 2015. This was succeeded by a rebound in 2016 and 2017, where margins increased to approximately 16.75% and 17.02%, respectively. A slight decline occurred in 2018 to 16.49% and further to 15.76% in 2019. Despite the fluctuations, the margin remained above 15% for the latter part of the period, indicating a reasonable level of operational efficiency.

Summary

Overall, the financial data indicates a period of initial decline in both net sales and operating profit, followed by a phase of recovery and relative stabilization. Net operating profit and operating profit margin both reflected the challenges faced in 2015 but showed resilience in subsequent years. The upward movement of net sales in the final year suggests a positive turnaround in market performance. The operating profit margin remained relatively stable above 15% in the later years, reflecting effective cost management or pricing strategies despite fluctuating sales volumes.

Net Sales Trend

The net sales figures show a declining trend from the fiscal year ending May 25, 2014, through May 28, 2017, decreasing from approximately $17.91 billion to $15.62 billion. A slight recovery occurs in the subsequent years, with net sales rising to about $15.74 billion in 2018 and further increasing to approximately $16.87 billion in 2019. Despite this partial rebound, the 2019 level remains below the initial 2014 figure.

Invested Capital Trend

Invested capital remains relatively stable from 2014 through 2017, fluctuating slightly in the range of about $18.4 billion to $19.4 billion. However, in 2018 there is a significant increase, with invested capital rising sharply to approximately $27.61 billion and maintaining a similar level at about $27.39 billion in 2019. This sharp increase in capital investment in the later period contrasts with the earlier relatively steady capital base.

Turnover of Capital (TO) Analysis

The turnover of capital ratio demonstrates a steady decline over the six-year period. Starting at around 0.92 in both 2014 and 2015, it decreases gradually to 0.9 in 2016 and then more sharply to 0.82 in 2017. The decline becomes even more pronounced in 2018 and 2019, with ratios dropping to 0.57 and then a slight increase to 0.62, respectively. This trend suggests decreasing efficiency in utilizing invested capital to generate sales.

Overall Insights

The data indicates that while net sales experienced an overall decrease followed by modest recovery, invested capital saw a significant increase starting in 2018. The turnout of capital ratio's steady decline reflects a reduced efficiency in capital utilization, possibly due to the spike in invested capital not generating proportionate sales growth. This could imply strategic changes such as large investments or acquisitions that have not yet fully translated into sales improvements.

Cash Operating Taxes

The cash operating taxes exhibit a general declining trend over the six-year period observed. Starting at 821,360 thousand US dollars in May 2014, the figure decreases to 383,900 thousand US dollars by May 2019, with notable fluctuations in between. The most significant drop occurs between May 2018 and May 2019, where the taxes paid nearly halve from 674,791 to 383,900 thousand US dollars.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes shows volatile behavior without a clear linear trend. The profit starts at 3,040,685 thousand US dollars in May 2014 and falls sharply in May 2015 to 2,293,167 thousand US dollars. It recovers to 2,774,648 thousand US dollars in May 2016, then experiences minor fluctuations before slightly increasing to 2,658,207 thousand US dollars in May 2019. This indicates some instability in operational earnings during the period but overall maintaining a range between approximately 2.3 and 3.0 million thousand US dollars.

Effective Cash Tax Rate (CTR)

The effective cash tax rate reveals a decreasing trend over the years. Beginning at 27.01% in May 2014, the rate moves irregularly but generally downward, reaching its lowest point at 14.44% by May 2019. A particularly sharp decline occurs from 26.00% in May 2018 to 14.44% in May 2019, aligning with the substantial reduction in cash operating taxes seen in the same period.

Overall Analysis

The data indicates that while net operating profits have fluctuated without a strong directional trend, the company has progressively reduced its tax burden both in absolute cash terms and in percentage terms of profit. The significant drop in effective tax rate and cash operating taxes in the final year suggests changes in tax planning, incentives, or regulatory conditions that have notably decreased the tax outflows relative to operating earnings. This reduction in tax expense, despite relatively stable profits, could imply increased tax efficiency or utilization of tax benefits.