General Mills Inc. (NYSE:GIS)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes showed fluctuations over the six-year period. It declined notably from approximately 2.22 billion in 2014 to about 1.62 billion in 2015, followed by a recovery and moderate increases in subsequent years, reaching approximately 2.27 billion in 2019. This indicates variability but an overall recovery and slight growth in operating profitability towards the end of the period.

Cost of Capital

The cost of capital exhibited a downward trend, beginning at 10.44% in 2014 and decreasing to 9.49% by 2019, with the lowest point at 8.86% in 2018. This reduction in the cost of capital suggests potentially improved financing conditions or lowered risk perceptions over the period.

Invested Capital

Invested capital remained relatively steady from 2014 to 2017, fluctuating around 19 billion US dollars. However, a significant increase occurred in 2018, surging to approximately 27.6 billion, before experiencing a slight decrease to about 27.4 billion in 2019. The sharp rise in 2018 indicates substantial capital deployment or acquisition activity during that year.

Economic Profit

Economic profit displayed substantial volatility and mostly negative values throughout the period. After a positive figure of approximately 197 million in 2014, it fell into negative territory in 2015 (-384 million), slightly recovered to a marginal positive in 2016 (15.7 million), then increased to 148 million in 2017. The last two years witnessed negative economic profits again, with -526 million in 2018 and -324 million in 2019. This pattern suggests that the company struggled to generate returns above its cost of capital for most years, especially pronounced in 2015, 2018, and 2019.

Summary

Overall, the data reflects a company experiencing variable profitability and significant investment activities. While operating profit shows resilience and recovery after an initial decline, the company's ability to generate economic profit above the cost of capital is inconsistent and often negative. The decrease in cost of capital might have partially offset some challenges, but the substantial capitalization investments and fluctuating returns highlight ongoing challenges in maximizing shareholder value during the period analyzed.

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.

The financial performance over the examined periods reveals notable volatility in key profitability metrics. Economic profit exhibited significant fluctuations, with positive values in some years and substantial negative results in others. Specifically, economic profit started positively, declined sharply to a negative figure in the subsequent year, improved again briefly, before experiencing large negative downturns towards the end of the analyzed timeframe.

Invested capital demonstrated relative stability initially, maintaining levels in the range of approximately 18 billion to 19 billion US dollars for the first four years. However, there was a pronounced increase in the latter two years, reaching over 27 billion US dollars. This substantial increase in invested capital may reflect expansion, acquisitions, or capital investments made during this period.

The economic spread ratio mirrored the trends seen in economic profit, with positive spreads early on, followed by negative spreads in subsequent years. The ratio's movement from just above zero to significant negative values indicates periods where the returns on invested capital were insufficient to cover the cost of capital, leading to economic value destruction in those years.

Economic Profit

The metric showed irregular performance, with positive economic profit in the first, third, and fourth years, suggesting value creation during these times. However, the negative values in the second, fifth, and sixth years indicate economic losses and potential underlying operational or market challenges.

Invested Capital

Initially consistent, the invested capital rose sharply in later years. This growth in capital base may point to strategic investments but also contributes to increased pressure on achieving sufficient returns as reflected by economic profit figures.

Economic Spread Ratio

The ratio's shift from positive to negative aligns with the observed economic profit trends, highlighting inconsistent efficiency in generating returns above the cost of capital. Negative spreads in later years suggest the company faced difficulties in maintaining profitable investment returns.

In summary, the data indicates a challenging economic environment with periods of both value creation and destruction. The rise in invested capital combined with declining economic spreads and fluctuating economic profit underscores the need for careful management of capital allocation and operational performance to restore consistent profitability.

Economic Profit

The economic profit exhibited significant volatility throughout the analyzed period. It started positively at 197,182 thousand US dollars in 2014, then decreased sharply to a negative value of -383,555 thousand US dollars in 2015. In 2016, economic profit improved to a modest positive value of 15,700 thousand US dollars, followed by a further increase to 148,318 thousand US dollars in 2017. However, the figure declined substantially to negative territory again in 2018 and 2019, reaching -526,040 thousand and -324,368 thousand US dollars respectively. This indicates an unstable performance in generating returns above the cost of capital over the years under review.

Net Sales

Net sales showed a generally downward trend from 2014 to 2017, decreasing from approximately 17,909,600 thousand US dollars in 2014 to 15,619,800 thousand US dollars in 2017. This decline was followed by a slight increase in 2018 to 15,740,400 thousand US dollars and a more pronounced recovery in 2019, reaching 16,865,200 thousand US dollars. Despite the recovery in the last two years, net sales in 2019 remained below the 2014 levels, indicating challenges in maintaining top-line growth consistently.

Economic Profit Margin

The economic profit margin mirrored the economic profit trend, displaying instability with noticeable fluctuations. Starting at a positive margin of 1.1% in 2014, it dropped sharply to -2.18% in 2015. A slight recovery occurred in 2016 with a marginally positive margin of 0.09%, improving further to 0.95% in 2017. Nevertheless, the margin again deteriorated in 2018 and 2019, reaching negative values of -3.34% and -1.92%, respectively. This pattern reveals recurring challenges in generating profitable economic returns relative to sales over the reviewed periods.

Overall Interpretation

The data indicate that the company experienced considerable instability in both profitability and sales performance over the six-year span. While there were brief periods of positive economic profit and margin, these were not sustained, as reflected by the recurring negative values in certain years. The partial recovery in net sales towards the end of the period did not correspond to improved economic profitability, suggesting possible issues with cost control, investment returns, or market conditions impacting overall economic value generation.