General Mills Inc. (NYSE:GIS)

Net operating profit after taxes (NOPAT)

The NOPAT demonstrates variability over the six-year period. Starting at approximately 2.22 billion USD in 2014, it decreased notably to around 1.62 billion USD in 2015, indicating a significant dip in operating performance. However, it rebounded in the following years, reaching about 2.08 billion USD in 2017 before slightly declining again in 2018. In 2019, NOPAT achieved its highest value in the period analyzed, increasing to approximately 2.27 billion USD, reflecting improved operational efficiency or profitability.

Cost of capital

The cost of capital fluctuated moderately, starting at 10.33% in 2014 and remaining close to this level through 2016 and 2017. A marked decrease occurred in 2018, dropping to 8.77%, which may suggest a lower risk profile or more favorable financing conditions. In 2019, the cost of capital rose again to 9.39%, though it remained below the initial years. This trajectory indicates some cost-efficiency in capital management during the period.

Invested capital

The invested capital remained relatively stable between 2014 and 2017, hovering near 19 billion USD. However, in 2018, there was a substantial increase to approximately 27.6 billion USD, which was sustained in 2019 with a slight decrease to around 27.4 billion USD. This increase could reflect significant asset acquisitions, investments, or changes in capital structure, impacting the company's overall investment base.

Economic profit

Economic profit, a key indicator of value creation beyond cost of capital, showed considerable volatility. It was positive at approximately 219 million USD in 2014 but turned negative the following year with a loss of about 362 million USD. A modest recovery occurred in 2016 and 2017, where economic profit was positive but relatively small. However, it dropped sharply into negative territory again in 2018 and 2019, with losses over 500 million USD and nearly 298 million USD respectively. This pattern suggests difficulties in consistently generating returns above the cost of capital despite rising NOPAT and invested capital.

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 data over the six-year period reveal notable fluctuations and some concerning trends in key performance indicators.

Economic Profit

The economic profit shows significant volatility, with positive values recorded in 2014, 2016, and 2017, and negative results in 2015, 2018, and 2019. The highest economic profit occurred in 2014 at approximately 218.6 million US dollars, followed by a sharp decline to a substantial loss of about 362.2 million US dollars in 2015. Subsequent years exhibit similar swings, with economic profit recovering partially in 2016 and 2017 before falling again into negative territory in the last two periods. This pattern indicates inconsistency in the company's ability to generate profit above its cost of capital.

Invested Capital

Invested capital remained relatively stable between 2014 and 2017, fluctuating slightly around 18.4 to 19.3 billion US dollars. However, there is a marked increase in 2018 to approximately 27.6 billion US dollars and a slight decrease in 2019. The substantial rise in invested capital starting in 2018 suggests considerable investments or acquisitions during this period, which may have implications for the company’s return on invested capital and financial leverage.

Economic Spread Ratio

The economic spread ratio, which measures the difference between return on invested capital and cost of capital expressed as a percentage, exhibits a similar fluctuating trend to economic profit. Positive spread was noted in 2014 (1.13%), 2016 (0.2%), and 2017 (0.89%), suggesting value creation during these years. Conversely, negative spreads in 2015, 2018, and 2019 (-1.88%, -1.82%, and -1.09%, respectively) indicate periods of value destruction, where returns failed to cover the cost of capital. The negative spreads in the later years are especially concerning given the increased level of invested capital.

Overall, the data depict a company undergoing cyclical financial performance with intermittent value creation phases interspersed with periods of value erosion. The increase in invested capital paired with negative economic spread ratios in recent years may warrant further analysis to assess the efficiency and strategic rationale of capital allocation decisions.

The financial data reveals several notable trends over the six-year period under consideration. The net sales figures demonstrate fluctuations with a general downward trend from 2014 to 2017, followed by a modest recovery in 2018 and a more significant increase in 2019. Economic profit, however, presents a more volatile pattern, exhibiting periods of both positive and negative values which do not strictly correlate with net sales trends.

Net Sales

Net sales decreased steadily from approximately $17.9 billion in 2014 to around $15.6 billion in 2017, indicating a contraction in sales over these years. A slight increase occurred in 2018, reaching about $15.7 billion, followed by a more appreciable rise in 2019 to roughly $16.9 billion. This recovery in sales suggests a potential turnaround or stabilization of market performance towards the end of the period.

Economic Profit

The economic profit figures fluctuate considerably, indicating variable profitability. In 2014, economic profit was positive at approximately $219 million, but it sharply turned negative in 2015 with a loss exceeding $362 million. A recovery is observed in 2016 and 2017 where profits returned to positive territory ($37 million and $169 million respectively). However, the trend reversed sharply downward again in 2018 and 2019, with losses reaching over $500 million and nearly $298 million respectively. These swings suggest challenges in maintaining consistent profitability despite the net sales fluctuations.

Economic Profit Margin

The economic profit margin aligns with the economic profit swings, ranging from a positive 1.22% in 2014 to a negative margin of -2.05% in 2015. Margins improved slightly in 2016 and 2017, reaching 0.23% and 1.08%, but declined significantly afterward to -3.19% in 2018 and -1.77% in 2019. These margins indicate struggles with operational efficiency or cost management during the latter years, contributing to the overall negative economic profit despite periods of sales recovery.

Overall, while net sales experienced a decline followed by a partial rebound, economic profitability and profit margins showed significant volatility, oscillating between profit and loss without sustained improvement. The disparity between sales trends and economic profit points to underlying issues affecting cost structure, investment returns, or competitive pressures impacting the company's financial performance during these years.