General Mills Inc. (NYSE:GIS)

Net Operating Profit After Taxes (NOPAT)

The NOPAT shows fluctuations over the six-year period. It decreased significantly from approximately 2.22 billion USD in 2014 to 1.62 billion USD in 2015. Subsequent years saw some recovery with increases to about 2.03 billion USD in 2016 and 2.08 billion USD in 2017. However, there was a decline in 2018 to 1.92 billion USD before rising again to around 2.27 billion USD in 2019, marking the highest level in the given timeframe.

Cost of Capital

The cost of capital demonstrated a downward trend over the period. It started at 10.45% in 2014, decreased gradually to 10.4% in 2015 and peaked slightly at 10.95% in 2016. Afterward, it declined steadily to 8.87% in 2018 before increasing modestly to 9.49% in 2019. This suggests a general reduction in the cost of capital, improving capital efficiency toward the end of the period.

Invested Capital

Invested capital remained relatively stable around 19.4 billion USD between 2014 and 2017. There was a significant increase in 2018 to approximately 27.6 billion USD, which was maintained at a similar level of 27.4 billion USD in 2019. This large increase in 2018 indicates a substantial capital investment or acquisition, impacting the firm's asset base.

Economic Profit

Economic profit exhibited high volatility throughout the period. It started positively at about 196 million USD in 2014 but turned negative in 2015 with a loss of 385 million USD. It recovered to a small positive figure in 2016 and increased further to approximately 147 million USD in 2017. However, it again declined sharply into negative territory, reaching losses of 527 million USD and 326 million USD in 2018 and 2019, respectively. These fluctuations indicate challenges in generating returns above the cost of capital, especially in the latter years.

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 demonstrates significant volatility over the observed periods. It begins with a positive value of 196,149 US$ thousands in 2014, followed by a sharp decline to a negative figure of -384,583 US$ thousands in 2015. In 2016, economic profit recovers modestly to 14,655 US$ thousands and further increases to 147,326 US$ thousands in 2017. However, the trend reverses in the subsequent years, with economic profit plunging to -527,220 US$ thousands in 2018 and improving slightly but remaining negative at -325,647 US$ thousands in 2019. Overall, the data suggest instability in generating economic profit, marked by periods of both recovering and declining profitability.

Invested Capital

Invested capital exhibits a generally increasing trend over the six-year period. Starting at approximately 19.36 billion US$ in 2014, it experiences a slight decline through 2016 to 18.40 billion US$, followed by a moderate rise in 2017 to 18.98 billion US$. A considerable increase occurs in 2018, with invested capital reaching 27.61 billion US$, and it remains relatively stable in 2019 at about 27.39 billion US$. The sharp rise in 2018 suggests significant capital investments, which remain sustained through 2019.

Economic Spread Ratio

The economic spread ratio mirrors the instability evident in economic profit. It starts at a positive 1.01% in 2014, declines to -2% in 2015, then slightly recovers to 0.08% in 2016 and 0.78% in 2017. The ratio deteriorates again to -1.91% in 2018 and marginally improves to -1.19% in 2019. This pattern indicates inconsistent returns on invested capital, with negative spreads dominating the latter part of the period, reflecting challenges in creating value above cost of capital during those years.

Economic profit

The economic profit exhibited significant fluctuations over the analyzed periods. Initially, there was a positive economic profit of 196,149 thousand US dollars in 2014, followed by a sharp decline to a negative value of -384,583 thousand in 2015. In 2016, the economic profit recovered slightly to 14,655 thousand and continued to increase to 147,326 thousand in 2017. However, this positive trend reversed dramatically in the subsequent years, with economic profit plunging to -527,220 thousand in 2018 and marginally improving to -325,647 thousand in 2019. These variations indicate inconsistency in value creation, with notable periods of economic loss.

Net sales

Net sales demonstrated a general declining trend from 2014 through 2017. Starting at 17,909,600 thousand US dollars in 2014, sales decreased annually to reach a low point of 15,619,800 thousand in 2017. A modest recovery occurred in the following years, with net sales increasing to 15,740,400 thousand in 2018 and further to 16,865,200 thousand in 2019. Despite this recovery, the 2019 net sales value remained below the 2014 level, indicating a partial rebound but not a full return to earlier sales volumes.

Economic profit margin

The economic profit margin mirrored the pattern observed in economic profit values. In 2014, the margin was positive at 1.1%, reflecting profitability relative to sales. This margin became negative in 2015, at -2.18%, indicating losses in relation to sales. A brief improvement was seen in 2016 and 2017, with margins of 0.09% and 0.94%, respectively, suggesting near-breakeven or slight profitability. However, the margin worsened considerably in 2018 to -3.35% and improved somewhat in 2019 to -1.93%, consistently registering negative profitability margins in the latter years.