December 17, 2014 / 2:07 PM / 3 years ago

UPDATE 1-General Mills profit beats estimates due to cost cuts

3 Min Read

(Adds details, shares)

Dec 17 (Reuters) - General Mills Inc, the maker of Cheerios cereal and Betty Crocker cake mixes, reaffirmed its full-year forecast and reported a better-than-expected profit as it cut costs to battle weak sales in the United States.

The company's shares rose 1.3 percent in premarket trading on Wednesday.

General Mills has embarked on a cost-saving program that aims to save more than $400 million in fiscal 2015. The company is cutting 700-800 jobs, improving supply chain efficiency and shaving advertising costs.

Advertising and media costs in the United States, its biggest market by sales, were 10 percent below year-ago levels in the second-quarter ended Nov. 23, the company said.

Selling, general and administrative expenses fell 5.1 percent in the quarter.

"The operating environment remains challenging but, as we move into the second half of our fiscal year, we expect to renew sales and profit growth," Chief Executive Ken Powell said.

Sales in the United States, its biggest market, have fallen for five straight quarters. Sales at its U.S. retail business fell 3.5 percent to $2.86 billion in the second quarter.

In a bid to curb the slide in sales and expand in the high-growth health foods market, General Mills acquired organic foods producer Annie's Inc for $820 million in September.

The Minneapolis, Minnesota-based company also said this week it would launch more than 50 protein-based, gluten free products next year.

Net income attributable to General Mills fell to $346.1 million, or 56 cents per share, in the second quarter. Revenue fell 3.4 percent to $4.71 billion.

Excluding items, General Mills earned 80 cents per share.

Analysts on average had expected second-quarter profit of 77 cents per share of revenue of $4.79 billion, according to Thomson Reuters I/B/E/S.

Shares of the company were up 1.1 percent at $51.70 in premarket trading. The stock has gained 2.4 percent this year to Tuesday's close of $51.13. (Reporting by Ramkumar Iyer in Bengaluru and Anjali Athavaley in New York)

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