General Mills Inc. (NYSE: GIS), the maker of Cheerios cereal and Pillsbury pastries, said Wednesday it will cut 850 jobs to cut costs in the face of rising food prices.
Minneapolis-based General Mills expects pre-tax restructuring costs of $109 million tied to employee severance costs and the write-down of production equipment. The company said $94 million of the costs will be recorded in its fiscal fourth quarter of 2012, ending May 27, and the remainder will be recorded in the company's fiscal 2013 earnings.
Savings will be reinvested in the company's growth plans.
General Mills reaffirmed its adjusted earnings guidance of $2.53 and $2.55 per share in fiscal 2012, which excludes costs related to the restructuring and integration of Yoplait SAS, the French yogurt company it bought last year for $1.15 billion.
The food company has been dragged down by rising costs for ingredients including wheat and sugar, as well as weaker consumer demand because of the economy. In the 2012 fiscal third quarter, it had profit of $391.5 million and 58 cents per share, down slightly from $392.1 million and 59 cents in the prior year.
Fiscal 2012 has presented a particularly challenging operating environment with commodity inflation the highest we've seen in 30 years and more than double the average annual rate we expect to see going forward. In addition, slow economic recovery has kept many consumer budgets under pressure, said Kendall Powell, chairman and CEO of General Mills, in a March earnings call.
Shares of General Mills fell 30 cents to $38.28 in midday trading.