Share Watch: Puffed-up cereals only the beginning for General Mills
Critics of American militarism used to maintain that Dwight D Eisenhower 'blew the gaff' when, in his farewell speech after an eight-year term as President of the USA, he used the phrase 'military/industrial complex'.
During the Vietnam war in particular, the various bands of free thinkers maintained that this was a well-oiled conspiracy to ensure there would always be an adversary to sustain the American need for this complex.
I'm not sure I ever fully understood what the military/industrial complex was, but sketching out the background to the company under scrutiny today, the giant foods company General Mills (GM), I'm beginning to get a better understanding of the term.
By the end of WWII, the company was manufacturing breakfast foods, vitamins, gun sights, dehydrated eggs, soups, sandbags, guns and tanks.
After the War it would go on to help invent the 'black box' flight recorder. It would help pioneer an understanding of the stratosphere for space travellers and it also built the submersible vessel, which went two miles deep into the Atlantic and found the long-lost liner Titanic. While all this was going on the company was the force behind the emergence of some of the great world brands like Burger King, Haagen-Dazs and Yoplait.
Today, GM Inc is still a global food company. It makes and markets branded and packaged consumer foods worldwide.
The company is valued at $36bn, employs 42,000 and operates in 100 countries. Its product portfolio is built on breakfast cereals, baking goods, grain snacks, meal products and organic food.
The company's brand names include Cheerio's, Old El Paso, Nature Valley, Betty Crocker, Pillsbury, as well as the afore-mentioned Yoplait and Haagen-Dazs, each with sales in excess of $1bn.
However sales in recent years are 'challenging', reflecting changing consumer preferences.
The company is of the opinion that consumers are increasingly interested in natural foods with simple ingredients.
To meet these challenges the company is reshaping its business through divestments, innovating its existing products and acquisitions. Recently it offloaded the low margin Green Giant brand. To increase its footprint in the natural and organic food segment it has over the past 16 years been developing its portfolio by acquisitions.
Today, sales in this sector exceed $700m with projections to exceed $1bn within the next three years.
The US is its largest and most important market with 60pc of the group sales and 72pc of profits at $2.2bn.
The group's international sales are half that of the US at $4.6bn, down 10pc on the year, and operating profits plunged by 15pc to $440m.
Europe accounts for 40pc of international sales; the remainder is divided equally between Canada, Asia-Pacific and Latin America.
The company's operating performances in 2016 was mixed. Sales declined 6pc to $16.5bn with operating profits falling short at $3bn.
GM immediately decided to drive costs down and expects to generate savings of $600m within the next two years.
The company is not stretched by its capital expenditure requirements of $700m as it is easily supported from net cash of $2.5bn.
In the last 10 years GM share price has moved from $20 to $73 earlier this year, a nice reward for those who bought and held. The share trades at $62 on a price earnings multiple of 21 having a market cap of $36bn. An increase in dividends will please shareholders (GM in all its guises has paid dividends without interruption or reduction for 117 years).
This is one good reason for having the stock in your portfolio; another is the increase in earnings per share helped by its $1.2bn share buyback programme.
However, rather than rush into this stock, I'd like a bit more knowledge on the US changing consumer market in the US and be sure about currency risk.
Nothing in this section should be taken as a recommendation, either explicit or implicit to buy any of the shares mentioned.