General Mills confirms expansion of its Buffalo plant and invests $25 million

General mills GIS has reportedly confirmed the expansion of cereal production at its Buffalo plant to include brands like Corn Chex, Honey Nut Chex and others. Notably, the facility already produces brands such as Kix flour, Total, Lucky Charms, Wheaties, Cheerios and Gold Medal.

Notably, the expansion project involves an investment of $25 million with public sector support from New York State to the tune of $1 million. The funds are in addition to the provision of low-cost hydropower and electricity by the Power Authority.

The project also includes the purchase of new packaging equipment and improved ingredient systems. The upgrade is expected to be completed in May 2017. Meanwhile, management said 417 of the plant’s current workers would be retained. At the same time, no new jobs will be created.

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General Mills recently cut costs to improve its bottom line. Earlier this year, General Mills announced plans to lay off 1,400 workers worldwide and close several factories due to low demand for some of its products.

It’s worth noting that the company’s American cereal category has seen a decline in recent years. Revenues from this segment declined 8% year-over-year to $2.33 billion in the first quarter of fiscal 2017. Although the grains sector showed some improvement over the In fiscal 2016, overall cereal sales decreased by approximately 1% over the year.

Declining demand for cereals due to competitive pressure from alternatives such as yogurt, eggs, bread and peanut butter is hurting the growth of this category. Additionally, changing consumer views on health and wellness have hurt retail cereal sales.

However, we believe that the Buffalo plant expansion initiative should go some way to helping General Mills revitalize this priority business.

General Mills currently carries a Zacks Rank #3 (Hold).

Actions to consider

Top-ranked stocks in this sector include Post Holdings, Inc. POST, Tate & Lyle plc TATYY, and ConAgra Foods, Inc. CAG.

Post Holdings – a Zacks Rank #1 (Strong Buy) stock – is expected to see a 295.81% rise in fiscal 2016 earnings.

Tate & Lyle is expected to see a 6.25% rise in earnings for fiscal 2017. The company carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

ConAgra Foods carries a Zanks Rank #2 (Buy). The company’s profit growth for the full financial year 2017 is forecast at 18.20%.

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