DBRS Changes General Mills, Inc.’s Trend to Stable

Dominion Bond Rating Service (“DBRS”) has today changed the trend on the Issuer Ratings of General Mills, Inc. (“GMI” or the “Company”) and its subsidiary, General Mills Canada Corporation, to Stable from Negative. DBRS has also assigned a Commercial Paper rating of R-1 (low) with a Stable trend to the Company.

The trend change reflects the significant improvement in GMI’s financial profile, which has come as a direct result of management’s focus on debt reduction over the past three years. The trend was Negative as a result of operational and integration challenges which delayed the reduction of leverage associated with the The Pillsbury Company acquisition. During F2005 alone, GMI reduced debt by approximately US$2 billion using free cash flow and proceeds from divestitures, improving credit metrics to within the range of the current ratings.

At the same time, GMI has maintained a decent and relatively steady earnings profile despite intense pressure on margins from significantly higher commodity costs, as profitability continues to be driven by the Company’s strong and diversified portfolio of brands and large scale.

Going forward, DBRS expects revenue to continue growing in the 3%-4% range, reflecting continued strong growth in the International segment and yogurt sales, which has offset weakness in cereal, although there are indications that cereal is beginning to stabilize in F2006. Margin pressure should abate somewhat in F2006 as GMI benefits from supply chain productivity initiatives, carryover benefits of F2005 price increases, and a lower rate of commodity cost inflation.

GMI’s financial profile should remain stable based on DBRS’s expectation for the Company to continue generating consistently strong free cash flow, which DBRS believes will be used primarily for share repurchases over the next two to three years while maintaining absolute debt levels relatively constant.

Note:
Issuer ratings apply to all general senior unsecured obligations of the issuer in question.