2nd UPDATE: General Mills, ConAgra: Double-Digit 2Q Earnings Drop

ConAgra Foods Inc. (CAG) and General Mills Inc. (GIS) are both banking on earnings growth in the second half of their fiscal years, following muted first-half results with margins down from higher costs and sales volume crimped by rising prices.

Tuesday, the two packaged-food giants both posted double-digit percentage declines in fiscal second-quarter earnings. General Mills earnings fell 28%, including charges related to its acquisition of 51% of the Yoplait yogurt international business. ConAgra's earnings fell 14.5%, as it experienced hedging losses and restructuring charges in parts of its business.

But both companies backed their earnings view for the year on expectations for strong finishes. With nearly all of their price increases in place, ConAgra and General Mills hope that increased marketing and a rash of new products can entice shoppers to buy enough of their products. The companies expect the increased spending to help them sell more products than in the prior-year periods.

The pushback on higher prices has largely played out as expected, executives at both companies said, though ConAgra executives said sales volume decline of 1% in the second-quarter was slightly better than it projected. ConAgra's prices were up 5%, contributing to a 4% sales increase for its consumer foods business. Its shares were up 3.9% to $26.15 in recent trading.

General Mills, the maker of Cheerios cereal and Progresso soups, meanwhile, saw its equivalent case volume fall 2% in its U.S. retail business for the quarter. Overall, dollar sales in the segment were up 3%, but without higher prices would have been down 7%. General Mills, whose results slightly missed expectations, sale shares fall 2.4% to $38.65 in recent trading.

While U.S. business face meager growth, General Mills continues to hammer away at growing overseas, where over the past five years sales have grown at twice the rate of General Mills. ConAgra, meanwhile, is looking at acquisitions in private-label, a segment it sees as having more growth potential. It recently bought a private-label pretzel maker for $300 million.

For its quarter, General Mills reported a fell by to $444.8 million from $613.9 million a year ago. Excluding one-time items, per-share earnings were flat year-over-year. Sales jumped 14% to $4.62 billion.

ConAgra's profit, meanwhile, fell to $171.8 million from $200.9 million, while revenue increased 8.1% to $3.4 billion.

-By Paul Ziobro, Dow Jones Newswires; 212-416-2194; paul.ziobro@dowjones.com

--Tess Stynes and Melodie Warner contributed to this article.

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