General Mills (NYSE:GIS) is making the best of a tough environment. Near-term challenges remain, but its latest moves are likely to benefit investors over the long haul.

The packaged foods giant announced yesterday that it will sell its 40.5% stake in a European snack joint venture to the other party in that enterprise, PepsiCo (NYSE:PEP). General Mills unloaded the stake for $750 million and plans to put the proceeds toward its long-term commitment to shave $2 billion from its debt load through fiscal 2006.

For investors, this is definitely a welcome sign. At the end of August, the firm's long-term debt totaled $7.4 billion, down about $100 million from last year. Payments on this debt are a major drag on earnings. In its fiscal first quarter, the company racked up $113 million in interest expense, and for all of fiscal 2005, the firm has projected that interest costs will be between $470 million and $490 million.

The PepsiCo transaction is General Mills' second major financial maneuver in recent months that stands to benefit investors. In October, the food outfit inked an agreement to sell $835 million in preferred interests to an affiliate of Lehman Brothers (NYSE:LEH). That deal was designed to finance General Mills' repurchase of 16.5 million of its shares from Diageo (NYSE:DEO).

As it seeks to improve its financial profile, General Mills also is working on some promising product initiatives. Unlike some of its competitors, the company never fully embraced the low-carb diet trend, whose growth is now leveling off. Instead, the firm has been taking some sensible steps to make its offerings more attractive to health-conscious consumers, including making all its cereals whole grain. In addition, General Mills has introduced reduced sugar versions of some of its popular kids' cereals, such as Trix and Cocoa Puffs.

Unfortunately, the company continues to wrestle with a few problems. The Securities and Exchange Commission is investigating General Mills' sales and accounting practices, and the high price of commodities has been crimping earnings. Still, the firm's financial and product initiatives seem likely to continue to pay off long after these problems are resolved.

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Fool contributor Brian Gorman is a freelance writer living in Chicago. He does not own shares of any companies mentioned here.