McCormick & Company, Inc.

Transcription

1 McCormick & Company, Inc. Fourth Quarter 2008 Financial Results and Business Outlook The following slides accompany a January 28, 2009 presentation to investment analysts 1

2 Forward-looking information Certain information contained in this release, including expected trends in net sales and earnings performance, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of Forward-looking statements are based on management s current views and assumptions and involve risks and uncertainties that could significantly affect expected results. Results may be materially affected by external factors such as damage to our reputation or brand name, business interruptions due to natural disasters or similar unexpected events, actions of competitors, customer relationships and financial condition, the ability to achieve expected cost savings and margin improvements, the successful acquisition and integration of new businesses, fluctuations in the cost and availability of raw and packaging materials, and global economic conditions generally which would include the availability of financing, interest and inflation rates as well as foreign currency fluctuations and other risks described in the Company s filings with the Securities Exchange Commission. Actual results could differ materially from those projected in the forward-looking statements. The Company undertakes no obligation to update or revise publicly, any forward-looking statements, whether as a result of new information, future events or otherwise. 2

3 Record results in 2008 Sales increased 9% Exceeded $3 billion Ahead of initial 4-6% projection Earnings per share up 12% Increase of 11% on comparable basis Ahead of initial 8-10% projection FY08 EPS - diluted $1.94 $ % Impact of restructuring charges Impact of impairment charge.15 - Net credit related to Lawry s* (.04) - Adjusted EPS - diluted $2.14 $ % Numbers in table may not add due to rounding. * Net gain related to acquisition of assets of Lawry s business due primarily to the sale of the Season-All business. 3

4 Resilient in a tough economy Sales increased 5%, 9% in local currency Gross profit margin up 50 bps Earnings per share on comparable basis up 12% Q08 EPS - diluted $.62 $.67-7% Impact of restructuring charges Impact of impairment charge.15 - Adjusted EPS - diluted $.84 $ % Numbers in table may not add due to rounding. 4

5 Resilient in a tough economy Broad portfolio of customers and products Expanded presence in alternative channels and gaining more distribution Products featuring value-priced meals + convenience Gravies +8% Slow cooker seasoning +46% Taco seasoning +14% Hispanic items +14% Supplier of private label for more than 25 years Strong sales to food manufacturers seeking innovation Supplier of pure, natural, high quality herbs and spices 5

6 Resilient in a tough economy Ability to adapt Culture of participation Message to employees: Two business segments Focused on flavor Experienced leadership Focus on sales Curtailing expenses Actively managing working capital Diligently monitoring credit status of suppliers and customers 6

7 Taking great flavors to new heights in 2008 Completed Lawry s, largest acquisition to date Exceeded $3 billion in sales Grew consumer business operating income 9%* Grew industrial business operating income 6%* Increased marketing support 13% from 2007 and 51% in last 5 years Reduced expenses $31 million $1.00 $0.80 Dividends declared Cut 5 days from cash conversion cycle Increased dividend 9%; tripled since 1998 * On comparable basis excluding restructuring and impairment charges $0.60 $0.40 $0.20 $0.00 7

8 Solid sales growth 4Q08 Sales increased 5.4% 8.7% in local currency $ in millions % +2.1% $907 $ % 4Q07 FX Pricing Vol/Mix 4Q08 8

9 Steady improvement in gross profit margin Basis points 150 Year-to-year change in gross profit margin 4Q08 gross profit margin increase of 50bp Q08 2Q08 3Q08 4Q08 9

10 Impact of impairment charge Non-cash impairment charge to reduce value of Silvo brand Amount of charge $29.0 million Reduced: Operating income $29.0 million Net income $20.1 million EPS $.15 10

11 4Q08 EPS 4Q07 Adjusted earnings per share - diluted $.75 Higher operating income.10 Income from unconsolidated operations (.01) 4Q08 Adjusted earnings per share - diluted $ % Adjusted EPS excludes the impact of restructuring and impairment charges and, related to the acquisition of the assets of the Lawry s business, a net gain due primarily to the sale of the Season-All business. A reconciliation of GAAP to non-gaap financial results is included in McCormick s earnings release. 11

12 4Q08 Consumer segment Consumer segment sales + 8.1%; +10.6% in local currency +7.0% from volume/mix, including +6.0% from acquisitions +3.6% pricing Sales in Americas +14.7%; +15.9% in local currency +12.6% from volume/mix, including +8.4% from acquisitions +3.3% pricing Sales in EMEA -9.9%; -4.0% in local currency -9.0% from volume/mix +5.0% pricing Sales in Asia/Pacific +1.3%; +4.1% in local currency +3.4% from volume/mix +0.7% pricing 12

13 4Q08 Consumer segment Operating income rose $15.4 million Includes $2.6 million increase in marketing support Increase of 11.8% vs 4Q07 on comparable basis Numbers in table are in millions Q08 Consumer operating income $107.0 $120.0 Impact of restructuring charges Impact of impairment charge Oper Inc excluding charges $145.5 $ % 13

14 4Q08 Industrial segment Industrial segment sales + 1.1%; +5.9% in local currency -5.7% from volume/mix, including +2.0% from acquisitions +11.6% pricing Sales in Americas +4.5%; +6.4% in local currency -8.1% from volume/mix, including +3.0% from acquisitions +14.5% pricing Sales in EMEA -16.0%; -0.3% in local currency -8.4% from volume/mix +8.1% pricing Sales in Asia/Pacific +17.7%; +16.6% in local currency mostly volume/mix, minimal pricing 14

15 4Q08 Industrial segment Operating income rose $4.9 million Benefit of effective price management, favorable business mix and product innovation Increase of 29.3% vs 4Q07 on comparable basis Q08 Industrial operating income $ 18.7 $ 12.0 Impact of restructuring charges Oper Inc excluding charges $ 21.6 $ % Numbers in table are in millions. 15

16 Balance sheet and cash flow Reduced cash conversion cycle 5 days. Maintained access to commercial paper market and back-up credit facilities. Lowered debt to EBITDA ratio since acquisition of Lawry s. Generated cash flow from operations of $315 million, ahead of $300 million goal. 16

17 Continued growth in 2009 Projected sales growth 2 to 4% Favorable volume/mix +2-4% Pricing expected to add +2-4% Acquisitions +3% Foreign exchange rates -7% Projected sales growth in local currency is 9-11% 17

18 Continued growth in 2009 Projected gross profit margin +50 bp Pricing to offset higher costs $21 million savings from supply chain initiatives $9 million savings from restructuring program Continued shift in mix toward higher-margin business 18

19 Continued growth in 2009 Also projecting for 2009: 20% increase in marketing support 31% tax rate Reduced income from unconsolidated operations in first half Shares outstanding up slightly from

20 Continued growth in 2009 Projected increase in EPS: 2009 EPS range of $2.24 to $2.28 Includes estimated $0.05 of restructuring charges 2009 Adjusted EPS range of $2.29 to $2.33 Increase of 7 to 9%, on comparable basis Adjusted EPS for 2009 excludes the impact of restructuring charges. Adjusted EPS for 2008 excludes the the impact of restructuring and impairment charges and, related to the acquisition of the assets of the Lawry s business, a net gain due primarily to the sale of the Season-All business. A reconciliation of GAAP to non-gaap 2008 financial results is included in McCormick s earnings release. 20

21 Continued growth in 2009 Generating cash from operations: Cut another 3 to 5 days from cash conversion cycle $30 to $50 million in incremental pension contributions Continue pay down of debt Fund $90 million capital expenditures Increased dividend payments 21

22 Strong business in tough environment Breadth of products and customers Industry knowledge and ability to adapt Identifying and pursuing opportunities for new products, expanded distribution and acquisitions Excited about prospects for growth 22