2016 FIRST QUARTER FINANCIAL RESULTS

Transcription

1 Kellogg Company Kellogg Company 2016 FIRST QUARTER FINANCIAL RESULTS Forward Looking Statements This presentation contains, or incorporates by reference, forward looking statements with projections concerning, among other things, the Company s global growth and efficiency program (Project K), the integration of acquired businesses, the Company s strategy, zero based budgeting, and the Company s sales, earnings, margin, operating profit, costs and expenditures, interest expense, tax rate, capital expenditure, dividends, cash flow, debt reduction, share repurchases, costs, charges, rates of return, brand building, ROIC, working capital, growth, new products, innovation, cost reduction projects, workforce reductions, savings, and competitive pressures. Forward looking statements include predictions of future results or activities and may contain the words expects, believes, should, will, anticipates, projects, estimates, implies, can, or words or phrases of similar meaning. The Company s actual results or activities may differ materially from these predictions. The Company s future results could also be affected by a variety of factors, including the ability to implement Project K as planned, whether the expected amount of costs associated with Project K will differ from forecasts, whether the Company will be able to realize the anticipated benefits from Project K in the amounts and times expected, the ability to realize the anticipated benefits and synergies from the acquisitions in the amounts and at the times expected, the impact of competitive conditions; the effectiveness of pricing, advertising, and promotional programs; the success of innovation, renovation and new product introductions; the recoverability of the carrying value of goodwill and other intangibles; the success of productivity improvements and business transitions; commodity and energy prices; labor costs; disruptions or inefficiencies in supply chain; the availability of and interest rates on short term and long term financing; actual market performance of benefit plan trust investments; the levels of spending on systems initiatives, properties, business opportunities, integration of acquired businesses, and other general and administrative costs; changes in consumer behavior and preferences; the effect of U.S. and foreign economic conditions on items such as interest rates, statutory tax rates, currency conversion and availability; legal and regulatory factors including changes in food safety, advertising and labeling laws and regulations; the ultimate impact of product recalls; business disruption or other losses from war, terrorist acts or political unrest; and other items. Forward looking statements speak only as of the date they were made, and the Company undertakes no obligation to update them publicly. Non GAAP Financial Measures. This presentation includes non GAAP financial measures. Please refer to the Appendices for a reconciliation of these non GAAP financial measures to the most directly comparable GAAP financial measures. Management believes that the use of such non GAAP measures assists investors in understanding the underlying operating performance of the company and its segments. 2 Page 1 of 11

2 Overview of Operating profit and earnings exceeded our expectations Good underlying performance and share gains in U.S. Cereal business Net sales* performance expected to improve as the year progresses *On a currency neutral comparable basis 3 Summary of Financial Results ($ in millions, except EPS) Reported $ Reported Growth Currency Neutral Comparable Growth* Currency Neutral Comparable Growth excl. VZ* Net Sales $ 3,395 (4.5)% 6.6% (1.0)% Operating Profit $ % 34.9% 1.7% Earnings Per Share (Comparable*) $0.97 (1)% Earnings Per Share (Currency Neutral Comparable*) $ % * Please refer to appendices for reconciliation of non GAAP measures to the most directly comparable GAAP measure. 4 Page 2of 11

3 Net Sales Components (year over year, % change) Currency Neutral Comparable Growth +6.6%, (1)% ex. VZ + 7.3% +0.2% +0.4% $3,556 M (0.7)% (11.7)% $3,395 M (4.5)% Q Volume Price / Mix Project K / Ship Day Diff. Acq. / Div. Currency Q Currency Neutral Comparable Gross Profit* $1.4b First Quarter $1.5b + Pricing in Venezuela Continued investment in food 38.0% Margin* 40.1% Margin* Category/channel mix + On track to post improvement for year * Please refer to appendices for reconciliation of non GAAP measures to the most directly comparable GAAP measure. 6 Page 3of 11

4 Operating Profit Performance by Region ($ in millions, currency neutral comparable performance,* year over year % change ) Reported Dollars Currency Neutral Comparable Growth* North America $362 8% Net input deflation and savings from Project K and zero based budgeting Europe $70 1% Driven by timing of investment to support commercial programs, offset by sales performance Latin America $23 329% Driven by pricing in Venezuela Asia Pacific $17 (6)% Largely due to investment in capabilities and timing of transactional currency impact * Please refer to appendices for reconciliation of non GAAP measures to the most directly comparable GAAP measure. 7 Operating Cash Flow (after capital expenditure)* (millions) First quarter cash flow of $(139) million Included $145 million associated with a bond tender in the quarter Results in line with expectations and on track to deliver $1.1 billion for the full year * Please refer to appendices for reconciliation of non GAAP measures to the most directly comparable GAAP measure. 8 Page 4of 11

5 Core Working Capital (a) (12 month rolling, as a percentage of sales) 7.6% 7.3% 6.8% 6.4% 6.2% 5.6% 4Q Q Q Q Q Q 2016 (a) Internal Kellogg Metric: Period ending. Last 12 months average trade receivables and inventory, less 12 months average trade payables, divided by last 12 months sales Outlook Guidance Guidance From Q Call Current Guidance Q Reported earnings per share $1.72 $1.72 Items affecting comparability Comparable earnings per share (EPS) $3.53 $3.53 EPS growth (+6 8%) EPS growth (+13 15%) Currency neutral comparable 2016 EPS (a) $3.74 $3.81 $4.00 $4.07 Estimate for impact of currency, ex. VZ ( 0.06) ( 0.06) Estimate for impact of VZ currency ( 0.04) ( 0.30) Total impact of currency ( 0.10) ( 0.36) Comparable 2016 EPS $3.64 $3.71 $3.64 $3.71 Integration costs $(0.02) (0.03) $(0.02) (0.03) Up front costs $(0.40) (0.50) $(0.40) (0.50) (a) 2016 guidance excludes the impact of currency translation, differences in the number of shipping days, mark to market adjustments, integration costs, costs related to Project K, Venezuela remeasurement, VIE deconsolidation, and other items that could affect comparability. Does include the impact of prior acquisitions and investment in JVs. 10 Page 5of 11

6 2016 Outlook Net Sales (a) Currency Neutral Comparable Ex. Venezuela +0 2% Incl. Venezuela +4 6% Operating Profit (a) Currency Neutral Comparable +4 6% % EPS (b) Currency Neutral Comparable $4.00 to $4.07 (a) 2016 guidance excludes the impact of acquisitions, dispositions, currency translation, differences in the number of shipping days, mark to market adjustments, integration costs, costs related to Project K, Venezuela remeasurement, VIE deconsolidation, and other items that could affect comparability. (b) 2016 guidance excludes the impact of currency translation, differences in the number of shipping days, mark to market adjustments, integration costs, costs related to Project K, Venezuela remeasurement, and other items that could affect comparability. Does include the impact of prior acquisitions and investment in JVs. 11 Introduction North America Return to Profitable Growth Accelerate momentum behind advantaged brands in Cereal, Snacks, and Frozen Transform Veggie and unlock the full potential of Kashi Company Expand margins (while investing to grow) Project K and ZBB 12 Page 6of 11

7 U.S. Morning Foods Kellogg Core Six Brands and Overall Portfolio Driving Share Growth Year Over Year Dollar Share Change (a) Kellogg s Core Six (b) Kellogg s Brand (c) 0.5% 0.5% 0.2% 0.2% FY 2015 Q (a) AC Nielsen Scantrack, xaoc, week ending 04/02/2016; (b) Core 6 = Special K, FMW, Raisin Bran, Frosted Flakes, Foot Loops, Rice Krispies; (c) Kellogg excl. Kashi 13 U.S. Snacks Good growth in Big Three Cracker brands Continued good performance from Pringles Expect sequential improvement in sales across the balance of the year 14 Page 7of 11

8 U.S. Specialty Share gains in the Convenience channel K 12 and on the go growth in Foodservice Distribution gains in Vending 15 North America Other Great new innovation launching in Frozen Food Performance of Kashi cereal improved and great innovation launching Growth in Canadian Cereal and Wholesome Snacks businesses 16 Page 8of 11

9 Summary North America Return to Profitable Growth Accelerate momentum behind advantaged brands in Cereal, Snacks, and Frozen Transform Veggie and unlock the full potential of Kashi Company Expand margins (while investing to grow) Project K and ZBB 17 Europe Continued strong growth in the Pringles business Growth in the Wholesome Snack business New innovation and support planned in Cereal business 18 Page 9of 11

10 Latin America Broad based share gains Strong performance of Snack business Challenging economic environment 19 Asia Pacific Good sales growth in Asia Pringles posted strong growth Our JVs continue to perform well 20 Page 10 of 11

11 Kellogg Company Summary Good start to the year Progress on food improvements, Pringles expansion, sales capabilities, and savings initiatives Building momentum as the year progresses, as we expected 21 Kellogg Company FIRST QUARTER 2016 FINANCIAL RESULTS Q&A Page 11 of 11