The J. M. Smucker Company. Investor Presentation April 2008

Transcription

1 The J. M. Smucker Company Investor Presentation April 2008

2 Forward Looking Statement During the course of our presentation today, we will make statements that may constitute projections, expectations, beliefs or similar forward-looking statements. We would like to caution you that the Company s actual results could differ materially from the results anticipated or projected in these forward-looking statements. Additional detailed information concerning important factors that could cause the Company s actual future results to differ materially from the information we will give you today is included in our public filings, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q, which are available on the SEC s EDGAR database or on our website. The Company does not undertake to update any of these forward-looking statements in light of new information or future events.

3 Agenda Our Company Our Business and Brands Our Strategy Financial Update

4 Who is The J. M. Smucker Company? 1897 Over 110 years old Headquartered in Orrville, Ohio Leading North American brands Five generations of family management Commitment to integrity, trust, and quality

5 Basic Beliefs Quality People Ethics Growth Independence

6 Core Competencies Relationships Emotional Bond Ability to Implement

7 Corporate Responsibility Sustainability Community Involvement Advertising Standards Education Initiatives

8 Our Business U.S. Retail Market Consumer Consumer Oils & Baking 75% of Total Sales 79% of Segment Profit 25% of Total Sales 21% of Segment Profit Special Markets Canada Foodservice Beverage International x% of Total Sales X% Margin

9 Smucker Business Segments Segment U.S. Retail Market Business Area Consumer Consumer Oils / Baking Brands Canada Special Markets International Foodservice Beverage

10 A. F. Murch Co. Grandview, WA Fruit Processing Locations and Distribution Network United States Washington J.M. Smucker Co.. West Fargo, ND Frozen PB&J Sandwiches Maine Smucker Quality Beverages Chico, CA Beverages J.M. Smucker Co. Oxnard, CA Fruit Processing Oregon California Nevada Idaho Utah MIRA LOMA DSC Logistics Arizona Montana Wyoming Colorado New Mexico North Dakota South Dakota Nebraska Kansas The Milnot Co. Seneca, MO Sweetened Condensed and Evaporated Milk J.M. Smucker Co. El Paso, TX Sweetened Condensed and Evaporated Milk Minnesota Wisconsin MEMPHIS Oklahoma DSC Logistics Arkansas JMS Specialty Foods Ripon, WI Fruit Spreads, Condiments & Ice Cream Toppings J.M. Smucker Co. Lexington, KY Peanut Butter J.M. Smucker Co. Orrville, OH Fruit Spreads & Ice Cream Toppings Tennessee J.M. Smucker Co. Memphis, TN Fruit Spreads & Ice Cream Toppings Miss. Alabama Georgia J.M. Smucker N. Carolina Co. Scottsville, KY Frozen PB&J Sandwiches S. Carolina New York Michigan J.M. Smucker Co. Pennsylvania Toledo, OH IowaBaking Mix Illinois and Frosting Indiana Ohio M J.M. Smucker Co. CINCINNATI D Cincinnati, OH Oils, Shortenings, and Sprays Exel W. Va Logistics Missouri Virginia Kentucky VT NJ ATLANTA DSC Logistics NH Mass. R.I. ALLENTOWN Conn DSC Logistics J.M. Smucker (Pennsylvania), Inc. Del. New Bethlehem, PA Peanut Butter Smucker Quality Beverages Havre de Grace, MD Beverages Texas Louisiana Florida Five Mixing Centers One order, one invoice across all brands

11 Locations and Distribution Network Canada British Columbia Alberta Manitoba Quebec Saskatchewan Calgary Excel Logistics Ontario J.M. Smucker Co. Markham, Ontario Canadian Headquarters Hamilton Atlas Cold Storage J.M. Smucker Co. Dehli Township, Ontario Tank Farm for Pickles J.M. Smucker Co. Ste.-Marie de Beauce, Quebec Fruit Spreads & Ice Cream Toppings Brampton Thomson Terminals J.M. Smucker Co. Dunnville, Ontario Condiments & Pickles J.M. Smucker Co. Sherbrooke, Quebec Carnation Canned and Powdered Milk

12 Go To Market Strategy Direct sales force with key accounts National broker for remaining accounts Trade fund management process Category development leadership

13 Strategy Own leading food brands Sold in the center of the store Emphasis on North America

14 Strategic Growth Objective Over our five-year strategic time frame, we expect sales growth to average 8%. We expect to grow our bottom line at this rate or slightly greater. Core Business Growth 3% New Products 1% Acquisitions 4% Total 8%

15 Strategy Implementation Growing Our Brands Core Growth New Products Acquisitions

16 Advertising Campaigns Advertising expense has increased 240% since FY 2002.

17 Cross Promotions

18 Themed Events Power of Family Meals

19 Sponsorships

20 Category Leadership

21 Strategy Implementation Growing Our Brands Core Growth New Products Acquisitions

22 Strategic Architecture Makes You Smile Fun Emotional Fulfillment Good & Good For You Adding Taste Adding Health Easy For You Ease of Use Ease of Purchase

23 Strategic Architecture Makes You Smile

24 Strategic Architecture Good & Good For You

25 Strategic Architecture Easy For You

26 Expanding Brands into New Categories

27 Strategy Implementation Growing Our Brands Core Growth New Products Acquisitions

28 Acquisitions FY 2005 FY 2003 FY 2007 FY 2008 KING KELLY

29 SD&A as % of Net Sales 25.0% 24.6% 23.0% 21.0% 19.0% 21.6% 21.7% 20.0% 20.3% 20.6% 19.2% 17.0% 15.0% FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 (9 months)

30 Divestitures Fiscal Year 2005 Henry Jones Foods (Australia) 2005 Smucker Brazil (Fruit Ingredients) 2005 U.S. Industrial Business (Fruit Ingredients) 2005 Multifoods Foodservice Business 2007 Canadian Non-branded Grain Business 2008 Smucker Scotland (Fruit Fillings)

31 Supply Chain Initiatives Plant Closings and Consolidations Fiscal Year 2004 Ripon, WI Facilities Combined and Expanded 2004 Woodburn & Watsonville (Fruit Processing) 2006 Salinas (Plant Consolidation) Other Initiatives 2005 Exit Contract Packaging in Europe and U.K Distribution Network Realignment

32 Portfolio Transformation Broader Portfolio Reaching a Broader Market Serving categories totaling over $8 billion

33 Sales Growth Net Sales $2.5 $2.0 $2.0B $2.1B $2.1B $1.5 $1.3B $1.4B $1.0 $0.5 $0.0 $650MM FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 Core Acquisitions 5-Year Total Business CAGR = 27% 5-Year Base Business CAGR = 7%

34 Earnings Growth Earnings Per Share (Non-GAAP) $3.00 $2.50 $2.14 $2.42 $2.60 $2.77 $2.89 $2.00 $1.50 $1.38 $1.00 $0.50 $0.00 FY2002 FY2003 FY2004 FY2005 FY2006 FY Year CAGR = 16%

35 Smucker Market Share Leadership U.S. % Dollar Share of Category 80% 75.7% 70% 65.9% 60% 50% 50.6% 47.5% 46.2% 45.3% 41.9% 40% 30% 20% #1 #1 #1 #1 #1 #1 #1 18.8% 21.3% 20.0% 14.9% 10% 0% #2 #3 #3 #3 10.3% Shorten. Ice Cream Swtnd. Nat. PB Nat. Fruit Peanut Edible Flour Baking Potatoes Pancake Syrup Toppings Cond. Milk Butter Beverages Spreads Butter Oils Mixes Mixes $183MM $147MM $136MM $119MM $358MM $873MM #4 5.3% #4 $1.1B $1.2B $480MM $1.5B $394MM $342MM $570MM

36 % Dollar Share of Category Smucker Market Share Leadership Canada 70% 60% 62.7% 59.4% 55.6% 52.3% 51.8% 49.5% 50% 40% 35.0% 30% #1 #1 #1 #1 #1 #1 #1 20% 10% 0% 8.3% 7.8% #3 #4 4.1% Flour Toppings Evap. Milk Swtnd. Cond. Shorten. Condiments Fruit Oils Hot Cereal Peanut Milk Spreads Butter $106MM $12MM $62MM $21M $29MM $168MM $154MM $127MM $103MM $165MM #4

37 Financial Overview

38 2008 Financial Results ($ in millions, except per share data) Third Quarter Ended 1/31/08 Nine Months Ended 1/31/08 $ % increase (decrease) $ % increase (decrease) Net Sales $ % $ 1,935 17% Net Sales (excluding divestitures) $ % $ 1,935 23% Operating Income $ 69 7% $ % Margin % 10.4% 11.4% Net Income $ 42 5% $ % E.P.S. $0.75 6% $ % E.P.S. (non-gaap) $ % $ % Cash Flow from Operations $ % $ 178 (16%)

39 2008 3Q Financial Highlights Smucker, Jif, Crisco and Pillsbury brands led sales growth Acquired Eagle and Carnation brands contributed one-half of top-line growth Record level cost for soybean oil and wheat Pricing to offset higher raw material costs has not maintained profit margins Reduced selling, distribution and administrative expenses from 20.8% to 18.5%

40 U. S. Retail Market Segment FY Q Results Sales growth of 28% Eagle contributed $57 million Consumer up 13% Oils and Baking up 46% (13% excluding Eagle)

41 Special Markets Segment FY Q Results Sales growth of 26% Canada up 49% Foodservice up 20% (8% excluding Eagle) Improved segment margin FY Q = 15.4% FY Q = 13.3%

42 Margin Challenges Commodity cost increases Pricing actions lag cost increases Categories and brands differ in ability to price Customers and consumers response to price increases Ability to improve profit margins in short term

43 Commodity Price Changes Commodity June 2002 March 31, 2008 % Change Crude Oil $ Barrel $ Barrel 280 % Wheat $ 3.00 Bushel $ 9.30 Bushel 210 % Soybean Oil $ 0.18 lb. $ 0.52 lb. 190 % Natural Gas $ 3.25 mm Btu $ mm Btu 210 % Corn $ 2.25 Bushel $ 5.67 Bushel 150 % Sugar $ 0.06 lb. $.12 lb. 100 % Milk Class III $ CWT $ CWT 71 % 43

44 Margin Opportunities Leveraging brands Bolt-on acquisitions New product expansion Supply chain initiatives Smucker Quality Management System (SQMS) Strategic sourcing Realignment of manufacturing network

45 Cash Flow From Operations $300 $273MM $250 $200 $150 $168MM $137MM $150MM $199MM $100 $70MM $50 $0 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 * $178MM for nine months ended January 31, 2008

46 Uses of Cash Nine Months Ended January 31, 2008 Share Repurchase $86 MM Dividends Cash $51 MM Acquisitions $167 MM CapEx $54 MM

47 Dividends and Share Repurchase $160 $140 $120 $100 $80 $60 $40 $20 $0 ($ in Millions) FY04 FY05 FY06 FY07 FY08 9ME Dividends Share Buyback Note: The Company has increased dividends paid in 27 out of the past 30 years. Average increase was 10.7%.

48 Summary of Capital Structure 6.77% Senior Notes due 6/09 $ 75, % Series C Senior Notes due 9/10 10, % Senior Notes due 6/14 100, % Senior Notes due 11/09 200, % Senior Notes due 4/22 400,000 Total Debt $ 785,000 1/31/08 1,850,600 Total Capitalization $ 2,635,600 Debt to Capitalization 30% Debt to EBITDA 2.15X

49 Capital Expenditures ($ in millions) $120 $98MM 8.0% $100 $88MM 7.0% 6.0% $80 $60 $48MM $64MM $57MM $70MM 5.0% 4.0% $40 $20 $0 Depreciation $23MM FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 (E) $24MM $35MM $36MM $53MM $62MM $57MM $65MM (E) 3.0% 2.0% 1.0% 0.0% CapEx % of Net Sales

50 Why Invest in The J. M. Smucker Company? Clear vision Strong portfolio of brands Long-term growth opportunities Strong balance sheet and cash flow Continuity of management

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