Forward Looking Statement

Transcription

1 Forward Looking Statement 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 acquired businesses, the Company s strategy, 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 Pringles acquisition 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 1of 33

2 Agenda Strategy & Overview Win in Breakfast Global Snacks & Emerging Markets Financial Review John Bryant Paul Norman Chris Hood Ron Dissinger 3 Kellogg Today U.S. Natural & Frozen North America Frozen & Specialty Channels North America Retail Cereal U.S. Convenience International Convenience U.S. Cereal 2000 Net Sales $6 billion North America Retail Snacks 2014 Net Sales $14.6 billion International Cereal International Snacks International Cereal 4 Page 2of 33

3 Strategy for Growth Win in Breakfast Become a Global Snacks Leader Grow Frozen Foods Win in Emerging Markets Financial Model 5 Long Term Targets From Q4 Earnings Call Comparable Net Sales (a) Comparable Operating Profit (a) 1% to 3% 4% to 6% Currency Neutral Comparable EPS (b) 7% to 9% (a) 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, and other items affecting comparability. (b) Excludes the impact of currency translation, differences in the number of shipping days, mark to market adjustments, integration costs, costs related to Project K, and other items impacting comparability. 6 Page 3of 33

4 Long Term Targets Our economics are very sensitive to topline growth Economics of Growth Net Sales Gross Profit 1 Brand Building Overhead Operating Profit EPS Growth Percentage Change 2% 3% at least 2% 2% 5% 7 9% 1 Assumes 60% variable gross margin, cost savings offset inflation 7 The Path to Purchase Returning to Growth desire decide delight Great ideas and innovation to get on the list Flawless execution to get in the cart Great food to get in the heart 8 Page 4of 33

5 The Path to Purchase Desire Advertising, as a % of sales* *as of the latest 10 k filing, as of 31 December, The Path to Purchase Decide In Store Effectiveness 10 Page 5of 33

6 The Path to Purchase Delight 11 What We Will Do We ll achieve it by: Drive improved rates of sales growth Setting pragmatic and realistic goals Investing in the Path to Purchase: Desire, Decide, Delight Increase brand building Improve in store capabilities Develop great food Stabilizing cereal business and driving global snack and emerging market businesses 12 Page 6of 33

7 Developed Cereal Business 14 Page 7of 33

8 Today, Core Four Cereal Markets* Represent about 1/4 of our Business % of Total Company Net Sales Core 4 50% Core 4 25% * US, UK, Canada, Australia 15 Cereal Category in Core Four Markets has Grown Over Time CAGR%* 5Year 1.2% 10 Year 0.3% 3.0% 1.3% 1.8% 2.1% 1.6% 0.4% *Euromonitor data, compound annual growth rate through 31 December, Page 8of 33

9 Great Brands Powerful portfolio offering broad choice Leading category share 17 Breakfast is Just as Important as Ever ~70% say breakfast is most important meal of the day ~20% are eating breakfast more often ~40% are making breakfast a higher priority ~75% of cereal is eaten at home ~30% of breakfast meals include ready to eat cereal 18 Page 9of 33

10 but Changing Habits are Affecting RTEC Changing views of healthy foods Changing consumer breakfast habits More options to choose from Move from emphasis on absence of negatives (low fat, low calorie, low carb) to the presence of positives (fresh, unprocessed) Timeframe of breakfast is expanding Almost 2 eating occasions per morning 16% eat breakfast out of the home; portability / accessibility is an opportunity Top needs at breakfast are taste, ease / convenience, satiety; followed by health 4+ items being consumed per occasion Source: Project Prime Breakfast Landscape Study 19 Developed Cereal Wellness in today s world Investing in our foods New ways to engage Dialing up the fun and executing with impact 20 Page 10 of 33

11 Wellness For Today s World Special K From diet to wellness Meeting evolving needs through innovation and renovation Helping change lives 21 Wellness For Today s World Kashi Experienced and focused team in place Go Lean full conversion to non GMO Expanding organic range and launching pioneering innovation 22 Page 11 of 33

12 Wellness For Today s World Origins Range of cereal, granola and muesli Real food prepared simply Made with ingredients you can see and pronounce 23 New Ways To Engage Two way dialogue Nutrition Sustainability Community Transparency 24 Page 12 of 33

13 New Ways To Engage See you at breakfast Evening consumption 25 Dialing Up The Fun Repertoire Fun in the box 26 Page 13 of 33

14 Executing With Impact Feet on the street (U.S.) Sales fundamentals Impact in store 27 In Summary Broad portfolio of great brands and foods offering wellness and fun Relevant for today s world Executing with greater impact 28 Page 14 of 33

15 Gr r reat to Be Here Agenda for Growth Europe Global Pringles Emerging Markets 30 Page 15 of 33

16 Europe Operating Scope Complex Environment > 1.2B Consumers > 200 Languages > 65 Countries Scaled Operation 30 Brands 14 Plants 9,300 Employees 31 Europe Strategic Focus Room To Grow Win at Breakfast with Cereal Explosively Grow Snacks Accelerate Growth in Emerging Markets 32 Page 16 of 33

17 European Footprint $2.9 Billion Sales Revenue (a) Snacks Emerging Cereal Developed (a) Net sales, fiscal year Powerful Iconic Brands 34 Page 17 of 33

18 Kellogg Europe Operating Structure Wired To Win Focused Portfolio 2 Categories Simplified Structure Room to Grow 6 Geographies 35 A Dynamic European Leadership Team Diverse Backgrounds 36 Page 18 of 33

19 Strong Operating Discipline Comparable Operating Profit Margin (a) Significant improvement since % (a) Comparable net sales growth and comparable operating profit growth are non GAAP measures which are reconciled to the directly comparable measure in accordance with U.S. GAAP within the financial tables included as part of the Kellogg Company earnings press release dated 12 February, Comparable operating profit margin is calculated as comparable operating profit divided by comparable net sales. We believe the use of such non GAAP measures provides increased transparency and assists in understanding our comparable operating performance. 37 Snacks Is a Growth Engine Europe Pringles Has Been Transformational Snacks 2011 $2.3B (a) Cereal Pringles 2014 $2.9B (a) Snacks Cereal Cereal (a) Net sales, fiscal years 38 Page 19 of 33

20 39 Global Snacks Presence Pringles Has Transformed our Global Snacks Footprint Global Snacks in 2011 by region Global Snacks in 2014 by region $4.8B (a) North America Europe Latin America Asia Pacific $6.5B (a) (a) Net sales, fiscal years 40 Page 20 of 33

21 Kellogg Company February 18, 2015 Pringles is a Ubiquitous Global Brand Approaching $2 Billion Global Revenues Investing in capacity Identical Global Brand and Product Sold in over 160 countries Horizontal and Vertical channel penetration 41 Kellogg s Has Strengthened Pringles +HSD (7 9%) Annual Net Sales Growth Post Acquisition New Capacity New Innovation Kutno, Poland Margin Expansion Improved Go to Market 42 Page 21 of 33

22 Innovative Marketing Programs Bigger and Better Every Year 43 New Packaging Sizes Key Consumption Occasions, Channels & Price Points 44 Page 22 of 33

23 New Product Forms Pringles Tortilla OVER UNITS SOLD 50MILLION HIGHLY SUCCESSFUL NORTH AMERICAN LAUNCH GLOBAL ROLLOUT UNDERWAY 45 Pringles Summary Gr r reat Results, with Room to Grow Consistent global growth; new capacity on line Increased brand building supported by innovation Transformational, especially in emerging markets 46 Page 23 of 33

24 Kellogg Company February 18, 2015 Emerging Markets Emerging Markets Are a Growth Engine 47 Emerging Market Strategy is Working Net Sales, Emerging Markets* Snacks a Big Enabler Driving Growth Snacks 2014 >$2B Cereal *Latin America, Asia ex. Japan, South Africa, Med/Middle East, Russia 48 Page 24 of 33

25 Russia Large Population Net Sales Growth Local Brand Relevance Fast Growing Pringles The Arabian Peninsula and Egypt Growth Environment Strong economies Net Sales >3x Since 2011 Large and growing population Fast growing consumption Healthy category growth Pro forma impact of investment in Bisco Misr 50 Page 25 of 33

26 Expanding in Egypt Bisco Misr A Great Future Successful tender offer Well run company Committed team Strong go to market Platform to expand Strong Brands 51 In Summary. Europe is poised to grow Pringles exceeding expectations globally Emerging Markets a big growth engine Bisco Misr a great acquisition for future growth 52 Page 26 of 33

27 Financial Overview 2015 Guidance Long Term Targets and Operating Principles Project K Cash Flow Returning Cash to Shareowners 54 Page 27 of 33

28 Full Year 2015 Outlook From Q4 Earnings Call Comparable Net Sales (a) Comparable Operating Profit (a) (includes a three to four point impact from incentive compensation) Currency Neutral Comparable EPS (b) Cash Flow (c) Approximately Flat 2% to 4% Flat to 2% Approximately $1 billion (a) 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, and other items affecting comparability. (b) Excludes the impact of currency translation, differences in the number of shipping days, mark to market adjustments, integration costs, costs related to Project K, and other items impacting comparability. (c) Cash from operations less capital expenditure. 55 Long Term Targets From Q4 Earnings Call Comparable Net Sales (a) Comparable Operating Profit (a) Currency Neutral Comparable EPS (b) 1% to 3% 4% to 6% 7% to 9% (a) 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, and other items affecting comparability. (b) Excludes the impact of currency translation, differences in the number of shipping days, mark to market adjustments, integration costs, costs related to Project K, and other items impacting comparability. 56 Page 28 of 33

29 Long Term Operating Principles Improve Price / Mix Drive Innovation Grow Comparable Net Sales Sustainable Growth Grow Brand Building Grow Comparable Gross Profit Dollars/ Margin Overhead Discipline Increase Return on Invested Capital Grow Comparable Net Earnings Manage For Cash Improve Financial Flexibility Reduce Core Working Capital Prioritize Capital Expenditure 57 Sales Growth and Margin Targets by 2020 North America Sales Growth Low SD Operating Margin Change* basis points Europe Low SD basis points Latin America Mid High SD Unchanged Asia Pacific Mid SD Slight improvement Total Low SD Improvement 58 Page 29 of 33

30 Project K On track: Operational Execution and Financial Goals Pre tax charges Non cash costs, incl. above Capital Spending Total Pre Tax Cash Savings by 2018 $1,200 1,400 million ($275 $325 million) $300 million $1,175 $1,425 million $425 million $475 million 59 Supply Chain Project K/Growth Investments Additions to capacity Reductions in capacity Cereal and Snacks in North America Cereal in Europe Aligning the network Reducing excess capacity in developed businesses Adding capacity in emerging businesses Implementing Kellogg Work Systems (KWS) Building the supply chain of the future Pringles in Europe Cereal and Snacks in Thailand Cereal in India Pringles in China and Malaysia Cereal and Snacks in Australia 60 Page 30 of 33

31 Project K Global Business Services Global Business Services locations Grand Rapids Bucharest Mumbai Manila Added a global service centre and three regional service centres Transitioning Source to Pay and Order to Cash services Transitioned transportation planning services in North America Service oriented focus on metrics; improve both effectiveness and efficiency 61 Project K Reinvestment Investment aligned with strategy Innovation/renovation of food and packaging Geographic expansion and growth in emerging markets Channel expansion/growth Area Initiatives Area Initiatives North America Food Innovation and Renovation Brand Building Natural Organic Food Sales Capabilities Europe Latin America Asia Pacific Food Innovation Brand Building Geographic Expansion Food Innovation Brand Building Sales Capabilities Emerging Market Cereal Growth Brand Building Pringles Expansion 62 Page 31 of 33

32 Cash Flow (a) Strong underlying cash flow Working capital initiatives partially to offset impact of investment in Project K $1.0 $1.2 $1.2 $1.5B $1.45B $1.2 $1.3B $1.4B $1.0 Cash flow before investment in Project K Cash flow including investment in Project K Guidance (a) Kellogg defines cash flow as cash from operating activities, less capital expenditures. Does not include 2011 s discretionary contribution to pension plans. 63 Uses of Cash Share Repos and Dividends $ in billions $1.4 Long history of returning cash $1.4 and Repos to shareowners $0.7 $1.2 Dividends Returned more than $6 billion during last five years Dividend: 40 50% payout ratio Currently less than $500 million through $1.5 billion sharerepurchase authorization Dividends Share Repurchases 64 Page 32 of 33

33 Summary Building a foundation for growth Realistic targets for sustainable growth Investing in the business across the Path to Purchase: Desire, Decide, Delight 65 Page 33 of 33