General Mills Fiscal 2017 Fourth Quarter and Full-year Results - PowerPoint PPT Presentation

General Mills Fiscal 2017 Fourth Quarter and Full-year Results June 28, 2017

A Reminder on Forward-looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management’s current expectations and assumptions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the potential results discussed in the forward-looking statements. In particular, our predictions about future net sales and earnings could be affected by a variety of factors, including: competitive dynamics in the consumer foods industry and the markets for our products, including new product introductions, advertising activities, pricing actions and promotional activities of our competitors; economic conditions, including changes in inflation rates, interest rates, tax rates, or the availability of capital; product development and innovation; consumer acceptance of new products and product improvements; consumer reaction to pricing actions and changes in promotion levels; acquisitions or dispositions of businesses or assets; changes in capital structure; changes in the legal and regulatory environment, including labeling and advertising regulations and litigation; impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets, or changes in the useful lives of other intangible assets; changes in accounting standards and the impact of significant accounting estimates; product quality and safety issues, including recalls and product liability; changes in consumer demand for our products; effectiveness of advertising, marketing and promotional programs; changes in consumer behavior, trends and preferences, including weight loss trends; consumer perception of health-related issues, including obesity; consolidation in the retail environment; changes in purchasing and inventory levels of significant customers; fluctuations in the cost and availability of supply chain resources, including raw materials, packaging and energy; disruptions or inefficiencies in the supply chain; effectiveness of restructuring and cost savings initiatives; volatility in the market value of derivatives used to manage price risk for certain commodities; benefit plan expenses due to changes in plan asset values and discount rates used to determine plan liabilities; failure or breach of our information technology systems; foreign economic conditions, including currency rate fluctuations; and political unrest in foreign markets and economic uncertainty due to terrorism or war. The company undertakes no obligation to publicly revise any forward-looking statements to reflect any future events or circumstances. 2

Ken Powell Chairman of the Board

Jeff Harmening Chief Executive Officer

Fiscal 2017 Summary • Executed Important Changes • New Global Organization Structure • Accelerated Cost-savings Initiatives • Full-year Net Sales and Operating Profit Fell Short of our Targets • Adjusted Diluted EPS Grew +6%*; Returned $2.7B in Cash to Shareholders * Growth in constant currency. Non-GAAP measure, see appendix for reconciliation 5

Fiscal 2018 Overview • Significant Improvement in Topline Growth Trends • Global Prioritization of Our Biggest Growth Platforms • Increased Investment in Brands and Capabilities • Improved Execution • Profit and EPS Growth Rates Reflect Higher Investment 6

Operating Profit Margin Progress Adjusted Operating Profit Margin* • Significant Progress from F15 (% of Net Sales) to F17 • Moderating Pace of Margin Higher 18.1% Expansion in F18 16.8% 15.9% • Focused on Balancing Sales Growth and Margin Expansion Over Long Term F15 F16 F17 F18 * Non-GAAP measure, see appendix for reconciliation 7

Fiscal 2017 Financial Review Don Mulligan EVP; Chief Financial Officer

Fourth Quarter Fiscal 2017 Financial Summary ($ in Millions, Except per Share) Constant- currency Organic % Change* % Change* $ % Change Net Sales $3,807 -3% -3% Segment Operating Profit* 673 +3 +4% Net Earnings Attributable to 409 +8 General Mills Diluted EPS $0.69 +11 Certain Items Affecting Comparability 0.04 Adjusted Diluted EPS* $0.73 +11% +14% *Non-GAAP measures. See appendix for reconciliation. 9

Fourth Quarter Fiscal 2017 Components of Net Sales Growth Organic Net Sales* = -3% +4 pts Flat Flat -3% -7 pts Organic Acquisitions / Total Organic Foreign Volume Divestitures Net Sales Price & Mix Exchange As Reported *Non-GAAP measure. 10

Fiscal 2017 Financial Summary ($ in Millions, Except per Share) Constant- currency Organic % Change* % Change* $ % Change Net Sales $15,620 -6% -4% Segment Operating Profit* 2,953 -2 -1% Net Earnings Attributable to General Mills 1,658 -2 Diluted EPS $2.77 Flat Certain Items Affecting Comparability 0.31 Adjusted Diluted EPS* $3.08 +5% +6% *Non-GAAP measures. See appendix for reconciliation. 11

Fiscal 2017 North America Retail Net Sales Growth by Operating Unit Segment Growth Q4 F17 Q4 F17 -4% -5% Organic Net Sales* U.S. Snacks +1% Flat U.S. Cereal -1 -3 Constant-currency U.S. Meals & Baking -1 -10 +9% -2% Segment Operating Profit* Canada -2 -2 Constant-currency* +2 -2 U.S Yogurt -22 -18 *Non-GAAP measure. See appendix for reconciliation 12

Fiscal 2017 Convenience Stores & Foodservice Net Sales Growth Q4 F17 Segment Growth by Platform Q4 F17 Flat -3% Organic Net Sales* Focus 6 Platforms +3% +2% Other -3 -8 Flat +6% Segment Operating Profit *Non-GAAP measure. See appendix for reconciliation 13

Fiscal 2017 Europe & Australia Segment Growth Q4 F17 -9% -4% Organic Net Sales¹* Constant-currency -26% -9% Segment Operating Profit* ¹Impact of Yoplait Europe Reporting Period Difference: -DD in Q4, -LSD in F17 *Non-GAAP measure. See appendix for reconciliation 14

Fiscal 2017 Asia & Latin America Segment Growth Q4 F17 +8% +3% Organic Net Sales¹* Constant-currency -23% +20% Segment Operating Profit* ¹Impact of Brazil Reporting Period Difference: +DD in Q4, +LSD in F17 *Non-GAAP measure. See appendix for reconciliation 15

Fiscal 2017 Joint Venture Results After-tax Earnings: $85MM; -6% vs. LY in Constant Currency* Cereal Partners Worldwide Häagen-Dazs Japan Net Sales: +3%** Net Sales: +8%** *Non-GAAP measure. See appendix for reconciliation. **Growth rates in constant currency. 16

Fiscal 2017 Cost Savings and Margin Results Adjusted Operating Profit Margin* Adjusted Gross Margin* (% of Net Sales) (% of Net Sales) F17 Cost Savings 36.1% 35.6% 18.1% • COGS HMM: $390MM 16.8% • Announced Projects: $540MM F16 F17 F16 F17 *Non-GAAP measures. See appendix for reconciliation. 17

Core Working Capital ($ in Millions) Q4 F17 F16 % Change Accounts Receivable $1,430 $1,361 Inventories 1,484 1,414 Accounts Payable 2,120 2,046 Total Core Working Capital $794 $729 +9% 18

Fiscal 2017 Cash Flow Highlights Full-year Operating Cash Flow ($ in Millions) • Fixed Asset Investment = $684MM $2,630 $2,313 • Dividends Paid = $1,135MM • Net Share Repurchases = $1,539MM F16 F17 19

Fiscal 2018 Plan Assumptions • Category Trends Similar to F17 • Organic Net Sales* Trends to Improve from Q1 to Q2 and 1H to 2H • COGS HMM = $390MM, More Than Offsetting 3% Input Cost Inflation • Savings from Announced Projects = $700MM, Up $160MM vs LY *Non-GAAP measure. 20

Fiscal 2018 Guidance ($ in Millions, Except per Share) Fiscal 2017 Fiscal 2018 Results Growth Net Sales $15,620 -1 to -2%¹ Advertising & Media Expense $624 Higher Total Segment Operating Profit* $2,953 Flat to +1%² Adjusted Operating Profit Margin* 18.1% Higher Interest Expense $295 Flat Tax Rate Excluding Items* 29.2% Flat Avg. Diluted Shares Outstanding 598 Down 1 to 2% Adjusted Diluted EPS* $3.08 +1 to 2%² Free Cash Flow Conversion* 86% > 95% *Non-GAAP measure. See appendix for reconciliation. (1) Organic growth rate. (2) Constant-currency growth rate. 21

Fiscal 2018 Plans Jeff Harmening Chief Executive Officer

U.S. Retail Sales Trends Improved in Q4 General Mills F17 U.S. Retail Sales • Better Merchandising and (% vs. LY, excludes Yogurt) Lower Price Gaps in Q4 • Expect Continued Improvement in Fiscal 2018 -3.7% -4.9% -5.1% -6.3% Q1 Q2 Q3 Q4 Source: Nielsen XAOC 23

What’s Changing in Fiscal 2018 • Global Prioritization of our Biggest Growth Platforms • Increasing Brand Investment • Increasing Level of New Product Innovation • “In the Zone” on Promotion • Winning with Growing Channels and Customers 24

Fiscal 2018 Growth Priorities • Grow Cereal Globally (Including CPW) • Improve U.S. Yogurt Through Innovation • Invest in Differential Growth Opportunities • Häagen-Dazs • Snack Bars • Old El Paso • Natural & Organic • Manage Foundation Brands with Appropriate Investment 25

Global Cereal: Investing Behind Wellness News K-12 and Colleges & Universities Portfolio Campaigns Cheerios Celebrating Cheerios’ Gluten Free and Granola “Ownable” Wellness News: Whole Grain, Ingredients, Health Portfolio Driving MSD Growth Gluten Free, Fiber Benefits, and Causes 26