Kellogg Company May 3, 2018 Kellogg Company FIRST QUARTER 2018 FINANCIAL RESULTS May 3, 2018 Forward-Looking Statements & Non-GAAP Measures 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 bud geting, 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 si milar 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 (including the exit from its Direct Story Delivery system) 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 benefits from our implementation of a more formal Revenue Growth Management discipline, 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. This presentation includes non‐GAAP financial measures. Please refer to the earnings press release, which is available on the Investor Relations page on the Company’s website, www.Kelloggcompany.com, 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 KELLOGG COMPANY Q1 2018 FINANCIAL RESULTS | MAY 3, 2018 Page 1 of 10
Kellogg Company May 3, 2018 Strong Start to 2018 Improving On Track Shaping Performance For Year Portfolio • • • Frozen Foods Top-line Parati growth • • • Post-DSD U.S. Savings RX growth Snacks • • Increased Brand West Africa • Pringles Europe Building investment • • Emerging Markets No change to base guidance 3 KELLOGG COMPANY Q1 2018 FINANCIAL RESULTS | MAY 3, 2018 Summary of Financial Results – On Track Change Versus Prior Year Q1 Results Net +4.7% Reported Sales +2.2% • Currency-Neutral * RX largely offset by DSD impact Operating +81.7% Reported Profit +5.1% • Currency-Neutral Adjusted* Double-digit Brand Building increase Earnings + 69.3% Reported Per • Operating Profit growth • +11.2% Tax Reform Currency-Neutral Adjusted* Share • Timing of discrete tax benefits * Please refer to Q1 2018 earnings press release tables for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. 4 KELLOGG COMPANY Q1 2018 FINANCIAL RESULTS | MAY 3, 2018 Page 2 of 10
Kellogg Company May 3, 2018 Net Sales – Strong Start Q1 2018 Net Sales Growth by Component * Year-over-year, % change Volume +2.9% • Includes negative DSD impact Price/Mix (2.3)% (SKU rationalization, elimination of price premium) Organic +0.6% Acquisitions/divest. +1.6% • RX acquisition and growth Currency-Neutral +2.2% Currency Translation +2.5% Reported +4.7% * Please refer to Q1 2018 earnings press release tables for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. 5 KELLOGG COMPANY Q1 2018 FINANCIAL RESULTS | MAY 3, 2018 Profit Margins – Underlying Improvement Q1 2018 % of Net Sales, Adjusted Basis * Gross Profit Margin * Operating Profit Margin * DSD re-set ~(125) bp 37.5% negative 14.7% 14.3% impact 36.3% +40 basis points Even with +DD Brand Building Q1 Q1 2017 2018 2017 2018 * Please refer to Q1 2018 earnings press release tables for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. 6 KELLOGG COMPANY Q1 2018 FINANCIAL RESULTS | MAY 3, 2018 Page 3 of 10
Kellogg Company May 3, 2018 Affirming 2018 Base Guidance Before West Africa Investment; Growth vs. Prior Year, Except Cash Flow * • Down (1)-(2)% on Organic basis • ~ Flat Organic decline comprised of DSD exit ~(1)%, with underlying Net Sales (a) business improving to (0)-(1)% Currency Neutral Unchanged • Includes roughly 1-2% of acquisition-related sales (RXBAR) • Productivity savings +4-6% Adjusted Operating Profit (b) • Increased Brand Building investment Currency Neutral Unchanged • Includes impact of acquisitions +1-2% • Adjusted EPS (b) Higher interest expense due to acquisition +9-11% • Tax rate 20-21%, due to Tax Reform Currency Neutral Unchanged • Modest decrease in average shares outstanding • Underlying growth plus Tax Reform benefit $1.2-1.3 billion • Includes remaining cash outlays for Project K Cash Flow * • Includes capital expenditure of ~0.5 billion Unchanged • Before potential voluntary contribution to pension plans * Please refer to Q1 2018 earnings press release tables for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. (a) 2018 guidance for Currency Neutral Net Sales growth excludes the impact of foreign currency translation. Organic growth also excludes acquisitions, divestitures, and changes in shipping days. (b) 2018 guidance for adjusted Operating Profit and adjusted Earnings Per Share excludes the impact of mark-to-market adjustments and costs related to Project K. Currency neutral also excludes the impact of foreign currency translation. 7 KELLOGG COMPANY Q1 2018 FINANCIAL RESULTS | MAY 3, 2018 West Africa – Increased Investment…and Consolidated Results Financial Details Impact on Impact on * Kellogg P&L 2018 Guidance New stake in: • • Consolidates Adds to currency-neutral TAF Distributor’s Net Net Sales and Adjusted Sales & Operating Operating Profit Increased Part Profit interest in: owner • Adds to Interest Expense • Adds share of Multipro • Reduction in net JV Manufacturer’s Earnings/Minority Interest Dufil earnings to JV Packaged food Packaged food Earnings, offset by • Immaterial to currency- manufacturer distributor minority interest neutral Adjusted EPS in Distributor * 2018 guidance for adjusted Operating Profit and adjusted Earnings Per Share excludes the impact of mark-to-market adjustments and costs related to Project K. Currency neutral also excludes the impact of foreign currency translation. 8 KELLOGG COMPANY Q1 2018 FINANCIAL RESULTS | MAY 3, 2018 Page 4 of 10
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