November 1, 2016 Kellogg Company Kellogg Company 2016 THIRD QUARTER FINANCIAL RESULTS November 1, 2016 Agenda Overview John Bryant , Chairman & Chief Executive Officer Financials Ron Dissinger , Chief Financial Officer North America Paul Norman , President Kellogg North America Europe Chris Hood , President Kellogg Europe Latin America Maria Fernanda Mejia , President Kellogg Latin America Asia Pacific Amit Banati , President Kellogg Asia Pacific Summary John Bryant , Chairman & Chief Executive Officer Q&A November 1, 2016 KELLOGG COMPANY | Q3 2016 EARNINGS 2 Page 1 of 21
November 1, 2016 Kellogg Company 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 expe nditure, 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,” “impli es, ” “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 suc h non-GAAP measures assists investors in understanding the underlying operating performance of the company and its segments. November 1, 2016 KELLOGG COMPANY | Q3 2016 EARNINGS 3 Q3 Update – Key Messages Results: Ahead of expectations on margins and tax rate Progress: Tangible progress against 2020 Growth Plan and 2016 priorities Outlook: Sequential improvement in Q4 and in 2017 *On a currency-neutral comparable basis November 1, 2016 KELLOGG COMPANY | Q3 2016 EARNINGS 4 Page 2 of 21
November 1, 2016 Kellogg Company Strategic Priorities 2020 Growth Plan November 1, 2016 KELLOGG COMPANY | Q3 2016 EARNINGS 5 Progress – One Year After “Day at K” November, 2015 November, 2016 • Progress in 3 of 4 core markets • Stabilize Core 4 RTEC Markets Win in Breakfast • Pringles growth in all Regions Be a Global • Pringles Expansion Snacking Powerhouse • Emerging Markets growth, JVs growth, acquisitions Double Our • Emerging Markets Emerging Market Engine • Revenue Growth Management, High Frequency Stores, Specialty Channels Win Where • Sales Capabilities the Shopper Shops • Project K, ZBB, new Marketing Model; • improved OP margins Productivity & Savings Fuel for Growth *On a currency-neutral comparable basis November 1, 2016 KELLOGG COMPANY | Q3 2016 EARNINGS 6 Page 3 of 21
November 1, 2016 Kellogg Company Summary of Financial Results Change Versus Prior Year Q3 Year to Date Net (2.2)% (4.5)% Reported Sales (1.0)% 4.8% Currency-Neutral Comparable * Currency-Neutral Comparable (1.6)% (1.6)% x-Venezuela * Operating 22.9% 14.8% Reported Profit 6.8% 17.9% Currency-Neutral Comparable * Currency-Neutral Comparable 5.0% 3.9% x-Venezuela * Earnings 41.4% 14.7% Reported Per 12.9% 2.9% Comparable * Share 17.6% 21.1% Currency-Neutral Comparable* * Please refer to appendices for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. November 1, 2016 KELLOGG COMPANY | Q3 2016 EARNINGS 7 Net Sales Components Third Quarter 2016 (year-over-year, % change) (a) YTD: (1.3)% 6.1% 0.2% (9.5)% Excluding VZ (1.2) (0.4) 0.3 (1.6) a) Other includes Project K, acquisitions, divestitures, and shipping day differences. November 1, 2016 KELLOGG COMPANY | Q3 2016 EARNINGS 8 Page 4 of 21
November 1, 2016 Kellogg Company Gross Profit Margin * Currency-Neutral, Comparable Basis, Excluding Venezuela, Gross Profit as % of Net Sales* + Productivity, Project K, ZBB efficiencies, - Adverse mix, transactional FX, investment in food - Lower production volume * Please refer to appendices for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. November 1, 2016 KELLOGG COMPANY | Q3 2016 EARNINGS 9 Operating Profit Margin* Currency-Neutral, Comparable Basis, Excluding Venezuela, Operating Profit as % of Net Sales* + Up 90 bp ex-Venezuela in Q3 + Productivity, Project K, ZBB efficiencies + Improvement in all Regions + On-track to post improvement for year * Please refer to appendices for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. November 1, 2016 KELLOGG COMPANY | Q3 2016 EARNINGS 10 Page 5 of 21
November 1, 2016 Kellogg Company Cash Flow * $ in Millions, Year to Date Through Q3 + 2016 includes $(97) million from bond tender + Continued reduction in core working capital* as % of sales + On-track to achieve $1.1 billion cash flow* for the full year * “Cash Flow” is Operating Cash Flow After Capital Expenditure; Year to Date through Q3 2016. “Core Working Capital” is an internal Kellogg metric defined as last 12 months’ average trade receivables and inventory, less 12 months’ average trade payables, divided by last 1 2 m onths’ net sales. For Cash Flow, please refer to appendices for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. November 1, 2016 KELLOGG COMPANY | Q3 2016 EARNINGS 11 2016 Guidance Including Excluding Venezuela Venezuela Net Sales (a) • ~ 4% ~ (1)% 2H improvement less than expected • Still expecting sequential improvement Currency-Neutral Comparable Previous: 4-6% Previous: Flat in Q4 • Still expecting high end of the range Operating Profit (a) +15-17% +4-6% • Better margin expansion offsets lower Currency-Neutral Comparable Previous: 15-17% Previous: 4-6% sales • Increased guidance range EPS (b) $4.16 - $4.23 • Q3’s tax favorability more than offsets impact of curbed Q4 share buybacks (for Currency-Neutral Comparable Previous: $4.11-$4.18 acquisition) • EPS (b) $3.64 - $3.71 Currency impact is $0.01 less negative than previous estimate Comparable Previous: $3.58-$3.65 * Please refer to appendices for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. (a) 2016 guidance for currency-neutral comparable net sales and operating profit 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 for comparable EPS excludes the impact of 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. Currency-neutral comparable EPS also excludes the impact of currency translation. November 1, 2016 KELLOGG COMPANY | Q3 2016 EARNINGS 12 Page 6 of 21
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