Q4 and FULL-YEAR 2018 FINANCIAL RESULTS February 7, 2019 - PDF document

Kellogg Company February 7, 2019 Kellogg Company Q4 and FULL-YEAR 2018 FINANCIAL RESULTS February 7, 2019 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; transportation costs; 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 Q4 & FULL YEAR 2018 FINANCIAL RESULTS | FEBRUARY 7, 2019 1 of 11

Kellogg Company February 7, 2019 2018 – Pivot to Growth • Strategy – Implemented Deploy For Growth, with clear priorities and tangible actions • Portfolio – Reshaping through acquisitions, investment; announced proposed divestitures • Investment – Stronger ideas, improved ROI, revitalizing brands, enhancing capabilities • Progress – Stabilized organic net sales trend, improved consumption performance 3 KELLOGG COMPANY Q4 & FULL YEAR 2018 FINANCIAL RESULTS | FEBRUARY 7, 2019 Net Sales Turnaround – The Heaviest Lifting Organic Growth in Net Sales, in Percent * • Re-establishing Brand messaging • New product launches • Pack formats and channels • International expansion • Capabilities development Est. * Please refer to the Q4 2018 earnings press release for reconciliation to non-GAAP measures. 4 KELLOGG COMPANY Q4 & FULL YEAR 2018 FINANCIAL RESULTS | FEBRUARY 7, 2019 2 of 11

Kellogg Company February 7, 2019 Building a Base for Sustainable Growth – 2019 Priorities • MultiPro (West Africa) • RX Reshaping Our Portfolio • New brands • Divestitures Revitalizing Brands • Innovation • Pack formats Enhancing Capabilities • Revenue Growth Management • E-commerce • Organizational structure 5 KELLOGG COMPANY Q4 & FULL YEAR 2018 FINANCIAL RESULTS | FEBRUARY 7, 2019 Net Sales – Improved Performance Fourth Quarter & Full Year 2018 Net Sales Growth by Component * Year-over-year, % change Q4 2018 2018 Comments: Volume (0.2)% +1.9% • Brands responding to investment • Organic growth impacted by (1)% Price/Mix (0.4)% (1.9)% from mechanical impact of DSD • Mix shift toward emerging markets Organic (0.6)% +0.0% Shipping Days (0.4)% (0.1)% • Year-ago Parati fiscal-year true-up • RX acquisition and growth Acquisitions +8.2% +6.3% • Multipro (West Africa) consolidation • Currency-neutral impact Currency-Neutral +7.2% +6.2% Currency Translation (3.0)% (0.8)% • Broad-based strengthening of U.S. Dollar during second half Reported +4.2% +5.4% * Please refer to Q4 2018 earnings press release tables for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. 6 KELLOGG COMPANY Q4 & FULL YEAR 2018 FINANCIAL RESULTS | FEBRUARY 7, 2019 3 of 11

Kellogg Company February 7, 2019 Gross Profit Margin – Impacted by Acquisition & Mix Fourth Quarter and Full Year 2018 % of Net Sales, Adjusted Basis * Mechanical: ~(150) bp for full year _ Multipro impact Q2-Q4 _ DSD impact Q1-Q3 Growth-Related: ~(100) bp for full year _ Adverse mix shifts (pack formats, emerging markets) + Operating leverage Ongoing: ~0 bp for the full year _ Cost inflation (transportation, energy, inputs) + Productivity savings * Please refer to Q4 2018 earnings press release tables for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. 7 KELLOGG COMPANY Q4 & FULL YEAR 2018 FINANCIAL RESULTS | FEBRUARY 7, 2019 Summary of Financial Results – Growth & Investment % Change Versus Prior Year Q4 Full Year Results Results 2018 Commentary: Net +4.2% +5.4% Reported • Organic flat, despite negative DSD impact Sales +7.2% +6.2% Currency-Neutral * • RX and Multipro acquisitions Operating (16.5)% +22.9% Reported • Strong increase in Brand Building Profit • Costs related to alternative pack formats (1.1)% +0.1% Currency-Neutral Adjusted* • Investments in capabilities Earnings (120.0)% +7.0% Reported Per • Tax Reform and discrete tax benefits +0.0% +8.0% Currency-Neutral Adjusted* Share * Please refer to Q4 2018 earnings press release tables for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. 8 KELLOGG COMPANY Q4 & FULL YEAR 2018 FINANCIAL RESULTS | FEBRUARY 7, 2019 4 of 11

Kellogg Company February 7, 2019 Cash Flow – Durable and As Expected * • 2018 cash flow of $958 million , roughly even with pre-recast 2017 • Includes $(162) million after-tax voluntary pension contribution • Increased capital expenditure for growth • Improved core working capital efficiency * Cash Flow defined as cash from operating activities, less capital expenditure. Please refer to Q4 2018 earnings press release for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. “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 12 months’ net sales. 9 KELLOGG COMPANY Q4 & FULL YEAR 2018 FINANCIAL RESULTS | FEBRUARY 7, 2019 Moving Toward Sustainable Growth Reduce Invest in Deliver Cost Brands & Sustainable Structure Growth Capabilities • Brand Building & • Complete Project K • Balanced Top-Line Growth Innovation • Sustain ZBB and Margin Expansion • Pack Formats • Commercial Execution • Portfolio Slide shown at 10 KELLOGG COMPANY Q4 & FULL YEAR 2018 FINANCIAL RESULTS | FEBRUARY 7, 2019 Nov. 13, 2018 5 of 11