Kellogg Company August 2, 2018 Kellogg Company SECOND QUARTER 2018 FINANCIAL RESULTS August 2, 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; 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 Q2 2018 FINANCIAL RESULTS | AUGUST 2, 2018 1 of 9
Kellogg Company August 2, 2018 Good Progress Continues Big Brands Investing for Improved Are Growing Future Outlook • • Brand Building +DD Improved organic and currency- • New pack formats neutral Net Sales • Pension contribution guidance • RX and West Africa • Higher reinvestment • Lower tax rate • Higher EPS 3 YTD, Global, Organic Net Sales Growth Q2 2018 FINANCIAL RESULTS | AUGUST 2, 2018 Summary of Financial Results – On Track % Change Versus Prior Year Q2 1H Results Results Net +5.9% +5.3% Reported • Organic flat, despite DSD impact Sales +6.3% +4.2% Currency-Neutral * • RX and Multipro acquisitions Operating +23.5% +48.1% Reported • Profit RX and Multipro acquisitions (0.7)% +2.1% Currency-Neutral Adjusted* • Double-digit Brand Building increase Earnings +113.8% +91.7% Reported Per • Operating Profit growth +15.5% +13.7% Currency-Neutral Adjusted* • Share Tax Reform, tax benefit from pension contribution * Please refer to Q2 2018 earnings press release tables for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. 4 Q2 2018 FINANCIAL RESULTS | AUGUST 2, 2018 2 of 9
Kellogg Company August 2, 2018 Net Sales – Ahead of Pace Q2 & 1H 2018 Net Sales Growth by Component * Year-over-year, % change Q2 1H Q2 Comments: • Lapped YAG promo reductions in Volume +2.9% +2.8% Europe and U.S. Snacks • Includes negative DSD impact Price/Mix (3.2)% (2.8)% (SKU rationalization, elimination of price premium) Organic +0.1% (0.4)% • RX acquisition and growth Acquisitions +6.7% +4.1% • Two months of Multipro (West Africa) • Currency-neutral impact Currency-Neutral +6.3% +4.2% Currency Translation (0.4)% +1.1% • Q2: Negative impact from Multipro (Nigeria Naira), slightly positive impact Reported +5.9% +5.3% elsewhere * Please refer to Q2 2018 earnings press release tables for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. 5 Q2 2018 FINANCIAL RESULTS | AUGUST 2, 2018 Gross Profit Margin – Impacted by DSD and Mix Q2 and 1H 2018 % of Net Sales, Adjusted Basis * Mechanical: _ Gross Profit Margin * DSD impact ~(125) bp in both Q1 and Q2 _ Multipro impact ~(80) bp in Q2 Growth-Related: _ Adverse mix shifts accelerated in Q2 (country, category, pack format) + Operating leverage Ongoing: _ Cost inflation (transportation, energy, inputs) + Productivity savings * Please refer to Q2 2018 earnings press release tables for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. 6 Q2 2018 FINANCIAL RESULTS | AUGUST 2, 2018 3 of 9
Kellogg Company August 2, 2018 Operating Profit Margin – Mix, Brand Investment Q2 and 1H 2018 % of Net Sales, Adjusted Basis * Operating Profit Margin * • Brand Building +DD in Q1 and Q2 • Multipro impact ~(35) bp in Q2 • Savings on track, operating leverage positive * Please refer to Q2 2018 earnings press release tables for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. 7 Q2 2018 FINANCIAL RESULTS | AUGUST 2, 2018 2018 Guidance – Improved Outlook Growth vs. Prior Year, Except Cash Flow * • Improved Organic growth outlook, now (1)%-0% • +4-5% DSD exit still ~(1)% to Organic growth, with underlying business Net Sales (a) improving to 0-1% Currency Neutral Previous: +3-4% • Includes roughly 4-6% of acquisition-related sales (RX, Multipro) • Productivity savings on track +5-7% Adjusted Operating Profit (b) • Increased Brand Building investment • Currency Neutral Unchanged Mix impact, mainly in 1H • Includes impact of acquisitions +2-3% • Tax rate reduced by 1-2 pts. for pension contribution, on top Adjusted EPS (b) +11-13% of previously guided 5-6 pts. from Tax Reform Currency Neutral • Interest expense remains higher due to acquisition Previous: +9-11% • Still projecting modest decrease in average shares outstanding • Now includes voluntary contribution to pension plans, and ~ $1 billion increased capital for growth (pack formats, emerging markets) Cash Flow * • Underlying improvement plus Tax Reform benefit Previous: $1.2-1.3 bn • Includes cash outlays for Project K * Please refer to Q2 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, costs related to Project K, and other gains/costs impacting comparability. Currency neutral also excludes the impact of foreign currency translation. 8 Q2 2018 FINANCIAL RESULTS | AUGUST 2, 2018 4 of 9
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