Slide 1: General Mills Fiscal 2016 First Quarter Results
General Mills Fiscal 2016 First Quarter Results
Slide 2: A Reminder on Forward-looking Statements
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
Slide 3: First Quarter 2016 Financial Review
First Quarter 2016 Financial Review Don Mulligan Executive Vice President; Chief Financial Officer
Slide 4: First Quarter Fiscal 2016 Summary
First Quarter Fiscal 2016 Summary • Strong Constant-currency Growth in Net Sales, Total Segment Operating Profit*, and Adjusted Diluted EPS* • Cost Savings Initiatives on Target • On Track to Deliver F16 Growth Goals** *Non-GAAP measures. **Excluding impact of proposed Green Giant divestiture. 8173-
Slide 5: Green Giant Divestiture
Green Giant Divestiture • Selling Green Giant Brand to B&G Foods; General Mills Will Continue to Operate in Europe and Select Other Markets Via Royalty-free License • Gross Sale Proceeds of Approximately $765MM • Net Cash Proceeds to be Used for Share Repurchases and Debt Reduction • Estimated F16 E
Slide 6: First Quarter Fiscal 2016 Financial Summary
First Quarter Fiscal 2016 Financial Summary ($ in Millions, Except per Share) Constant- currency $ % Change % Change* Net Sales $4,208 -1% +4% Segment Operating Profit* 826 +20% +23% Net Earnings Attributable to General Mills 427 +24 Diluted EPS $0.69 +25 Certain Items Affecting Comparability 0.10 A
Slide 7: First Quarter Fiscal 2016 Components of Net Sales Growth
First Quarter Fiscal 2016 Components of Net Sales Growth (As Reported) +2pts +2pts -1pt -5pts Price & Foreign Total Volume Mix Exchange Net Sales Annie’s Contribution: 1 Point of Volume Growth, 2 Points of Net Sales Growth 8173-7
Slide 8: First Quarter Fiscal 2016 U.S. Retail Segment
First Quarter Fiscal 2016 U.S. Retail Segment Q1 Net Sales Growth Cereal +6% Meals +6 Yogurt +4 Snacks +2 Baking Products Flat Total U.S. Retail +4% 8173-8
Slide 9: U.S. Retail Sales Trends
U.S. Retail Sales Trends • U.S. Retail Net Sales Outpaced Consumer Movement in Q1 − Growth in Non-measured Channels − Customer Inventory Build − High Promotional Expense in Year-ago Period − Growth in Net Sales and Consumer Movement Comparable on 2-Year Basis • Expect Stronger Consumer Movement in Q
Slide 10: First Quarter Fiscal 2016 Convenience Stores & Foodservice Segment
First Quarter Fiscal 2016 Convenience Stores & Foodservice Segment Q1 Net Sales Growth 6 Focus Platforms +9% Other -6 Total CS&F +1% 8173-10
Slide 11: First Quarter Fiscal 2016 International Segment
First Quarter Fiscal 2016 International Segment Q1 Constant-currency Net Sales Growth* Europe +7% Canada +5 Asia / Pacific +3 Latin America +3 Total International +5% *Non-GAAP measure. See appendix for reconciliation. 8173-11
Slide 12: Adjusted Gross Margin* Results
Adjusted Gross Margin* Results Q1 • F15 First Quarter Impacted 37.7% by High Promotional Expense 34.8% • Benefit from Cost Savings Projects • HMM Offsetting Inflation • Expect 2% Inflation for Full Year F15 F16 *Non-GAAP measure. See appendix for reconciliation. 8173-12
Slide 13: First Quarter Fiscal 2016 Segment Operating Profit
First Quarter Fiscal 2016 Segment Operating Profit ($ in Millions) Memo: Q1 F15 Constant- Constant- currency currency $ % Change % Change* % Change* Total Segment Operating Profit* $826 +20% +23% -15% U.S. Retail 630 +38 -25 International 117 -20 -3 +17 Convenience Stores & Foodservice 80 -9 +18 *No
Slide 14: First Quarter Fiscal 2016 Joint Venture Results
First Quarter Fiscal 2016 Joint Venture Results After-tax Earnings: $26MM; +16% vs. LY in Constant Currency* Cereal Partners Worldwide Häagen-Dazs Japan Net Sales -2%** Net Sales +9%** *Non-GAAP measure. See appendix for reconciliation. **Growth rates in constant currency. 8173-14
Slide 15: First Quarter Fiscal 2016 Other Income Statement Items
First Quarter Fiscal 2016 Other Income Statement Items • Restructuring & Project-related Charges of $95MM Pretax (Includes $35MM in Cost of Sales) • Unallocated Corporate Expense Decreased Excluding Certain Items • Net Interest Expense $3MM Below Last Year • Adjusted Effective Tax Rate 32.3%, Flat t
Slide 16: Core Working Capital
Core Working Capital ($ in Millions) Q1 F16 F15 % Change Accounts Receivable $1,532 $1,623 Inventories 1,796 1,823 Accounts Payable 1,760 1,571 Total Core Working Capital $1,568 $1,875 -16% 8173-16
Slide 17: First Quarter Fiscal 2016 Cash Flow Highlights
First Quarter Fiscal 2016 Cash Flow Highlights Operating Cash Flow Uses of Cash ($ in Millions) • Fixed Asset Investment = $431 $147MM $329 • Dividends Paid = $267MM • Share Repurchases = $152MM F15 F16 8173-17
Slide 18: Update on Cost Savings Initiatives
Update on Cost Savings Initiatives • Targeting $400MM in F16 COGS HMM Savings • Incremental Cost Savings Initiatives Remain on Track (Project Century, Project Catalyst, Project Compass, and Policies & Practices Update) − Cumulative Annual Savings − F15: $75MM − F16 Goal: $285 - $310MM − F17 Goal: $4
Slide 19: Reaffirming Fiscal 2016 Guidance
Reaffirming Fiscal 2016 Guidance (Guidance Excludes Impact of Green Giant Divestiture) Constant-currency Growth (52 vs 53 wks) Net Sales Flat Segment Operating Profit* +LSD Adjusted Diluted EPS* +MSD *Non-GAAP measures. 8173-19
Slide 20: U.S. Retail Sales Update
U.S. Retail Sales Update Shawn O’Grady Senior Vice President; President, Sales and Channel Development
Slide 21: U.S. Retail Salesforce
U.S. Retail Salesforce Leading Profitable Growth: • Supporting U.S. Retail Priorities • Growth Across Channels • Quality Execution 8173-21
Slide 22: U.S. Retail Sales
U.S. Retail Sales 1,700 Sales Employees Expertise in 25 Categories Frozen Refrigerated Dry Across 3 Temperature States Average 690 SKUs/Store 8173-22
Slide 23: U.S. Retail Priorities
U.S. Retail Priorities Grow Cereal Accelerate Yogurt and Snacks Drive Double-digit Growth on Natural & Organic Portfolio Deliver Consumer-first Value on Key Brands 8173-23
Slide 24: Grow Cereal
Grow Cereal Gluten Free Cheerios • Full Pallet In-store Displays • Customized Point-of-sale • Digital Tie-in with Customers 8173-24
Slide 25: Accelerate Yogurt & Snacks
Accelerate Yogurt & Snacks Brand Innovation • Secure Shelf Space • Seed Launch with Introductory Merchandising • Execute In-store Sampling 8173-25
Slide 26: Drive Growth on Natural & Organic
Drive Growth on Natural & Organic Distribution Expansion • Strengthen Core Distribution • Expand into New Channels • Sell New Offerings 8173-26
Slide 27: U.S. Retail Landscape
U.S. Retail Landscape Alternative Grocery Supercenter Channels 5-Year F&B Industry CGR: 5-Year F&B Industry CGR: 5-Year F&B Industry CGR: +LSD +LSD +HSD Source: Kantar Retail, Nielsen scanner data, company estimates. 8173-27
Slide 28: Growth Across Channels: Club
Growth Across Channels Club • Win in Snacking Occasion • Leverage Strong Product Credentials • Launch Unique Innovation 8173-28
Slide 29: Growth Across Channels: Natural & Organic
Growth Across Channels Natural & Organic • 3rd Largest U.S. N&O Food Manufacturer • Increasing Resources • Leveraging Annie’s Expertise to Grow General Mills Natural & Organic Brands 8173-29
Slide 30: Growth Across Channels: Drug & Dollar Stores
Growth Across Channels Drug & Dollar Stores • Drug: Health Needs • Dollar: Key Price Points • Leading Advisor on Food 8173-30
Slide 31: Growth Across Channels: E-commerce
Growth Across Channels E-commerce • Virtual Shelf / Captaincies • Smaller Brands: Spearfishing • Bigger Brands: Full Basket Shopping 8173-31
Slide 32: Quality Execution
Quality Execution On-Shelf Distribution In-Store Display 8173-32
Slide 33: Quality Distribution
Quality Distribution Top 450 SKUs 75% of Volume 25% Distribution Gap Significant Growth Opportunity Source: Nielsen scanner data; internal shipment data. 8173-33
Slide 34: Quality Display
Quality Display Optimizing In-Store Display • Focus on Most Productive Categories • Focus on Leading National Brands • Feature Fewer, Larger Items 8173-34
Slide 35: Reaching Hispanic Consumers
Reaching Hispanic Consumers Priority Categories Targeted Channels Quality Execution 8173-35
Slide 36: U.S. Retail Salesforce
U.S. Retail Salesforce Leading Profitable Growth: • Supporting U.S. Retail Priorities • Growth Across Channels • Quality Execution 8173-36
Slide 37: Operating Highlights
Operating Highlights Ken Powell Chairman and CEO
Slide 38: Progress on U.S. Retail Fiscal 2016 Priorities
Progress on U.S. Retail Fiscal 2016 Priorities • Growing Cereal, Yogurt and Snacks • Increasing Distribution on Natural & Organic Products • Addressing Value on Key Brands 8173-38
Slide 39: Improving U.S. Cereal Trends
Improving U.S. Cereal Trends (RTE Cereal Category Retail Sales) -1.6% -1.2% -2.2% -3.6% -5.2% Q1 Q2 Q3 Q4 Q1 F15 F15 F15 F15 F16 Source: Nielsen XAOC. 8173-39
Slide 40: U.S. Cereal Renovation and Innovation
U.S. Cereal Renovation and Innovation First Half Fiscal 2015 Second Half Fiscal 2015 Gluten-free Cheerios Off to a Good Start Expanding Nature Valley Franchise 8173-40
Slide 41: U.S. Yogurt Continues to Grow
U.S. Yogurt Continues to Grow (Q1 Retail Sales) Yoplait Greek Yoplait Original +11% +4% Source: Nielsen XAOC ended 8.29.15. 8173-41
Slide 42: U.S. Snacks Highlights
U.S. Snacks Highlights • Retail Sales Growth in Grain Snacks • Retail Sales Declines in Fruit and Salty Snacks Due to Lower Merchandising • Strong Levels of Innovation in 2H Source: Nielsen XAOC ended 8.29.15. 8173-42
Slide 43: Natural & Organic Portfolio Innovation
Natural & Organic Portfolio Innovation Cereal Soup Snacks 8173-43
Slide 44: Introducing Annie's Yogurt
Introducing Annie’s Yogurt • Organic, Whole-milk Yogurt • Three Kid-friendly Flavors • Launching in January 2016 8173-44
Slide 45: Additional U.S. Retail First-quarter Highlights
Additional U.S. Retail First-quarter Highlights Old El Paso Totino’s Hot Snacks Q1 Retail Sales: +2% Q1 Retail Sales: +4% Progresso Soup Improved Launches Value Source: Nielsen XAOC ended 8.29.15. 8173-45
Slide 46: Convenience Stores & Foodservice First-quarter Highlights
Convenience Stores & Foodservice First-quarter Highlights Cereal Yogurt Snacks Frozen Meals 8173-46
Slide 47: International Highlights - Canada
International Highlights - Canada Q1 Constant-currency Net Sales: +5%* Grain Snacks Yogurt Q1 Retail Sales Growth: +18% Q1 Retail Sales Growth: +2% *Non-GAAP measure. See appendix for reconciliation. Source: Nielsen ended 8.22.15. 8173-47
Slide 48: International Highlights - Europe
International Highlights - Europe Q1 Constant-currency Net Sales: +7%* Häagen-Dazs Old El Paso Q1 Retail Sales Growth: +22% Q1 Retail Sales Growth: +3% *Non-GAAP measure. See appendix for reconciliation. Source: Nielsen Scantrack FYTD through July 2015. 8173-48
Slide 49: International Highlights - Asia/Pacific Region
International Highlights - Asia/Pacific Region Q1 Constant-currency Net Sales: +3%* China AMEA Häagen-Dazs Wanchai Ferry Snacks Yoplait Off to a Häagen-Dazs Good Start *Non-GAAP measure. See appendix for reconciliation. 8173-49
Slide 50: International Highlights - Latin America
International Highlights - Latin America • Q1 Constant-currency Net Sales: +3%* • Good Growth in Argentina and Mexico • Challenging Market Conditions in Brazil *Non-GAAP measure. See appendix for reconciliation. 8173-50
Slide 51: General Mills First Quarter Fiscal 2016 Summary
General Mills First Quarter Fiscal 2016 Summary • Strong Constant-currency Growth in Net Sales, Total Segment Operating Profit*, and Adjusted Diluted EPS* • Cost Savings Initiatives on Target • On Track to Deliver F16 Growth Goals** *Non-GAAP measures. **Excluding impact of proposed Green Giant dive
Slide 52: Reconciliation of First Quarter Total Segment Operating Profit
Reconciliation of First Quarter Total Segment Operating Profit (Fiscal Years, $ in Millions) Q1 2016 2015 U.S. Retail $630 $457 International 117 146 Convenience Stores & Foodservice 80 87 Total Segment Operating Profit $826 $690 Unallocated Corporate Items 83 119 Restructuring, Impairment, and Othe
Slide 53: Reconciliation of First Quarter Constant-currency Net Sales Growth
Reconciliation of First Quarter Constant-currency Net Sales Growth (Fiscal Years) Q1 2016 % Change in % Change in Net Sales Net Sales Impact of Foreign on a Constant- as Reported Currency Exchange currency Basis Europe -10% -17 pts 7% Canada -11 -16 5 Asia/Pacific Flat -3 3 Latin America -26 -29 3 T
Slide 54: Reconciliation of Adjusted Diluted EPS and Related Constant-currency Growth Rate
Reconciliation of Adjusted Diluted EPS and Related Constant-currency Growth Rate (Fiscal Years) Q1 2016 2015 Change Diluted EPS $0.69 $0.55 +25% Mark-to-market effects -- .05 Restructuring costs .09 .01 Project-related costs .01 -- Adjusted Diluted EPS $0.79 $0.61 +30% Impact of Foreign Currency Exc
Slide 55: First Quarter Fiscal 2016 Reconciliation of Constant-currency Segment Operating Profit Growth
First Quarter Fiscal 2016 Reconciliation of Constant-currency Segment Operating Profit Growth (Fiscal Years) Q1 2016 % Change in % Change in Segment Segment Operating Profit Operating Profit Impact of Foreign on a Constant- as Reported Currency Exchange currency Basis International Segment Operating
Slide 56: Reconciliation of First Quarter Adjusted Gross Margin
Reconciliation of First Quarter Adjusted Gross Margin (Fiscal Years, $ in Millions) Q1 2016 2015 % of % of $ Net Sales $ Net Sales Net Sales $4,208 $4,268 Gross Margin as Reported* 1,555 36.9% 1,439 33.7% Mark-to-market effects -3 49 Restructuring charges 22 -- Project-related costs 13 -- Adjusted G
Slide 57: First Quarter Fiscal 2015 Reconciliation of Constant-currency Segment Operating Profit Growth
First Quarter Fiscal 2015 Reconciliation of Constant-currency Segment Operating Profit Growth (Fiscal Years) Q1 2015 % Change in % Change in Segment Segment Operating Profit Operating Profit Impact of Foreign on a Constant- as Reported Currency Exchange currency Basis International Segment Operating
Slide 58: Reconciliation of Constant-currency After-tax JV Earnings
Reconciliation of Constant-currency After-tax JV Earnings (Fiscal Years) Q1 2016 % Change in % Change in After-tax After-tax JV Earnings JV Earnings Impact of Foreign on a Constant- as Reported Currency Exchange currency Basis Total After-tax Earnings from Joint Ventures -1% -17 pts 16% 8173-58
Slide 59: Reconciliation of Tax Rate Excluding Items
Reconciliation of Tax Rate Excluding Items (Fiscal Years, $ in Millions) Q1 2016 Q1 2015 Pre-tax Income Pre-tax Income Earnings* Taxes Earnings* Taxes As Reported $608 $199 $479 $153 Mark-to-market effects -3 -1 49 18 Restructuring charges 82 24 14 5 Project-related costs 13 5 -- -- As Adjusted $700