General Mills, Inc. · NYSE:GIS
General Mills — Q3 FY2015 Earnings Presentation
55 slides from General Mills's earnings presentation, May 18, 2015
Slide 1: New Growth: General Mills Fiscal 2015 Third Quarter Results
New Growth General Mills Fiscal 2015 Third 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: Don Mulligan, Chief Financial Officer
Don Mulligan Executive Vice President; Chief Financial Officer
Slide 4: Third Quarter Fiscal 2015 Financial Summary
Third Quarter Fiscal 2015 Financial Summary ($ in Millions, Except per Share) Constant- currency $ % Change % Change* Net Sales $4,351 -1% +3% Segment Operating Profit* 698 +1 +3 Net Earnings Attributable to General Mills 343 -16 Diluted EPS .56 -12 Certain Items Affecting Comparability .14 Adjusted
Slide 5: Components of Net Sales Growth
Third Quarter Fiscal 2015 Components of Net Sales Growth (As Reported) +4pts -1pt -1pt -4pts Price & Foreign Total Volume* Mix Exchange Net Sales* * Annie’s Contributed 1 Point of Volume Growth and 1 Point of Net Sales Growth 7797-5
Slide 6: U.S. Retail Segment
Third Quarter Fiscal 2015 U.S. Retail Segment Segment Net Sales +1% vs. LY Segment Operating Profit +1% vs. LY Q3 Net Sales (Change vs. LY) Total U.S. Retail Segment +1% Snacks +14 Yogurt +10 Cereal Flat Meals -2 Baking Products -9 7797-6
Slide 7: Convenience Stores & Foodservice Segment
Third Quarter Fiscal 2015 Convenience Stores & Foodservice Segment Segment Net Sales +6% vs. LY Segment Operating Profit +11% vs. LY Q3 Net Sales (Change vs. LY) Frozen Breakfast +49% Yogurt +27 Cereal +12 Snacks +7 Biscuits +5 Mixes +2 Total Focus Platforms +12% 7797-7
Slide 8: International Segment
Third Quarter Fiscal 2015 International Segment Constant-currency Segment Net Sales* +6% vs. LY Constant-currency Segment Operating Profit* +10% vs. LY Q3 Constant-currency Net Sales* (Change vs. LY) Latin America +20% Asia / Pacific +4 Canada +4 Europe +3 *Non-GAAP measures. See appendix for reconc
Slide 9: Gross Margin Performance
Third Quarter Fiscal 2015 Gross Margin Performance As Reported Adjusted* • Raw Materials 95% 34.6% 34.1% Covered 33.2% 31.6% • Expect Q4 Adjusted Gross Margin Will Match Last Year Q3 F14 Q3 F15 Q3 F14 Q3 F15 *Non-GAAP measure. See appendix for reconciliation. 7797-9
Slide 10: Improving SG&A Efficiency
Third Quarter Fiscal 2015 Improving SG&A Efficiency • SG&A as Percent of Sales Down 110 Basis Points – R&D, Advertising & Media Expense Lower – Savings from Project Catalyst and Policy & Practice Update • Expect Full Year SG&A as Percent of Sales Excluding Media and R&D* to Be Below Last Year *Non-G
Slide 11: Joint Venture Results
Third Quarter Fiscal 2015 Joint Venture Results • Q3 After-tax JV Earnings $13MM vs $23MM Last Year – CPW Asset Impairment – Foreign Exchange CPW HDJ • Expect Full Year After-tax JV Net Sales -3%* Net Sales +7%* Earnings Below Last Year *Growth rates in constant currency. 7797-11
Slide 12: Other Income Statement Items
Third Quarter Fiscal 2015 Other Income Statement Items • Restructuring & Project-related Costs of $74MM Pretax (Includes $25MM in Cost of Sales) • $7MM Charge for Venezuela Balance Sheet Remeasurement • Unallocated Corporate Expense Decreased Excluding Certain Items • Interest Expense $4MM Above Las
Slide 13: Core Working Capital
Third Quarter Fiscal 2015 Core Working Capital ($ in Millions) Q3 F15 F14 % Change Accounts Receivable $1,585 $1,648 Inventories + 1,585 1,560 Accounts Payable - 1,481 1,360 Total Core Working Capital: $1,689 $1,848 -9% 7797-13
Slide 14: Nine Months Fiscal 2015 Cash Flow Highlights
Nine Months Fiscal 2015 Cash Flow Highlights YTD Q3 Operating Cash Flow YTD Uses of Cash ($ in Millions) • Fixed Asset Investment = $1,724 $491MM $1,561 • Dividends Paid = $751MM • Share Repurchases = $1,162MM F14 F15 7797-14
Slide 15: Strong Cash Returns to Shareholders
Strong Cash Returns to Shareholders ($ in Millions) Share Repurchases Dividends $2,728 $1,893 $1,913 $1,913 $1,113 F11 F12 F13 F14 F15 Share YTD Repurchase Ave. Price: $36 $39 $42 $48 $52 7797-15
Slide 16: Update on Productivity and Cost Savings Initiatives
Update on Productivity and Cost Savings Initiatives • Ongoing HMM Efforts – $400+ Million Savings in F15 – $4 Billion Cumulative Savings between F10-F20 • Incremental Cost Savings Projects – Project Century: Negotiations Completed on Announced Plant Closures – Project Catalyst: Actions Largely Compl
Slide 17: Fiscal 2015 Outlook
Fiscal 2015 Outlook Q4 Expectations in Constant Currency* • HSD Net Sales Growth, Including 53rd Week and Annie’s • DD Adjusted Diluted EPS* Growth Annual Expectations in Constant Currency* • LSD Growth in Net Sales* • LSD Decline in Segment Operating Profit* • LSD Growth in Adjusted Diluted EPS* *N
Slide 18: Bethany Quam, President, Convenience Stores & Foodservice
Bethany Quam Vice President; President, Convenience Stores & Foodservice
Slide 19: A Large Market Opportunity
A Large Market Opportunity U.S. Food and Beverage Expenditures (Calendar 2014) 48% 52% Away-from- At-home home $1.3 Trillion Source: U.S. Bureau of the Census, Technomic7797-19
Slide 20: We're Focused on Growing Channels
We’re Focused on Growing Channels Healthcare Convenience Stores Channel Growth 2015 Est. 2014 Nominal K-12 Schools Est. Sales Growth ($ in Billions) Total Foodservice $640 4% K-12 Schools $19 2% Colleges & Universities $16 4% Convenience Stores $51 3% Colleges & Foodservice Universities Operators So
Slide 21: Convenience Stores & Foodservice Portfolio Transformation
Convenience Stores & Foodservice Portfolio Transformation Fiscal Years % of F14 Net Sales 2005 2015 YTD SKU Count 5,500 1,900 Manufacturing Locations 33 8 Unbranded Salesforce Broker Direct 14% Branded Divested Businesses Branded to to Bread Concentrate Consumers Operators Frozen Bread Dough 31% 55%
Slide 22: Convenience Stores & Foodservice Net Sales Performance
Convenience Stores & Foodservice Net Sales Performance ($ in Millions) $1,984 $2,010 $1,983 $1,959 $1,841 $1,919 +4% $1,741 $1,468 F08 F09 F10 F11 F12 F13 F14 F15 YTD 7797-22
Slide 23: Convenience Stores & Foodservice Segment Operating Profit
Convenience Stores & Foodservice Segment Operating Profit ($ in Millions) CGR = +10% $315 +14% $306 $307 $287 $263 $252 $170 $178 F08 F09 F10 F11 F12 F13 F14 F15 Profit YTD Margin: 8.6% 8.9% 15.1% 16.6% 14.5% 16.1% 16.0% 17.2% 7797-23
Slide 24: Our Six Focus Platforms
Our Six Focus Platforms (% of F15 YTD Results) Frozen Baking Breakfast Yogurt Snacks Cereal Mixes Biscuits • Half of Segment Net Sales • 70% of Segment Operating Profit 7797-24
Slide 25: Six Focus Platforms Net Sales Performance
Six Focus Platforms Net Sales Performance ($ in Millions, +/- LY) CGR = +4% +2% +4% +8% +2% +4% +9% F10 F11 F12 F13 F14 F15 YTD 7797-25
Slide 26: Yogurt Continues to Grow
Yogurt Continues to Grow F15 YTD Net Sales +27% • #1 Yogurt Brand in Foodservice • Good Performance on Go-Gurt • Developing Innovative Solutions for Operators Source: NPD Supply Track, Calendar 2014 7797-26
Slide 27: Frozen Breakfast in Schools
Frozen Breakfast in Schools F15 YTD Net Sales +24% • More Than13 Million Breakfasts Served in Schools Daily • Innovative Hot Breakfasts with Great Brands Kids Love Source: USDA FY2014 7797-27
Slide 28: Cereal is Growing in Schools, Too
Cereal is Growing in Schools, Too F15 YTD Net Sales +6% K-12 Schools Colleges & Universities 7797-28
Slide 29: Snacks Growing in All Channels
Snacks Growing in All Channels F15 YTD Net Sales +9% K-12 Schools Convenience Stores Natural/Organic Snacks 7797-29
Slide 30: Strong Execution Capabilities
Strong Execution Capabilities • National, Direct Salesforce • Consumer and Operator Insights • Innovative Solutions 7797-30
Slide 31: Convenience Stores & Foodservice Summary
Convenience Stores & Foodservice Summary • Streamlined Portfolio for Future Growth • Focused on Six Key Platforms in Growing Channels • On Track for a Strong Year in F15: – MSD Net Sales Growth – DD Segment Operating Profit Growth 7797-31
Slide 32: Ken Powell, Chairman and CEO
Ken Powell Chairman and CEO
Slide 33: U.S. Retail Operating Unit Performance
U.S. Retail Operating Unit Performance (F15 Net Sales Growth) H1 Q3 YTD Snacks +3% +14% +7% Yogurt +1 +10 +4 Cereal -7 Flat -5 Meals -8 -2 -6 Baking Products -6 -9 -7 Total -4% +1% -3% 7797-33
Slide 34: U.S. Retail – Share Growth in Majority of Key Categories
U.S. Retail – Share Growth in Majority of Key Categories YTD Fiscal 2015 Dollar Share Change Share vs. LY (bps) Grain Snacks 42.9% +187 Frozen Hot Snacks 25.9 +110 Yogurt 25.0 +75 Frozen Pizza 9.6 +51 RTE Cereal 31.6 +31 Refrig. Baked Goods 70.3 +13 Fruit Snacks 47.2 +13 RTS Soup 39.4 -10 Mexican Pr
Slide 35: U.S. Retail Highlights: Yogurt
U.S. Retail Highlights Yogurt Greek Original Style Q3 Retail Sales +43% Q3 Retail Sales +17% Kid Q3 Retail Sales +7% Source: Nielsen XAOC, period ended 2.21.15 7797-35
Slide 36: Return to Growth for U.S. Yogurt
Return to Growth for U.S. Yogurt General Mills Yogurt F15 Retail Sales Growth (% vs LY) 12% 11% 7% 7% 6% 6% 6% 2% 1% Jun Jul Aug Sep Oct Nov Dec Jan Feb Market Share +/- LY: Flat Flat +1.4 +0.5 +0.3 +0.6 +1.0 +0.9 +2.1 Source: Nielsen XAOC 7797-36
Slide 37: U.S. Retail Highlights: Cereal
U.S. Retail Highlights Cereal (Q3 Retail Sales Growth) Toast Crunch Granola Varieties Protein Varieties Franchise (+26%) (+130%) (+13%) Q3 Dollar Share = 4.4, +0.6pts Source: Nielsen XAOC, period ended 2.21.15 7797-37
Slide 38: Gluten Free Cheerios
Gluten Free Cheerios • 88% of Cheerios Sales (11% of Cereal Category Sales) • Start Ship Q1 F16 Wheat and Barley No Formula Change Changed to Just Pure Oats Sorghum and Millet 7797-38
Slide 39: Gaining Share in Cereal
Gaining Share in Cereal General Mills RTE Cereal Dollar Market Share 31.6 29.7 F07 F08 F09 F10 F11 F12 F13 F14 F15 YTD Sources: F07-F09 Nielsen All Outlet; F10-F14 Nielsen XAOC; F15 Nielsen XAOC FYTD ended 2.21.15 7797-39
Slide 40: U.S. Retail Highlights: Snacks
U.S. Retail Highlights Snacks Grain Snacks Nutrition Bars Chex Mix & Gardetto’s Q3 Retail Sales +4% Q3 Retail Sales +11% Q3 Retail Sales +3% Source: Nielsen XAOC, period ended 2.21.15 7797-40
Slide 41: U.S. Retail Highlights: Totino's Hot Snacks
U.S. Retail Highlights Totino’s Hot Snacks Q3 Retail Sales +4% Source: Nielsen XAOC, period ended 2.21.15 7797-41
Slide 42: Natural & Organic Portfolio Growth
Natural & Organic Portfolio Growth (Net Sales, $ in Millions) Q3 Q3 F14 F15 Annie’s +++ Cascadian Farm + Lärabar + Food Should Taste Good + Muir Glen + Mountain High - Immaculate + Liberte + Ttl N/O Portfolio $100 $161 +61% Includes Net Sales in U.S. Retail and Convenience Stores & Foodservice Segme
Slide 43: International Highlights: Europe Region
International Highlights Europe Region Q3 Constant Currency Net Sales: +3%* Mexican Retail Sales +10% Ice Cream Retail Sales -1% Yogurt Retail Sales +1% *Non-GAAP measure. See appendix for reconciliation Source: Nielsen latest quarter ended January 2015 7797-43
Slide 44: International Highlights: Canada
International Highlights Canada Q3 Constant Currency Net Sales: +4%* Yogurt Retail Sales +1% Cereal Retail Sales Flat OEP Retail Sales +8% Snacks Retail Sales +11% *Non-GAAP measure. See appendix for reconciliation Source: Nielsen latest 13 weeks ended 2.21.15 7797-44
Slide 45: International Highlights: Latin America
International Highlights Latin America Q3 Constant Currency Net Sales: +20%* *Non-GAAP measure. See appendix for reconciliation 7797-45
Slide 46: International Highlights: Asia/Pacific
International Highlights Asia/Pacific Q3 Constant Currency Net Sales: +4%* AMEA Greater China *Non-GAAP measure. See appendix for reconciliation 7797-46
Slide 47: General Mills – New Growth
General Mills – New Growth • Putting the Consumer First to Deliver New Growth – Renovating Core Brands to Meet Evolving Consumer Preferences – Innovating with Compelling New Products – Investing in Relevant Consumer Marketing 7797-47
Slide 48: Reconciliation of Total Segment Operating Profit
Reconciliation of Total Segment Operating Profit (Fiscal Years, $ in Millions) Q3 2015 2014 U.S. Retail $521 $517 International 108 110 Convenience Stores & Foodservice 69 62 Total Segment Operating Profit $698 $690 Unallocated Corporate Items 112 19 Restructuring, Impairment, and Other Exit Costs 4
Slide 49: Reconciliation of Constant-currency Total Segment Operating Profit Growth
Reconciliation of Constant-currency Total Segment Operating Profit Growth (Fiscal Years) Q3 2015 % Change in % Change in Total Segment Total Segment Operating Profit Operating Profit Impact of Foreign on a Constant- as Reported Currency Exchange currency Basis Total Segment Operating Profit 1% -2 pt
Slide 50: Reconciliation of Adjusted Diluted EPS and Constant-currency Growth Rate
Reconciliation of Adjusted Diluted EPS and Related Constant-currency Growth Rate (Fiscal Years) Q3 2015 2014 Change Diluted EPS $0.56 $0.64 -12% Mark-to-market Effects .05 (.02) Restructuring Charges .07 -- Project-related Costs -- -- Venezuela Currency Devaluation .01 -- Acquisition Integration Cos
Slide 51: Reconciliation of Constant-currency Net Sales Growth
Reconciliation of Constant-currency Net Sales Growth (Fiscal Years) Q3 2015 % Change in % Change in Net Sales Net Sales Impact of Foreign on a Constant- as Reported Currency Exchange currency Basis Europe -8% -11 pts 3% Canada -5 -9 4 Asia/Pacific 2 -2 4 Latin America -14 -34 20 Total International
Slide 52: Reconciliation of Constant-currency International Segment Operating Profit Growth
Reconciliation of Constant-currency International Segment Operating Profit Growth (Fiscal Years) Q3 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 Profit -2%
Slide 53: Reconciliation of Adjusted Gross Margin
Reconciliation of Adjusted Gross Margin (Fiscal Years, $ in Millions) Q3 2015 Q3 2014 % of % of $ Net Sales $ Net Sales Net Sales $4,351 $4,377 Gross Margin as Reported 1,376 31.6% 1,513 34.6% Mark-to-market Effects 44 (23) Restructuring Charges 22 -- Project-related Costs 3 -- Venezuela Currency De
Slide 54: Reconciliation of Tax Rate Excluding Items
Reconciliation of Tax Rate Excluding Items (Fiscal Years, $ in Millions) Q3 2015 Q3 2014 Pre-tax Income Pre-tax Income Earnings* Taxes Earnings* Taxes As Reported $457 $116 $595 $201 Mark-to-market effects 44 16 (23) (8) Restructuring Charges 71 26 -- -- Project-related Costs 3 1 -- -- Venezuela Cur
Slide 55: Summary of Restructuring and Project-related Costs and Savings
Summary of Restructuring and Project-related Costs and Savings Nine-Month Period Quarter Ended Ended Estimated In Millions Feb. 22, 2015 Feb. 22, 2015 Estimated Future Estimated Total Savings Charge Cash Charge Cash Charge Cash Charge Cash (a) Century $ 70 $ 2 $ 159 $ 8 $ 136 $ 111 $ 295 $ 120 Catal