Mccormick & Company, Incorporated · NYSE:MKC
Mccormick & — Q4 2023 Earnings Presentation
32 slides from Mccormick &'s earnings presentation, Jan 25, 2024
Slide 1: 4th Quarter 2023 Financial Results and Outlook
4 QUARTER th 2023 Financial Results and Outlook McCORMICK & COMPANY, INC. January 25, 2024 The following slides accompany a January 25, 2024, earnings release conference call. This information should be read in conjunction with the press release issued on that date. 1
Slide 2: Forward-Looking Information
FORWARD-LOOKING INFORMATION Certain information contained in this presentation, including statements concerning expected performance such as those relating to net sales, gross margin, earnings, cost savings, special charges, acquisitions, brand marketing support, volume and product mix, income tax e
Slide 3: Brendan Foley, President and CEO
Brendan Foley President and Chief Executive Officer 3
Slide 4: Fourth Quarter Performance
FOURTH QUARTER PERFORMANCE Greater than expected pressure on consumer impacted growth Improvement in key areas highlights strategies and initiatives are working Dedication to improving volume trends Prioritized investments to drive impactful results 4
Slide 5: Fourth Quarter 2023 Sales Growth
FOURTH QUARTER 2023 SALES GROWTH 2%1 NET SALES GROWTH DRIVEN BY 5% PRICING WITH (3)% VOLUME OFFSET Differed from Expectations Met Expectations Consumer Consumer More volume declines in prepared foods Spices and seasonings volume growth in Americas Impact from mustard private label low price points R
Slide 6: Proven Initiatives Focused on Key Areas
PROVEN INITIATIVES FOCUSED ON KEY AREAS Growth Levers Spices and Seasonings Americas branded volume growth, improved share trends, restored distribution BRAND MARKETING France and Australia volume growth and share gains PRICE GAP MANAGEMENT Branded Foodservice Strong volume across all channels NEW P
Slide 7: In a Position of Strength to Focus on Growth
IN A POSITION OF STRENGTH TO FOCUS ON GROWTH MARGIN EXPANSION AND IMPROVED CASH FLOW TO FUEL INVESTMENTS Gross Margin Performance Full Year Performance Expansion throughout the year Operating margin expansion ▪ Effective price realization Cash flow improvement ▪ Optimization of cost structure Debt p
Slide 8: Executing on Growth Plans for 2024
EXECUTING ON GROWTH PLANS FOR 2024 Category Management Brand Marketing New Products Proprietary Technologies Differentiated Customer Engagement Performance Nutrition 8
Slide 9: Mike Smith, Executive Vice President and CFO
Mike Smith Executive Vice President and Chief Financial Officer 9
Slide 10: 4Q 2023 Sales Results
4Q 2023 SALES RESULTS TOTAL COMPANY 1.9% constant currency 5.2% 1.5% 3.4% -0.2% -3.1% Acquisitions/ Volume/Mix Price Divestitures Currency Net Sales Divestitures CONSUMER FLAVOR SOLUTIONS 0.0% constant currency 4.8% constant currency 7.4% 7.0% 3.8% 1.0% 2.2% 0.0% 1.0% -2.0% -0.6% -3.8% Acquisitions/
Slide 11: 4Q 2023 Sales Results: Consumer Segment, Americas
4Q 2023 SALES RESULTS: CONSUMER SEGMENT AMERICAS CONSUMER -4.4% constant currency ▪ Volume and mix decline included: – Exit of Hispanic product direct store delivery 1.9% – Lower volume in prepared foods, mustard, and recipe mixes 0.0% -0.1% – Partially offset by growth in spices and seasonings -4.5
Slide 12: 4Q 2023 Sales Results: Consumer Segment, EMEA
4Q 2023 SALES RESULTS: CONSUMER SEGMENT EMEA CONSUMER 9.2% constant currency ▪ Pricing actions to offset cost inflation 18.5% 12.9% ▪ Broad-based growth across markets and categories 9.3% 0.0% -3.7% Acquisitions/ Volume/Mix Price Acquisitions Currency Net Sales Divestitures 12 The non-GAAP measure i
Slide 13: 4Q 2023 Sales Results: Consumer Segment, APAC
4Q 2023 SALES RESULTS: CONSUMER SEGMENT APAC CONSUMER 31.3% constant currency ▪ Recovery in China as expected 25.5% 28.0% ▪ Broad-based volume growth outside of China ▪ Pricing actions to offset cost inflation 5.8% 0.0% -3.3% Acquisitions/ Volume/Mix Price Currency Net Sales Divestitures 13 The non-
Slide 14: 4Q 2023 Sales Results
4Q 2023 SALES RESULTS TOTAL COMPANY 1.9% constant currency 5.2% 1.5% 3.4% -0.2% -3.1% Acquisitions/ Volume/Mix Price Divestitures Currency Net Sales Divestitures CONSUMER FLAVOR SOLUTIONS 0.0% constant currency 4.8% constant currency 7.4% 7.0% 3.8% 1.0% 2.2% 0.0% 1.0% -2.0% -0.6% -3.8% Acquisitions/
Slide 15: 4Q 2023 Sales Results: Flavor Solutions, Americas
4Q 2023 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT AMERICAS FLAVOR SOLUTIONS 5.5% constant currency ▪ Pricing actions to offset cost inflation ▪ Broad-based growth across the portfolio 7.1% 5.9% ▪ Strength in branded foodservice 1.6% 0.0% -0.4% Acquisitions/ Volume/Mix Price Acquisitions/ Currency Net
Slide 16: 4Q 2023 Sales Results: Flavor Solutions, EMEA
4Q 2023 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT EMEA FLAVOR SOLUTIONS 2.1% constant currency ▪ Pricing actions to offset cost inflation ▪ 3% impact from divestiture of Giotti canning business 13.5% 8.7% ▪ Volume and mix decline included: 6.6% – Lower volume in the businesses of some customers – 1% i
Slide 17: 4Q 2023 Sales Results: Flavor Solutions, APAC
4Q 2023 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT APAC FLAVOR SOLUTIONS 5.1% constant currency ▪ Pricing actions to offset cost inflation ▪ Volume and mix decline included 6.5% – Lower demand in quick service restaurants outside of China 3.5% 0.0% – Partially offset by strong growth in China -1.4% -1.
Slide 18: Gross Margin
GROSS MARGIN 4Q YTD 2023 (in millions) 4Q 2023 4Q 2022 Fav/(Unfav) Fav/(Unfav) Change Change Gross Margin 40.0% 36.8% 320 bps 180 bps ▪ Favorable gross margin impacts: − Favorable product mix in both Consumer and Flavor Solutions segments − Comprehensive Continuous Improvement (CCI) and Global Opera
Slide 19: Operating Income
OPERATING INCOME 4Q YTD 2023 (in millions) 4Q 2023 4Q 2022 Fav/(Unfav) Fav/(Unfav) Change Change Selling, general & administrative expenses as percent of net sales 22.3% 20.4% (190) bps (80) bps Operating income $297.2 $264.3 12% 12% Adjusted operating income $311.3 $277.9 12% 12% Consumer 235.2 235
Slide 20: Interest Expense and Income Taxes
INTEREST EXPENSE AND INCOME TAXES 4Q YTD 2023 (in millions) 4Q 2023 4Q 2022 Fav/(Unfav) Fav/(Unfav) Change Change Interest Expense $52.7 $44.4 (19%) (40%) Income tax rate 22.2% 23.3% 110 bps (110) bps Adjusted income tax rate 22.3% 23.1% 80 bps (110) bps ▪ Increased interest expense driven by the hi
Slide 21: Income from Unconsolidated Operations
INCOME FROM UNCONSOLIDATED OPERATIONS 4Q YTD 2023 (in millions) 4Q 2023 4Q 2022 Fav/(Unfav) Fav/(Unfav) Change Change Income from Unconsolidated Operations $18.7 $10.6 76% 49% ▪ Increase driven by strong performance in largest joint venture, McCormick de Mexico 21
Slide 22: Earnings Per Share
EARNINGS PER SHARE 4Q YTD 2023 4Q 2023 4Q 2022 Fav/(Unfav) Fav/(Unfav) Change Change Earnings per share $0.81 $0.69 17% 0% Adjusted earnings per share $0.85 $0.73 16% 7% Change in adjusted earnings per share Increase in adjusted operating income 0.09 Increase in unconsolidated income 0.03 Increase i
Slide 23: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW ▪ Strong 2023 cash flow provided from operations of $1.2 billion CASH FLOW FROM – Nearly double the cash flow relative to prior year OPERATIONS – Higher operating income and working capital improvements, including $1,237M lower inventory drove increase ▪ $419 million of c
Slide 24: 2024 Outlook
2024 OUTLOOK Reported Currency Constant Currency Sales growth -2% to 0% -1% to 1% Adjusted operating income increase 3% to 5% 4% to 6% Cost inflation Low single-digit increase Adjusted gross profit margin Up 50 to 100 bps Brand marketing High single-digit increase Adjusted income from unconsolidated
Slide 25: Key Takeaways
KEY TAKEAWAYS Margins strengthened, cash flow significantly improved, and debt leverage lowered Strategies and initiatives drove volume growth in areas of focus FPO Certain areas are challenged and controllable drivers being addressing Initiatives expected to drive improved volume trends and build t
Slide 26: McCormick's Leadership and Differentiation
KEY PRIORITIES TO ADVANCE McCORMICK’S LEADERSHIP AND DIFFERENTIATION Strengthen global leadership in core categories Drive profitable growth and higher returns on investments Accelerate digital transformation Elevate Power of People culture Strengthen and expand system of competitive advantages HARN
Slide 27: 4th Quarter 2023 Financial Results and Outlook
4 QUARTER th 2023 Financial Results and Outlook McCORMICK & COMPANY, INC. January 25, 2024 The following slides accompany a January 25, 2024, earnings release conference call. This information should be read in conjunction with the press release issued on that date. 27
Slide 28: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES The tables below include financial measures of adjusted gross profit, adjusted gross profit margin, adjusted operating income, adjusted operating income margin, adjusted income tax expense, adjusted income tax rate, adjusted net income and adjusted diluted earnings per sh
Slide 29: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES (in millions except per share data) Three Months Ended Year Ended 11/30/2023 11/30/2022 11/30/2023 11/30/2022 Operating income $ 297.2 $ 264.3 $ 963.0 $ 863.6 1) Special charges for the year ended November 30, 2022 include a $10.0 million non-cash intangible Impact of oth
Slide 30: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES Because we are a multi-national company, we are subject to variability of our reported U.S. dollar results due to changes in foreign currency exchange rates. Those changes have been volatile over the past several years. The exclusion of the effects of foreign currency exc
Slide 31: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES To present “constant currency” information for the fiscal year 2024 projection, projected sales and adjusted operating income for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the company’s budgeted exchange rates for 2024
Slide 32: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES The following provides a reconciliation of our estimated earnings per share to adjusted earnings per share for 2024 and actual results for 2023: Year Ended 2024 Projection 11/30/2023 Earnings per share - diluted $2.76 to $2.81 $ 2.52 Impact of special charges 0.04 0.18 Ad