Mccormick & Company, Incorporated · NYSE:MKC
Mccormick & — Q4 2022 Earnings Presentation
33 slides from Mccormick &'s earnings presentation, Jan 26, 2023
Slide 1: 4th Quarter 2022 Financial Results and Outlook
4 QUARTER th 2022 Financial Results and Outlook McCORMICK & COMPANY, INC. JANUARY 26, 2023 The following slides accompany a January 26, 2023, earnings release conference call. This information should be read in conjunction with the press release issued on that date.
Slide 2: Forward-Looking Information
FORWARD-LOOKING INFORMATION Certain information contained in this release, including statements concerning expected performance, such as those relating to net sales, gross margin, earnings, cost savings, transaction and integration expenses, special charges, acquisitions, brand marketing support, vo
Slide 3: Lawrence Kurzius, Chairman and Chief Executive Officer
Lawrence Kurzius Chairman and Chief Executive Officer 3
Slide 4: Dynamic Global Environment Challenged 2022 Performance
DYNAMIC GLOBAL ENVIRONMENT CHALLENGED 2022 PERFORMANCE ENDING A VOLATILE 2022 WITH CONFIDENCE IN OUTLOOK FOR STRONG 2023 AND BEYOND 2022 CHALLENGING WELL-POSITIONED ENTERING 2023 CONDITIONS DRIVING SUCCESSFUL STRATEGY EXECUTION AND STRONGER RESULTS Persistently higher cost inflation Positive con
Slide 5: Fourth Quarter 2022 Sales Growth
FOURTH QUARTER 2022 SALES GROWTH SALES GROWTH WITHIN GUIDANCE POSITIONED TO ACCELERATE SALES GROWTH BUT BELOW EXPECTATIONS FOLLOWING STRONG 4Q UNDERLYING GROWTH 2%1 Actual sales growth reflects: Strengthening consumer consumption trends Growth from pricing actions of 9% partially Outstanding F
Slide 6: Fourth Quarter 2022 Profit Pressure
FOURTH QUARTER 2022 PROFIT PRESSURE PROFIT SHORT OF EXPECTATIONS DRIVEN GLOBAL OPERATING EFFECTIVENESS PROGRAM BY PRODUCT MIX AND ONE-TIME ITEMS COMMITTED TO INCREASING PROFIT REALIZATION Adjusted operating income declined 9%1 Targeting elimination of $100M of supply chain costs Adjusted earnings pe
Slide 7: Global Operating Effectiveness Program
GLOBAL OPERATING EFFECTIVENESS PROGRAM EXPECTED ANNUAL COST SAVINGS OF $125 MILLION … $75 MILLION TO BE REALIZED IN 2023 NORMALIZING SUPPLY CHAIN COSTS ADVANCING OUR WHILE SUPPORTING CUSTOMER GROWTH GLOBAL OPERATING MODEL Reducing 10% of Americas supply chain workforce Streamlining workforce across
Slide 8: Fourth Quarter Consumer Segment Update
FOURTH QUARTER CONSUMER SEGMENT UPDATE BRAND MARKETING, NEW PRODUCTS & CATEGORY MANAGEMENT DRIVING POSITIVE MOMENTUM AMERICAS EMEA 6% unfavorable impact due to restocking comparisons Strongest sales growth of the year 6% branded portfolio consumption growth strongest of the year Sequential a
Slide 9: Fourth Quarter Flavor Solutions Segment Update
FOURTH QUARTER FLAVOR SOLUTIONS SEGMENT UPDATE STRENGTH OF PORTFOLIO AND CAPABILITIES ARE DRIVING OUTSTANDING MOMENTUM AMERICAS Strongest performance of the year Strong growth in snack seasonings and flavors for performance nutrition and health Expanded distribution and share gains in branded
Slide 10: Global Demand for Flavor Is Foundation of Sales Growth
GLOBAL DEMAND FOR FLAVOR IS FOUNDATION OF SALES GROWTH McCORMICK IS END-TO-END FLAVOR CAPITALIZING ON ACCELERATED INTENTIONALLY FOCUSED ON LONG-TERM CONSUMER TRENDS FAST GROWING CATEGORIES1 HEALTHY AND FLAVORFUL COOKING DIGITAL ENGAGEMENT TRUSTED BRANDS PURPOSE-MINDED PRACTICES 1) 2022 net sales wit
Slide 11: Focused on Long-Term Goals, Strategies and Values
FOCUSED ON LONG-TERM GOALS, STRATEGIES AND VALUES THAT HAVE DRIVEN COMPOUNDING GROWTH Confidence in growth momentum and ability to navigate environment with: Strength of business model and value of products and capabilities Execution of proven long-term strategies by experienced leaders Well-pos
Slide 12: Mike Smith, Executive Vice President and Chief Financial Officer
Mike Smith Executive Vice President and Chief Financial Officer
Slide 13: 4Q 2022 Sales Results
4Q 2022 SALES RESULTS TOTAL COMPANY 2.0% constant currency 9.3% -0.9% -2.0% -4.0% -6.4% Acquisitions/ Volume/Mix Price Divestitures Currency Net Sales Divestitures CONSUMER FLAVOR SOLUTIONS -4.3% constant currency 13.7% constant currency 8.7% 10.5% 8.5% 3.2% 0.0% -1.4% -3.3% -5.2% -7.6% -11.6% Acqui
Slide 14: 4Q 2022 Sales Results: Consumer Segment, Americas
4Q 2022 SALES RESULTS: CONSUMER SEGMENT AMERICAS Pricing actions to offset cost increases -3.5% constant currency Return to pre-pandemic holiday promotional levels 2% decline from Kitchen Basics divestiture 9.2% 6% decline in volume and mix from lapping restocking of retail inventory in 4Q 2
Slide 15: 4Q 2022 Sales Results: Consumer Segment, EMEA
4Q 2022 SALES RESULTS: CONSUMER SEGMENT EMEA Pricing actions to offset cost increases 2.0% constant currency 4% decline from lower Russia sales included in volume and mix 9.1% 0.0% -7.1% -13.4% -15.4% Acquisitions/ Volume/Mix Price Acquisitions Currency Net Sales Divestitures 15 The non-GAAP mea
Slide 16: 4Q 2022 Sales Results: Consumer Segment, Asia/Pacific
4Q 2022 SALES RESULTS: CONSUMER SEGMENT ASIA / PACIFIC Volume and mix includes a 23% decline driven by: -22.1% constant currency − Consumption disruption in China related to COVID 3.4% − Exit of low margin business in India 0.0% Pricing actions to offset cost inflation -6.5% -25.5% -28.6% Acquis
Slide 17: 4Q 2022 Sales Results
4Q 2022 SALES RESULTS TOTAL COMPANY 2.0% constant currency 9.3% -0.9% -2.0% -4.0% -6.4% Acquisitions/ Volume/Mix Price Divestitures Currency Net Sales Divestitures CONSUMER FLAVOR SOLUTIONS -4.3% constant currency 13.7% constant currency 8.7% 10.5% 8.5% 3.2% 0.0% -1.4% -3.3% -5.2% -7.6% -11.6% Acqui
Slide 18: 4Q 2022 Sales Results: Flavor Solutions, Americas
4Q 2022 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT AMERICAS Pricing actions to offset cost inflation 13.2% constant currency Higher sales to packaged food and beverage companies with strength in snack seasonings 11.0% 12.9% Higher demand from branded foodservice customers 2.2% 0.0% -0.3% Acquisit
Slide 19: 4Q 2022 Sales Results: Flavor Solutions, EMEA
4Q 2022 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT EMEA Broad-based growth, including pricing actions, led by: 15.9% constant currency − Strong growth with quick service restaurant customers − Strong growth with packaged food and beverage company 10.3% customers 5.6% 0.0% -1.8% -17.7% Acquisitions/ V
Slide 20: 4Q 2022 Sales Results: Flavor Solutions, Asia/Pacific
4Q 2022 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT ASIA / PACIFIC Pricing actions to offset cost inflation 11.3% constant currency Quick service restaurants drove volume and mix growth driven by strength in core menu items 8.0% 3.3% 0.0% 0.0% -11.3% Acquisitions/ Volume/Mix Price Acquisitions Curre
Slide 21: Gross Margin
GROSS MARGIN 4Q YTD 2022 (in millions) 4Q 2022 4Q 2021 Fav/(Unfav) Fav/(Unfav) Change Change Gross Margin 36.8% 40.6% (380) bps (370) bps Adjusted Gross Margin 36.8% 40.9% (410) bps (390) bps EXPECTED DRIVERS UNEXPECTED DRIVERS ~250 basis point dilutive impact of pricing to offset dollar inflation
Slide 22: Operating Income
OPERATING INCOME 4Q YTD 2022 (in millions) 4Q 2022 4Q 2021 Fav/(Unfav) Fav/(Unfav) Change Change Selling, general & administrative expenses as percent of net sales 20.4% 23.1% 270 bps 90 bps Operating income $264.3 $276.2 (4%) (15%) Adjusted operating income $277.9 $308.7 (10%) (17%) Consumer 235.2
Slide 23: Interest Expense and Income Taxes
INTEREST EXPENSE AND INCOME TAXES 4Q YTD 2022 (in millions) 4Q 2022 4Q 2021 Fav/(Unfav) Fav/(Unfav) Change Change Interest Expense $44.4 $33.3 (33%) (9%) Income tax rate 23.3% 23.0% (30 bps) 80 bps Adjusted income tax rate 23.1% 21.3% (180 bps) (80 bps) Increased interest expense driven by the hig
Slide 24: Earnings Per Share
EARNINGS PER SHARE 4Q YTD 2022 4Q 2022 4Q 2021 Fav/(Unfav) Fav/(Unfav) Change Change Earnings per share $0.69 $0.73 (5%) (10%) Adjusted earnings per share $0.73 $0.84 (13%) (17%) Change in adjusted earnings per share Decrease in adjusted operating income ($0.08) Increase in interest expense (0.04) I
Slide 25: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW Cash flow provided from operations was $652 million for 2022 BALANCED USE OF CASH − Impacted by lower net income and higher inventory levels $397 million of cash returned to shareholders through dividends Drive growth Capital expenditures of $262 million in 2022
Slide 26: 2023 Outlook
2023 OUTLOOK DISCRETE YEAR-OVER-YEAR DRIVERS CONSTANT GLOBAL NET CHINA KITCHEN INCENTIVE INTEREST TAX UNDERLYING TOTAL CURRENCY OPERATING RECOVERY BASICS COMP HEADWIND1 HEADWIND 3-YEAR BUSINESS 2Q 2022 SALES GUIDANCE EFFECTIVE- DIVESTITURE REBUILD GROWTH NESS SALES CAGR1 PROGRAM GROWTH Sales 5% to 7
Slide 27: 2023 Outlook
2023 OUTLOOK Reported Currency Constant Currency Sales growth 5% to 7% 5% to 7% Adjusted operating income increase 9% to 11% 9% to 11% CCI-led cost savings Approximately $85M Cost inflation Low to mid-teens increase Adjusted gross profit margin Up 25 to 75 bps Brand marketing Low single-digit increa
Slide 28: Key Takeaways
KEY TAKEAWAYS WE ARE CONFIDENT IN DRIVING THE PROFITABLE GROWTH IN OUR 2023 OUTLOOK We have positive momentum entering 2023. We expect an acceleration of Consumer segment sales and continued strong Flavor Solutions performance. We are committed to increasing our profit realization and with our Globa
Slide 29: 4th Quarter 2022 Financial Results and Outlook
4 QUARTER th 2022 Financial Results and Outlook McCORMICK & COMPANY, INC. JANUARY 26, 2023 The following slides accompany a January 26, 2023, earnings release conference call. This information should be read in conjunction with the press release issued on that date.
Slide 30: 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 31: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES (in millions except per share data) Three Months Ended Year Ended 11/30/2022 11/30/2021 11/30/2022 11/30/2021 Gross profit $ 624.4 $ 702.9 $2,274.5 $2,494.6 1) Transaction and integration expenses include transaction and integration expenses Impact of transaction and inte
Slide 32: 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 33: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES To present “constant currency” information for the fiscal year 2023 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 2023