General Mills, Inc. · NYSE:GIS
General Mills — Q2 FY2020 Earnings Presentation
44 slides from General Mills's earnings presentation, Dec 18, 2019
Slide 1: General Mills Earnings Second Quarter Fiscal 2020
General Mills Earnings Investor Day Fiscal Second Quarter Fiscal20202020 December 18, 2019 July 9, 2019 1
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: Jeff Harmening, Chairman and Chief Executive Officer
Jeff Harmening Chairman and Chief Executive Officer General Mills Earnings Investor Day Fiscal Second Quarter Fiscal2020 2020 December 18,July 9, 2019 2019 3
Slide 4: Today's Key Messages
Today’s Key Messages • Broad-based Organic Sales Improvement in Q2 • Strong Earnings and Free Cash Flow Drove Reduced Debt in 1H • Expect to Step Up Investments and Organic Sales Growth in 2H • Remain on Track to Deliver Fiscal 2020 Goals for Sales, Profit, and EPS; Raising Guidance for Cash Convers
Slide 5: Second Quarter Fiscal 2020 Financial Results
Second Quarter Fiscal 2020 Financial Results Dollars in millions except per share data Q2 TOTAL GENERAL MILLS $MM VS LY Net Sales $4,421 Flat Organic Sales* +1% Adjusted Operating Profit* $813 +7%1 Adjusted Diluted EPS* $0.95 +11%1 *Non-GAAP measure. See appendix for reconciliation. (1) Constant cur
Slide 6: Our Fiscal 2020 Priorities
Our Fiscal 2020 Priorities 1 Accelerate Organic Sales Improve NAR while continuing to drive Pet growth Maintain 2 Strong Margins Fuel growth investments through HMM and SRM 3 Reduce Leverage Continue cash discipline and pay down debt 6
Slide 7: Components of Net Sales Growth
Second Quarter Fiscal 2020 Components of Net Sales Growth Organic Net Sales* = +1% +1 pt Flat Flat Flat -1 pt Organic Organic Foreign Acquisitions / Total Net Sales Volume Price / Mix Exchange Divestitures As Reported *Non-GAAP measure. 7
Slide 8: North America Retail
Second Quarter Fiscal 2020 North America Retail SEGMENT RESULTS $MM VS. LY SEGMENT HIGHLIGHTS Net Sales $2,676 Flat¹ • Organic sales in-line with year ago levels • Net sales growth in U.S. Cereal (+5%) and Segment Operating Profit $642 +4%² Canada (+2% in CC2) offset by declines in U.S. Meals & Baki
Slide 9: Strong First Half Results on U.S. Cereal
Strong First Half Results on U.S. Cereal GENERAL MILLS U.S. CEREAL CONTINUED FOCUS ON STRONG (Retail Sales, % vs. LY) FUNDAMENTALS IN THE SECOND HALF 2% Flat Flat Consumer Investment and Product News F18 F19 F20 1H Share pts +0.8 +0.3 +1.0 vs. LY Strong Innovation Source: Nielsen xAOC 9
Slide 10: U.S. Yogurt
U.S. Yogurt INNOVATION AND CONSUMER SUPPORT GENERAL MILLS U.S. YOGURT (Retail Sales % vs. LY) TO DRIVE SECOND HALF IMPROVEMENT -2% -3% Dairy-Free Flavor News -11% F18 F19 F20 1H Share pts -1.5 +0.1 -0.5 vs. LY 3 Simple Ingredients Increased Consumer Source: Nielsen xAOC Support 10
Slide 11: Improving U.S. Snacks
Improving U.S. Snacks GENERAL MILLS U.S. SNACKS U.S. SNACKS IMPROVEMENT TO (Retail Sales, % vs. LY) CONTINUE IN SECOND HALF • 2H Improvement Driven by Nature Valley Total Snacks Snack Bars Innovation, Fiber One Renovation, and Fruit Snacks Momentum -1% • Lapping Distribution Losses on Nature Valley
Slide 12: Competing Effectively in U.S. Meals & Baking
Competing Effectively in U.S. Meals & Baking (General Mills F20 1H Retail Sales & Market Share vs. LY) SOUP OLD EL PASO REFRIGERATED DOUGH Retail Sales: +3% Retail Sales: +6% Retail Sales: -3% Share: +0.9 Pts Share: +0.2 Pts Share: +0.7 Pts Source: Nielsen xAOC 12
Slide 13: Pet Segment
Second Quarter Fiscal 2020 Pet Segment SEGMENT RESULTS $MM VS. LY SEGMENT HIGHLIGHTS Net Sales $389 +16%¹ • Q2 net sales increase led by strong growth in FDM and E-commerce, Segment Operating Profit $81 +14% positive price/mix, and shipment timing benefit • Life Protection Formula and Wilderness net
Slide 14: Pet All-channel Retail Sales +DD in First-Half F20
Pet All-channel Retail Sales +DD in First-Half F20 FDM PET SPECIALTY E-COMMERCE RETAIL SALES AT CUSTOMERS WITH BLUE MORE THAN 12 MONTHS +45% F19 Q2 F20 Q2 Retail Sales +++ Retail Sales -DD Retail Sales +High Teens Source: Nielsen and IRI excluding rawhide, chews, and RX sold in-store Source: Nielsen
Slide 15: Convenience Stores & Foodservice
Second Quarter Fiscal 2020 Convenience Stores & Foodservice SEGMENT RESULTS $MM VS. LY SEGMENT HIGHLIGHTS Net Sales $514 Flat¹ • Significant topline improvement vs. Q1 • Focus 6 net sales +2%, led by Cereal, Segment Operating Profit $115 +5% Frozen Baked Goods, and Yogurt • Q2 profit growth driven b
Slide 16: Europe & Australia
Second Quarter Fiscal 2020 Europe & Australia SEGMENT RESULTS $MM VS. LY SEGMENT HIGHLIGHTS Net Sales $433 -1%¹ • Significant topline improvement vs. Q1; net sales decline driven by Yogurt, Segment Operating Profit $31 +45%² partially offset by growth in Mexican Food and Snack Bars • Q2 retail sales
Slide 17: Asia & Latin America
Second Quarter Fiscal 2020 Asia & Latin America SEGMENT RESULTS $MM VS. LY SEGMENT HIGHLIGHTS Net Sales $410 +1%¹ • Significant topline improvement vs. Q1 • Net sales growth in Latin America and Segment Operating Profit $24 +42%² China, partially offset by India distribution network changes • Q2 pro
Slide 18: Don Mulligan, Chief Financial Officer
Don Mulligan Chief Financial Officer General Mills Earnings Investor Day Fiscal Second Quarter Fiscal2020 2020 December 18,July 9, 2019 2019 18
Slide 19: Joint Ventures
Second Quarter Fiscal 2020 Joint Ventures Q2 AFTER-TAX EARNINGS: $25MM; +11% VS. LY JV GROWTH CPW HDJ Net Sales* +1% -6% Highlights: • CPW net sales increase driven by growth in the UK, Australia, Turkey, and Middle East • HDJ net sales decline primarily driven by slower category performance • After
Slide 20: Margin Results
Second Quarter Fiscal 2020 Margin Results ADJUSTED GROSS ADJUSTED OP PROFIT MARGIN* MARGIN* MARGIN DRIVERS (% OF NET SALES) (% OF NET SALES) 18.4% + COGS HMM Savings 34.5% 35.3% 17.3% + Manufacturing Leverage - Input Cost Inflation - Increased Media Expense F19-Q2 F20-Q2 F19-Q2 F20-Q2 *Non-GAAP meas
Slide 21: Other Income Statement Items
Second Quarter Fiscal 2020 Other Income Statement Items • Unallocated Corporate Expenses Increased $6MM ex. Certain Items • Net Interest Expense Decreased $13MM • Adjusted Effective Tax Rate 21.9% vs. 23.8% LY* • Average Diluted Shares Outstanding Up 1% *Non-GAAP measure. See appendix for reconcilia
Slide 22: First Half Fiscal 2020 Financial Results
First Half Fiscal 2020 Financial Results Dollars in millions except per share data TOTAL GENERAL MILLS $MM VS LY Net Sales $8,423 -1% Organic Sales* Flat Adjusted Operating Profit* $1,495 +7%1 Adjusted Diluted EPS* $1.74 +12%1 *Non-GAAP measure. See appendix for reconciliation (1) Constant currency
Slide 23: First-Half Fiscal 2020 Balance Sheet and Cash Flow
First-Half Fiscal 2020 Balance Sheet and Cash Flow OPERATING CASH FLOW ($ IN MILLIONS) • Core Working Capital -19% vs. LY $1,396 $1,457 • Capital Investments = $158MM • Dividends Paid = $596MM • Debt Reduction = $655MM F19 1H F20 1H 23
Slide 24: Second Half Expectations
Second Half Expectations • Continued In-market Competitiveness in NAR and Strong Retail Sales Growth in Pet • Organic Sales Growth Accelerating in 2H, Driven by: • Improved Trends for CS&F, EUAU, and ASLA vs. 1H • Fiscal Year End Alignment: Extra Month of Results in Pet in Q4 • 2H Profit Impacted by
Slide 25: Updating Fiscal 2020 Guidance for FCF Conversion
Updating Fiscal 2020 Guidance for FCF Conversion FISCAL 2020 KEY FINANCIAL METRICS* GUIDANCE Organic Net Sales Growth +1 to +2% Adjusted Operating Profit Growth +2 to +4%¹ Adjusted Diluted EPS Growth +3 to +5%¹ Free Cash Flow Conversion >105% Previously >95% Leverage Ratio 3.5x *Non-GAAP measures (1
Slide 26: CFO Transition
CFO Transition Will update background Don Mulligan Kofi Bruce Retirement Effective June 1, 2020 CFO Effective February 1, 2020 26
Slide 27: Today's Key Messages
Today’s Key Messages • Broad-based Organic Sales Improvement in Q2 • Strong Earnings and Free Cash Flow Drove Reduced Debt in 1H • Expect to Step Up Investments and Organic Sales Growth in 2H • Remain on Track to Deliver Fiscal 2020 Goals for Sales, Profit, and EPS; Raising Guidance for Cash Convers
Slide 28: A Reminder on Non-GAAP Guidance
A Reminder on Non-GAAP Guidance Our fiscal 2020 outlook for organic net sales growth, adjusted operating profit, and adjusted diluted EPS are non-GAAP financial measures that exclude, or have otherwise been adjusted for, items impacting comparability, including the effect of foreign currency exchang
Slide 29: Appendix: North America Retail
Appendix: North America Retail F20 Q2 OPERATING UNIT RESULTS Operating Unit Net Sales % vs. LY U.S. Cereal +5% U.S. Snacks -2% U.S. Meals & Baking -1% U.S. Yogurt -4% Canada Flat Canada Constant-currency1 +2% (1) Constant currency growth rate. Non-GAAP measure. See appendix for reconciliation 29
Slide 30: Reconciliation of Organic Net Sales Growth
Reconciliation of Second Quarter Fiscal 2020 Organic Net Sales Growth (FISCAL YEAR) Q2 2020 Organic Organic Organic Net Foreign Acquisitions & Reported Net Volume Price/Mix Sales Exchange Divestitures Sales Growth North America Retail - - Flat - - Flat Convenience Stores 2 pts (2) pts Flat - - Flat
Slide 31: Reconciliation of Adjusted Operating Profit Constant-currency Growth Rate
Reconciliation of Second Quarter Fiscal 2020 Adjusted Operating Profit Constant-currency Growth Rate (FISCAL YEARS, $ IN MILLIONS) Q2 2020 2019 Change Operating profit as reported $ 811.2 $ 547.0 48 % Mark-to-market effects (22.6) 11.8 Restructuring charges 10.5 3.6 Project-related costs 0.7 - Asset
Slide 32: Reconciliation of Adjusted Diluted EPS and Constant-currency Growth Rate
Reconciliation of Second Quarter Fiscal 2020 Adjusted Diluted EPS and Related Constant-currency Growth Rate (FISCAL YEARS) Q2 Per Share Data 2020 2019 Change Diluted earnings per share, as reported $ 0.95 $ 0.57 67 % Mark-to-market effects** (0.03) 0.02 Restructuring charges** 0.01 - Asset impairmen
Slide 33: Reconciliation of Canada Constant-currency Net Sales Growth
Reconciliation of Second Quarter Fiscal 2020 Canada Operating Unit Constant-currency Net Sales Growth (FISCAL YEAR) Q2 2020 Percentage Change in Impact of Percentage Change in Canada Net Sales Foreign Currency Canada Net Sales on a as Reported Exchange Constant-currency Basis Flat (1) pt 2% *Table m
Slide 34: Reconciliation of Constant-currency Segment Operating Profit Growth
Reconciliation of Second Quarter Fiscal 2020 Constant-currency Segment Operating Profit Growth (FISCAL YEAR) Q2 2020 Percentage Change in Impact of Foreign Percentage Change in Segment Operating Currency Segment Operating Profit on Profit as Reported Exchange a Constant-currency Basis North America
Slide 35: Reconciliation of Adjusted Gross Margin
Reconciliation of Second Quarter Fiscal 2020 Adjusted Gross Margin (FISCAL YEARS) Q2 2020 2019 % of % of Net Sales Net Sales Gross margin as reported 35.5 % 34.2 % Mark-to-market effects (0.5) 0.3 Hyperinflationary accounting - - Restructuring charges 0.3 - Adjusted gross margin 35.3 % 34.5 % *Table
Slide 36: Reconciliation of Adjusted Operating Profit Margin
Reconciliation of Second Quarter Fiscal 2020 Adjusted Operating Profit Margin (FISCAL YEARS) Q2 2020 2019 % of % of Net Sales Net Sales Operating profit margin as reported 18.3 % 12.4 % Mark-to-market effects (0.5) 0.3 Restructuring charges 0.2 - Project-related costs - - Asset impairments - 4.7 Inv
Slide 37: Reconciliation of Tax Rate Excluding Items
Reconciliation of Second Quarter Fiscal 2020 Tax Rate Excluding Items (FISCAL YEARS, $ IN MILLIONS) Q2 2020 2019 Pretax Income Pretax Income Earnings** Taxes Earnings** Taxes As reported $722.0 $155.5 $435.3 $106.6 Mark-to-market effects (22.6) (5.2) 11.8 2.7 Restructuring charges 10.5 1.7 3.6 0.5 P
Slide 38: Reconciliation of First Half Organic Net Sales Growth
Reconciliation of First Half Fiscal 2020 Organic Net Sales Growth (FISCAL YEAR) 1H 2020 Organic Organic Organic Net Foreign Acquisitions & Reported Net Volume Price/Mix Sales Exchange Divestitures Sales Growth North America Retail (1) pt - Flat - - Flat Convenience Stores (2) pts - (2) % - - (2) % &
Slide 39: Reconciliation of First Half Adjusted Operating Profit Growth
Reconciliation of First Half Fiscal 2020 Adjusted Operating Profit Constant-currency Growth Rate (FISCAL YEARS, $ IN MILLIONS) 1H 2020 2019 Change Operating profit as reported $ 1,473.6l $ 1,148.5l 28 % Mark-to-market effects (7.6) 42.9l Restructuring charges 24.8l 2.4l Project-related costs 0.7l 1.
Slide 40: Reconciliation of First Half Adjusted Diluted EPS
Reconciliation of First Half Fiscal 2020 Adjusted Diluted EPS and Related Constant-currency Growth Rate (FISCAL YEARS) 1H Per Share Data 2020 2019 Change Diluted earnings per share, as reported $ 1.80 $ 1.22 48 % Tax item (0.09) - Mark-to-market effects** (0.01) 0.06 Restructuring charges** 0.03 - A
Slide 41: Reconciliation of First Half Tax Rate Excluding Items
Reconciliation of First Half Fiscal 2020 Tax Rate Excluding Items (FISCAL YEARS, $ IN MILLIONS) 1H 2020 2019 Pretax Income Pretax Income Earnings** Taxes Earnings** Taxes As reported $1,295.9 $222.7 $924.2 $217.3 Tax item - 53.1 - - Mark-to-market effects (7.6) (1.7) 42.9 9.9 Restructuring charges 2
Slide 42: Reconciliation of First Half Free Cash Flow
Reconciliation of First Half Fiscal 2020 Free Cash Flow (FISCAL YEARS, $ IN MILLIONS) 1H 2020 2019 Net cash provided by operating activities $ 1,456.6 $ 1,396.5 Purchases of land, buildings, and equipment (158.5) (253.8) Free cash flow $ 1,298.1 $ 1,142.7 42 *Table may not foot due to rounding
Slide 43: Reconciliation of Fiscal 2019 Adjusted Diluted EPS
Reconciliation of Fiscal 2019 Adjusted Diluted EPS (FISCAL YEAR) Full Year Per Share Data 2019 Diluted earnings per share, as reported $ 2.90 Net tax benefit (0.01) Tax items (0.12) Mark-to-market effects* 0.05 Divestiture loss, net* 0.03 Acquisition transaction and integration costs* 0.03 Restructu
Slide 44: Reconciliation of Fiscal 2019 Income Taxes on Adjusting Items
Reconciliation of Fiscal 2019 Income Taxes on Adjusting Items (FISCAL YEAR, $ IN MILLIONS) 2019 Full Year Pretax Income Earnings* Taxes As reported $2,082.0 $367.8 Net tax benefit - 7.2 Tax items - 72.9 Mark-to-market effects 36.0 8.3 Divestitures loss 30.0 13.6 Acquisition transaction and integrati