General Mills, Inc. · NYSE:GIS
General Mills — FY2018 Earnings Presentation
45 slides from General Mills's earnings presentation, Jun 27, 2018
Slide 1: Fiscal 2018 Fourth Quarter and Full-year Results
GENERAL MILLS Fiscal 2018 Fourth Quarter and Full-year Results June 27, 2018
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
Jeff Harmening Chairman and Chief Executive Officer
Slide 4: Today's Key Messages
Today’s Key Messages ✓Strong Finish in F18 Q4 ✓Progress on Our Global Growth Priorities in F18; More Work to Do on Bottom Line ✓F19 Targets: • Investing to Accelerate Growth • Maintaining Focus on Efficiency and Cash Generation 4
Slide 5: Fiscal 2018 Q4 Financial Performance
Fiscal 2018 Q4 Financial Performance Total General Mills % vs LY ✓3rd Consecutive Quarter of Organic Net Organic Net Sales* +1% Sales Growth ✓Positive Price/Mix and “Accelerate” Platforms Drove Net Sales Performance Total Segment +7%¹ Operating Profit* ✓Adjusted Operating Profit Margin +170bps vs LY
Slide 6: Fiscal 2018 Annual Financial Performance
Fiscal 2018 Annual Financial Performance Total General Mills % vs LY ✓Organic Net Sales Growth Represents Organic Net Sales* Flat 400bps Improvement Over F17 Growth Rate Total Segment ✓Higher Supply Chain Costs and Increased -6%¹ Operating Profit* Merchandising Drove Total SOP Decline ✓Adjusted Oper
Slide 7: Our Global Growth Priorities
Our Global Growth Priorities COMPETE 1 Effectively Across All Brands and All Geographies 2 ACCELERATE Our Differential Growth Platforms 3 RESHAPE the Portfolio for Growth 7
Slide 8: Competed More Effectively in F18
Competed More Effectively in F18 GREW CEREAL GLOBALLY IMPROVED U.S. YOGURT THROUGH INNOVATION STRENGTHENED REGIONAL BUSINESSES ACCELERATED E-COMMERCE GROWTH +48% Source: Nielsen and Internal Estimates 8
Slide 9: Positioned Accelerate Platforms for F19 Success
Positioned Accelerate Platforms for F19 Success (F18 Retail Sales vs LY) HÄAGEN-DAZS SNACK BARS +LSD +DD OLD EL PASO NATURAL & ORGANIC +LSD +MSD HD/Bars/OEP Source: Nielsen global retail sales in General Mills geographies, in USD, 12-months ended Mar/Apr 2018 9 N&O source: U.S. Nielsen + natural sup
Slide 10: Reshaped Portfolio in F18 with Blue Buffalo
Reshaped Portfolio in F18 with Blue Buffalo ✓ Acquisition Closed April 24, 2018 ✓ Continued Business Momentum • Jan-Apr 2018 Net Sales +DD ✓ Confident in Ability to Deliver F19 Plans for Continued Growth 10
Slide 11: Fiscal 2019 Priorities
Fiscal 2019 Priorities Deliver Financial Grow The Core Transition Blue Buffalo Commitments Compete Effectively and Successfully Transition Blue Buffalo Achieve Profit and Accelerate Growth Platforms and Maintain Momentum Cash Flow Goals 11
Slide 12: Fiscal 2019 Outlook
Fiscal 2019 Outlook Net Sales Growth +9 to +10% Adjusted Operating Profit* Growth +6 to +9%1 Adjusted Diluted EPS* Growth Flat to -3%1 *Non-GAAP measure. (1) Constant-currency growth rate. 12
Slide 13: Don Mulligan
Don Mulligan EVP, Chief Financial Officer
Slide 14: Fourth Quarter Fiscal 2018 Components of Net Sales Growth
Fourth Quarter Fiscal 2018 Components of Net Sales Growth Organic Net Sales* = +1% +3 pts +2% +1 pt Flat -2 pts Organic Organic Foreign Acquisitions / Total Volume Price & Mix Exchange Divestitures Net Sales As Reported *Non-GAAP measure. 14
Slide 15: Fiscal 2018 North America Retail
Fiscal 2018 North America Retail SEGMENT GROWTH Q4 F18 NET SALES GROWTH BY OPERATING UNIT Organic Net Sales* -1% -1% Q4 F18 U.S. Snacks +2% 2% Constant-currency +7% -4% U.S. Cereal +2 Flat Segment Operating Profit* Canada Flat +3 Highlights: Constant-currency* -5 -1 • Solid fundamentals drove broad-
Slide 16: Fiscal 2018 Convenience Stores & Foodservice
Fiscal 2018 Convenience Stores & Foodservice SEGMENT GROWTH Q4 F18 NET SALES GROWTH BY PLATFORM Organic Net Sales* +5% +3% Q4 F18 Segment Operating Profit +11% -2% Focus 6 Platforms +4% +2% Other +5 +4% Highlights: Total CS&F +5% +3% • Frozen Meals, Cereal, and Snacks drove Focus 6 growth • Index pr
Slide 17: Fiscal 2018 Europe & Australia
Fiscal 2018 Europe & Australia SEGMENT GROWTH Q4 F18 Organic Net Sales* +4% +2% Constant-currency +37% -22% Segment Operating Profit* Highlights: • Organic net sales accelerated in Q4 • Snack Bars, Häagen-Dazs, OEP led growth • Price/mix and cost savings drove Q4 profit growth • Full-year profit imp
Slide 18: Fiscal 2018 Asia & Latin America
Fiscal 2018 Asia & Latin America SEGMENT GROWTH Q4 F18 Organic Net Sales¹* Flat -2% Constant-currency -56% -56% Segment Operating Profit* Highlights: • Q4 organic net sales +DD excluding reporting period difference • Challenging full-year sales performance in Brazil; improvement in Q4 • Asia net sal
Slide 19: Margin Expansion in Q4
Margin Expansion in Q4 ADJUSTED GROSS MARGIN* ADJUSTED OP PROFIT MARGIN* (% of Net Sales) (% of Net Sales) 36.1% 18.5% 35.8% 18.1% 35.1% 34.4% 17.2% 16.8% +70 +170 bps bps F17-Q4 F18-Q4 F17 F18 F17-Q4 F18-Q4 F17 F18 • Q4 margin expansion driven by positive price/mix, increased costs savings, and low
Slide 20: Joint Venture Results
Full-Year Fiscal 2018 Joint Venture Results AFTER-TAX EARNINGS: $85MM; -3% VS. LY IN CONSTANT CURRENCY* Cereal Partners Worldwide Häagen-Dazs Japan Net Sales Flat** Net Sales +1%** *Non-GAAP measure. See appendix for reconciliation. **Growth rates in constant currency. 20
Slide 21: Fourth Quarter Fiscal 2018 Other Income Statement Items
Fourth Quarter Fiscal 2018 Other Income Statement Items • Restructuring and Impairment Charges of $151MM • Unallocated Corporate Expense Decreased Excluding Certain Items • Net Interest Expense Increased $68MM vs. LY Due to M&A Financing • Adjusted Effective Tax Rate 26.7% vs. 26.8% LY* • Average Di
Slide 22: Fiscal 2018 Balance Sheet and Cash Flow
Fiscal 2018 Balance Sheet and Cash Flow WORKING CAPITAL IMPROVEMENT DRIVING CASH FLOW GROWTH FULL-YEAR OPERATING CASH FLOW ($ IN MILLIONS) • Core Working Capital = $580MM; -27% vs. LY $2,841 +18% $2,415 • Capital Investments = $623MM (4.0% of Net Sales) • Free Cash Flow* = $2.2B; +28% vs. LY • Divid
Slide 23: Fiscal 2019 Plan Assumptions
Fiscal 2019 Plan Assumptions • Input Cost Inflation = ~5% of COGS • COGS HMM = $450MM • Increased Investment in Growth Accelerators and Capabilities • Net Interest Expense Approximately $550MM • Adjusted Effective Tax Rate* 23-24% • Average Diluted Shares Outstanding +4% • Blue Buffalo -$0.04 Impact
Slide 24: Fiscal 2019 Financial Outlook
Fiscal 2019 Financial Outlook KEY FINANCIAL METRICS FISCAL 2019 OUTLOOK Net Sales Growth +9 to +10% Organic Net Sales Growth* Flat to +1% Adjusted Operating Profit Growth* +6 to +9%¹ Adjusted Diluted EPS Growth* Flat to -3%¹ Free Cash Flow Conversion* >95% *Non-GAAP measures. (1) Constant-currency g
Slide 25: Today's Key Messages
Today’s Key Messages ✓Strong Finish in F18 Q4 ✓Progress on Our Global Growth Priorities in F18; More Work to Do on Bottom Line ✓F19 Targets: • Investing to Accelerate Growth • Maintaining Focus on Efficiency and Cash Generation 25
Slide 26: A Reminder on Non-GAAP Guidance
A Reminder on Non-GAAP Guidance Our fiscal 2019 outlook for organic net sales growth and constant-currency 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 fore
Slide 27: Reconciliation of Fourth Quarter Fiscal 2018 Organic Net Sales Growth
Reconciliation of Fourth Quarter Fiscal 2018 Organic Net Sales Growth (FISCAL YEAR) Q4 2018 Reported Organic Organic Organic Foreign Acquisitions Net Sales Volume Price/Mix Net Sales Exchange & Divestitures Growth North America Retail (2) pts 1 pt (1) % 1 pt - Flat Convenience Stores - 5 pts 5% - -
Slide 28: Reconciliation of Fourth Quarter Fiscal 2018 Total Segment Operating Profit
Reconciliation of Fourth Quarter Fiscal 2018 Total Segment Operating Profit (FISCAL YEARS, $ IN MILLIONS) Q4 2018 2017 % Change North America Retail $543.0 $507.7 7% Convenience Stores & Foodservice 117.0 105.8 11 Europe & Australia 57.3 37.0 55 Asia & Latin America 9.5 22.3 (57) Total Segment Opera
Slide 29: Reconciliation of Fiscal 2018 Constant-currency Total Segment Operating Profit Growth
Reconciliation of Fiscal 2018 Constant-currency Total Segment Operating Profit Growth (FISCAL YEAR) 2018 Percentage Change in Percentage Change in Total Segment Impact of Total Segment Operating Profit as Foreign Currency Operating Profit on a Reported Exchange Constant-currency Basis Q4 8% 1 pt 7%
Slide 30: Reconciliation of Fourth Quarter Fiscal 2018 Adjusted Operating Profit Margin
Reconciliation of Fourth Quarter Fiscal 2018 Adjusted Operating Profit Margin (FISCAL YEARS) Q4 2018 2017 % of % of Net Sales Net Sales Operating profit margin as reported 14.4 % 16.0 % Mark-to-market effects (0.8) 0.2 Restructuring charges 1.5 0.4 Project-related costs 0.1 0.2 Acquisition transacti
Slide 31: Reconciliation of Fourth Quarter Fiscal 2018 Adjusted Diluted EPS
Reconciliation of Fourth Quarter Fiscal 2018 Adjusted Diluted EPS and Related Constant-currency Growth Rate (FISCAL YEARS) Q4 Per Share Data 2018 2017 Change Diluted earnings per share, as reported $ 0.59 $ 0.69 (14) % Provisional net tax benefit (0.03) - Mark-to-market effects* (0.04) 0.01 Acquisit
Slide 32: Reconciliation of Fiscal 2018 Organic Net Sales Growth
Reconciliation of Fiscal 2018 Organic Net Sales Growth (FISCAL YEAR) 2018 Full Year Reported Organic Organic Organic Foreign Acquisitions Net Sales Volume Price/Mix Net Sales Exchange & Divestitures Growth North America Retail Flat (1) pt (1) % - Flat (1) % Convenience Stores 1 pt 2 pts 3% - - 3% &
Slide 33: Reconciliation of Fiscal 2017 Organic Net Sales Growth
Reconciliation of Fiscal 2017 Organic Net Sales Growth (FISCAL YEAR) 2017 Full Year Reported Organic Organic Organic Foreign Acquisitions Net Sales Volume Price/Mix Net Sales Exchange & Divestitures Growth North America Retail (9) pts 4 pts (5) % - (2) pts (7) % Convenience Stores - (3) pts (3) % -
Slide 34: Reconciliation of Fiscal 2018 Total Segment Operating Profit
Reconciliation of Fiscal 2018 Total Segment Operating Profit (FISCAL YEARS, $ IN MILLIONS) Full Year 2018 2017 % Change North America Retail $2,217.4 $2,303.6 (4) % Convenience Stores & Foodservice 392.6 401.2 (2) Europe & Australia 142.1 164.2 (14) Asia & Latin America 39.6 83.6 (53) Total Segment
Slide 35: Reconciliation of Fiscal 2018 Adjusted Diluted EPS
Reconciliation of Fiscal 2018 Adjusted Diluted EPS and Related Constant-currency Growth Rate (FISCAL YEARS) Full Year Per Share Data 2018 2017 Change Diluted earnings per share, as reported $ 3.64 $ 2.77 31 % Provisional net tax benefit (0.89) - Tax items 0.07 - Mark-to-market effects* (0.04) (0.01)
Slide 36: Reconciliation of Free Cash Flow and Free Cash Flow Conversion
Reconciliation of Free Cash Flow and Free Cash Flow Conversion (FISCAL YEARS, $ IN MILLIONS) Full Year 2018 2017 Change Net earnings, including earnings attributable to redeemable and noncontrolling interests $2,163.0 $1,701.1 Provisional net tax benefit (523.5) - Mark-to-market effects* (22.1) (8.8
Slide 37: Reconciliation of Fiscal 2018 Adjusted Operating Profit Margin
Reconciliation of Fiscal 2018 Adjusted Operating Profit Margin (FISCAL YEARS) Full Year 2018 2017 % of % of Net Sales Net Sales Operating profit margin as reported 15.9 % 16.4 % Mark-to-market effects (0.2) (0.1) Restructuring charges 0.6 1.4 Project-related costs - 0.3 Divestiture loss - 0.1 Acquis
Slide 38: Reconciliation of Fourth Quarter Fiscal 2018 Operating Profit Growth by Segment
Reconciliation of Fourth Quarter Fiscal 2018 Constant-currency Operating Profit Growth by Segment (FISCAL YEAR) Q4 2018 Percentage Change in Impact of Percentage Change in Segment Operating Foreign Currency Segment Operating Profit on Profit as Reported Exchange a Constant-currency Basis North Ameri
Slide 39: Reconciliation of Fiscal 2018 Operating Profit Growth by Segment
Reconciliation of Fiscal 2018 Constant-currency Operating Profit Growth by Segment (FISCAL YEAR) 2018 Full Year Percentage Change in Impact of Percentage Change in Segment Operating Foreign Currency Segment Operating Profit on Profit as Reported Exchange a Constant-currency Basis North America Retai
Slide 40: Reconciliation of Fiscal 2018 Canada Net Sales Growth
Reconciliation of Fiscal 2018 Canada Operating Unit Constant-currency Net Sales Growth (FISCAL YEAR) 2018 Percentage Change in Percentage Change in Canada Canada Net Sales Impact of Foreign Net Sales on a Constant- as Reported Currency Exchange currency Basis Q4 Flat 5 pts (5) % Full Year 3% 4 pts (
Slide 41: Reconciliation of Fourth Quarter Fiscal 2018 Adjusted Gross Margin
Reconciliation of Fourth Quarter Fiscal 2018 Adjusted Gross Margin (FISCAL YEARS) Q4 2018 2017 % of % of Net Sales Net Sales Gross margin as reported 36.5 % 34.7 % Mark-to-market effects (0.8) 0.2 Project-related costs 0.1 0.2 Adjusted gross margin 35.8 % 35.1 % 41
Slide 42: Reconciliation of Fiscal 2018 Adjusted Gross Margin
Reconciliation of Fiscal 2018 Adjusted Gross Margin (FISCAL YEARS) Full Year 2018 2017 % of % of Net Sales Net Sales Gross margin as reported 34.5 % 35.6 % Mark-to-market effects (0.2) (0.1) Restructuring charges 0.1 0.3 Project-related costs - 0.3 Adjusted gross margin 34.4 % 36.1 % 42
Slide 43: Reconciliation of Fiscal 2018 Constant-currency After-tax JV Earnings
Reconciliation of Fiscal 2018 Constant-currency After-tax JV Earnings (FISCAL YEAR) 2018 Percentage Change in Percentage Change in After- After-tax Earnings from tax Earnings from Joint Joint Ventures Impact of Foreign Ventures on a Constant- as Reported Currency Exchange currency Basis Full Year Fl
Slide 44: Reconciliation of Fourth Quarter Fiscal 2018 Tax Rate Excluding Items
Reconciliation of Fourth Quarter Fiscal 2018 Tax Rate Excluding Items (FISCAL YEARS, IN MILLIONS, EXCEPT PER SHARE DATA) Q4 2018 2017 Pretax Income Pretax Income Earnings* Taxes Earnings* Taxes As reported $423.9 $86.4 $539.9 $144.2 Provisional tax benefit - 19.7 - - Mark-to-market effects (28.6) (8
Slide 45: Reconciliation of Fiscal 2018 Tax Rate Excluding Items
Reconciliation of Fiscal 2018 Tax Rate Excluding Items (FISCAL YEARS, IN MILLIONS, EXCEPT PER SHARE DATA) Full Year 2018 2017 Pretax Income Pretax Income Earnings* Taxes Earnings* Taxes As reported $2,135.6 $57.3 $2,271.3 $655.2 Provisional tax benefit - 523.5 - - Mark-to-market effects (32.1) (10.0