Conagra Brands, Inc. · NYSE:CAG
Conagra Brands — Investor Day (2019)
40 slides from Conagra Brands's investor day presentation, 2019
Slide 1: Conagra Brands
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Slide 2: Dave Marberger, Chief Financial Officer
Dave Marberger CHIEF FINANCIAL OFFICER 2
Slide 3: Dave Marberger, Chief Financial Officer
DAVE MARBERGER CHIEF FINANCIAL OFFICER With Conagra since 2016 Previous Experience Prestige Brands: 1 year Godiva Chocolatier: 7 years Tasty Baking Company: 5 years Campbell’s: 10 years PricewaterhouseCoopers: 6 years 3
Slide 4: Key Messages
Key Messages 1 We have made significant progress reshaping Legacy Conagra over the last four years 2 The acquisition of Pinnacle is the next step forward in our value creation playbook 3 Our long-term targets and capital allocation policy create a compelling investment opportunity 4
Slide 5: What I Will Cover
What I Will Cover Our Journey Continuing the Transformation With Pinnacle The New Conagra Brands 5
Slide 6: What I Will Cover
What I Will Cover Our Journey Continuing the Transformation With Pinnacle The New Conagra Brands 6
Slide 7: Four Years Ago ConAgra Foods Was…
Four Years Ago ConAgra Foods Was… A conglomerate Allocating resources to both branded businesses & private label Reporting weak margins Lagging peers across key metrics Struggling to grow profitably Pushing volume at the expense of profitability 7
Slide 8: As the Newly Minted Conagra Brands, We Committed to Transform the Business
As the Newly Minted Conagra Brands, We Committed to Transform the Business Investor Day 2016 Commitments Through FY201,2 Organic Net Sales4 +1% to +2% (3 YR CAGR) Adjusted Operating Margin3 ~15.5% (reflecting pension accounting changes) Adjusted EPS Growth +10% (3 YR CAGR) Working Capital Savings $4
Slide 9: Heavy Lifting Led to a Higher-Quality Business
Heavy Lifting Led to a Higher-Quality Business Operational • Value Over Volume • $200MM SG&A reduction program • $100MM trade efficiency program Divestitures & Spin Higher-quality net sales base • Lamb Weston • Trenton Modernizing brands to meet consumer preferences • Spicetec • Del Monte Canada • J
Slide 10: Our Actions Show in the Numbers
Our Actions Show in the Numbers Organic Net Sales Adj. Operating Adj. Diluted EPS Growth3 Margin2 from Cont. Ops. $2.11 14.9% 15.0% $1.74 ~ +1% +0.1% 11.9% 10.8% $1.30 $1.22 (5.4)% FY17 FY18 FY19 1 FY15 FY16 FY17 FY18 FY15 FY16 FY17 FY18 (Guidance) Note: “Adjusted” financial measures and organic net
Slide 11: Cash Deployment over the Last Four Years
Cash Deployment over the Last Four Years Cumulative Business Investment Cumulative Shareholder Return $1.7 billion $3.6 billion Strategic Share CapEx Dividends Acquisitions Repurchases $1.0 billion $700 million $1.6 billion $2.0 billion 11 Note: Time period shown inclusive of FY15 through FY18
Slide 12: What I Will Cover
What I Will Cover Our Journey Continuing the Transformation With Pinnacle The New Conagra Brands 12
Slide 13: Pinnacle Is the next Step in Our Transformation
Pinnacle Is the next Step in Our Transformation Strategic Rationale Financial Rationale Leading brands Attractive top-line prospects Complementary businesses Significant synergies Increased scale IRR > WACC Enhanced frozen position EPS accretion Robust innovation platform Strong cash flow generation
Slide 14: Key Pinnacle Integration Milestones on Track
Key Pinnacle Integration Milestones on Track Closed acquisition Re-confirmed strategic Employees transition to Corporate SAP Plant SAP conversions FY19 Q2 priorities post-close Chicago & Omaha by conversion FY20 Q1 over the next two years FY20 Q1 Majority of key milestones will be complete less than
Slide 15: Cost Synergies Expected to Exceed Initial Targets
Cost Synergies Expected to Exceed Initial Targets $285MM Updated Estimate Strong Synergies Compared Favorable $70MM vs. Previously Communicated to Past CPG Deals1 (Synergies as % of Target’s Net Sales) $285MM Expected Synergy Trade Timing $20MM Efficiency • ~55% achieved by end of FY20 $215MM • ~95%
Slide 16: Cash Costs to Achieve Favorable to Original Expectations
Cash Costs to Achieve Favorable to Original Expectations $320MM Updated Estimate OpEx CapEx Favorable $35MM vs. Previously Communicated • System integration • Closures • Vendor transition • Systems $355MM • Headcount • Repatriation $320MM Costs to Achieve Update CapEx $142MM $85MM • Eliminated lower
Slide 17: Pinnacle Turnaround Cadence
Pinnacle Turnaround Cadence Introduction of Consumption & innovation distribution FY20 H2 Synergy capture declines moderate accelerates FY20 H2 FY20 Q2 17
Slide 18: What I Will Cover
What I Will Cover Our Journey Continuing the Transformation With Pinnacle The New Conagra Brands 18
Slide 19: FY18 Pro Forma Net Sales
FY18 Pro Forma Net Sales Key Brands International 8% Foodservice 9% Grocery & Snacks 30% ~$11.1B Net Sales Pinnacle 28% Refrigerated & Frozen 25% Note: References to pro forma items include historical financial results for Pinnacle Foods prior to completion of the acquisition of Pinnacle Foods by th
Slide 20: Reiterating FY19 Guidance
Reiterating FY19 Guidance1,2 Total Conagra Pinnacle Latest FY19 (incl. Pinnacle-related corporate expense) Key Financial Metrics Guidance Latest FY19 Key Financial Metrics Organic Net Sales Growth4 Guidance Approx. +1% (excl. Trenton impact) Reported Net Sales $1.71B to $1.73B Below Range Adj. Gross
Slide 21: Preliminary FY20 Outlook
Preliminary FY20 Outlook1,2 Metric Preliminary FY20 Outlook Organic Net Sales Growth3 Approx. +1% Adj. Diluted EPS from Cont. Ops. $2.10 to $2.20 Note: Assumes no additional acquisitions or divestitures. 1. The inability to predict the amount and timing of future items makes a detailed reconciliatio
Slide 22: Financial Progress Accelerates Through FY22
Financial Progress Accelerates Through FY221,2 Metric Target Organic Net Sales Growth4 +1% to +2% (3 YR CAGR ending FY22) FY22 Adj. Operating Margin3 18% to 19% FY22 Adj. Diluted EPS from Cont. Ops. $2.70 to $2.80 Free Cash Flow Conversion 95%+ (% of Adj. Net Income; 3 YR avg. ending FY22) Leverage
Slide 23: Key Factors Driving Sales Growth
Key Factors Driving Sales Growth1,2 +1% to +2% Organic Net Sales3 CAGR Through FY22 (3 YR CAGR ending FY22) Frozen growth Snacks growth Condiments and Trade efficiency Maintain share above category in-line or enhancers synergies in lower growth above category becoming fully categories competitive 1.
Slide 24: Margin Expansion Attributable to Multiple Factors
Margin Expansion Attributable to Multiple Factors Customer Channel & Brand Sales Innovation Pricing/Trade Investments Mix Synergies Realized Product & Packaging COGS Productivity Inflation Investments Synergies Gross Margin Sales & COGS Mix SG&A / A&P Lean SG&A Brand Investments Synergies 18% - 19%
Slide 25: Key Drivers of EPS Growth
Key Drivers of EPS Growth Tax $2.70 to $2.80 Rate JV Wesson Divestiture, Income Interest Expense & Share Count Margin Expansion Synergies Organic Net $2.03 to $2.08 Sales Growth3 Full Year of Pinnacle FY19 Adj. EPS FY22 Adj. EPS Guidance1,2 Target 1,2 Note: Assumes no additional acquisitions or dive
Slide 26: Free Cash Flow to Increase Rapidly
Free Cash Flow to Increase Rapidly Annual Free Cash Flow2,4 Key Drivers (Dollars in Millions) >$1,300 >$1,200 • Adjusted earnings growth ~$1,000 • OpEx to achieve synergies: $235MM $668 ~$700 • CapEx: 3% to 4% of net sales • Incl. $85MM of CapEx to achieve synergies • $300MM of working capital impro
Slide 27: Go Forward Capital Allocation Policy
Go Forward Capital Allocation Policy Dividend Debt • Maintain current annualized • De-lever to 3.6x to 3.5x Priority dividend (~$400MM / year) by FY21 • Modest increases subject to • Solid investment grade Board of Directors approval credit rating Share Repurchase M&A • Only if ahead of • Acquisitio
Slide 28: Disciplined Approach to Acquisitions…
Disciplined Approach to Acquisitions… • Tend to be smaller Modernizing • Consistent with emerging trends Acquisitions • Provide platform for expansion • Tend to be larger Synergistic • Can enhance network and capabilities Acquisitions • Can offer material economic benefit 28
Slide 29: …And Divestitures
…And Divestitures Strategic Fit Financial Fit • Limited coherence with portfolio • Consistent business underperformance objectives • Lower-than-average returns • Disadvantaged category fundamentals • Outside buyer offering value in excess • Low priority for innovation or investment of internal value
Slide 30: Conclusion
Conclusion 1 We have made significant progress reshaping Legacy Conagra over the last four years 2 The acquisition of Pinnacle is the next step forward in our value creation playbook 3 Our long-term targets and capital allocation policy create a compelling investment opportunity 30
Slide 31: Conagra Brands
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Slide 32: Appendix
Appendix % wW4z CONAGRA
Slide 33: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Diluted EPS from income from Selling, general Income from continuing Net income continuing operations and operations before income Income tax attributable to attributable to administrative taxes and equity met
Slide 34: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Diluted EPS from income from Income from continuing continuing operations Selling, operations before Income Net income attributable to general and income taxes and tax attributable Conagra Brands, administrati
Slide 35: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Income from continuing Net income Diluted EPS from income Selling, general operations before (loss) from continuing operations and income taxes and equity Income tax attributable to attributable to Conagra adm
Slide 36: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Income from Net income Diluted EPS from income Selling, continuing operations Income (loss) from continuing general and before income taxes tax attributable to operations attributable to administrative and equ
Slide 37: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Reconciliation of Refrigerated & Frozen Organic Net Sales and Adjusted Operating Profit Trailing 4 Quarters FY17 YTD Q4 FY18 Q3 FY19 YTD (as of FY19 Q3) Net Sales $ 2,652.7 $ 690.7 $ 2,117.3 $ 2,808.0 Net sale
Slide 38: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) FY18 FY17 Net Sales $ 7,938.3 $ 7,826.9 Impact of foreign exchange (27.9) 29.2 Net sales from acquired businesses (169.1) (36.5) Net sales from divested businesses (283.2) (370.0) Net sales from sold Trenton p
Slide 39: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures (in millions) Reconciliation of Adjusted Working Capital Receivables, less allowance for May 29, 2016 doubtful accounts Inventories Accounts payable Working capital Reported 1 $ 650.1 $ 1,044.1 $ 706.7 $ 987.5 Divested busi
Slide 40: Conagra Brands
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