Slide 1: General Mills Fiscal 2015 Second Quarter Results
GENERAL MILLS Fiscal 2015 Second Quarter Results
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: Q2 Financial Review
Q2 FINANCIAL REVIEW Don Mulligan Executive Vice President; Chief Financial Officer
Slide 4: Second Quarter Fiscal 2015 Financial Summary
Second Quarter Fiscal 2015 Financial Summary ($ in Millions, Except per Share) Constant- currency $ % Change % Change* Net Sales $4,712 -3% -1% Segment Operating Profit* 847 -8 -6 Net Earnings Attributable to General Mills 346 -37 Diluted EPS .56 -33 Certain Items Affecting Comparability .24 Adjuste
Slide 5: Components of Net Sales Growth
Second Quarter Fiscal 2015 Components of Net Sales Growth As Reported +1pt -2pts -2pts -3pts Volume Price & Foreign Total Mix Exchange Net Sales 7686-5
Slide 6: U.S. Retail Segment
Second Quarter Fiscal 2015 U.S. Retail Segment Segment Net Sales: -4% vs. LY Segment Operating Profit: -10% vs. LY Second Quarter Net Sales (Change vs. LY) Total U.S. Retail Segment -4% Snacks +2 Yogurt +1 Cereal -5 Baking Products -5 Meals -7 7686-6
Slide 7: Convenience Stores & Foodservice Segment
Second Quarter Fiscal 2015 Convenience Stores & Foodservice Segment Segment Net Sales: +4% vs. LY Segment Operating Profit: +13% vs. LY Q2 Net Sales Growth Yogurt +22% Snacks +15 Cereal +13 Frozen Breakfast +13 Biscuits -1 Mixes -1 Total Priority Platforms +11% 7686-7
Slide 8: International Segment
Second Quarter Fiscal 2015 International Segment Constant-currency Segment Net Sales*: +3% vs. LY Constant-currency Segment Operating Profit*: -2% vs. LY Q2 Constant-currency Net Sales* (Change vs. LY) Latin America +14% Europe +4 Asia / Pacific +2 Canada -7 *Non-GAAP measures. See appendix for reco
Slide 9: Gross Margin Performance
Second Quarter Fiscal 2015 Gross Margin Performance As Reported Adjusted* 36.1% 35.7% 34.9% 34.4% • Expect 3% Inflation for Full Year • 70% Covered Q2 F14 Q2 F15 Q2 F14 Q2 F15 *Non-GAAP measure. See appendix for reconciliation. 7686-9
Slide 10: Joint Venture Results
Second Quarter Fiscal 2015 Joint Venture Results After-tax Earnings: $27MM; +13% vs. LY in Constant Currency* Cereal Partners Worldwide Häagen-Dazs Japan Net Sales -3%** Net Sales +5** *Non-GAAP measure. See appendix for reconciliation. **Growth rates in constant currency. 7686-10
Slide 11: Other Income Statement Items
Second Quarter Fiscal 2015 Other Income Statement Items • Unallocated Corporate Expense Decreased Excluding Restructuring Costs & Mark-to-market Effects • Restructuring Costs of $233MM Pre-tax (Includes $19MM in Cost of Sales) • Interest Expense $9MM Above Last Year • Adjusted Effective Tax Rate 33.
Slide 12: Fiscal 2015 Core Working Capital
Fiscal 2015 Core Working Capital ($ in Millions) Q2 F15 F14 % Change Accounts Receivable $1,706 $1,725 Inventories + 1,893 1,752 Accounts Payable - 1,657 1,424 Total Core Working Capital: $1,942 $2,053 -5% 7686-12
Slide 13: First Half Fiscal 2015 Cash Flow Highlights
First Half Fiscal 2015 Cash Flow Highlights 1H Operating Cash Flow Uses of Cash ($ in Millions) $1,009 • Fixed Asset Investment = $863 $318MM • Dividends Paid = $503MM • Share Repurchases = $969MM F14 F15 7686-13
Slide 14: Projects Underway to Generate Savings and Fuel Growth
Projects Underway to Generate Savings and Fuel Growth • Project Century: Streamlining North American Manufacturing & Distribution Network • Project Catalyst: U.S. Organization Design • Policies and Practices Update • Cumulative Annual Savings Goal: – F15: $40 Million – F16: $260 - $280 Million – F17
Slide 15: Fiscal 2015 Outlook
Fiscal 2015 Outlook 2nd Half Expectations, Including 53rd Week • MSD Net Sales Growth in Constant Currency* • Input Cost Inflation in Line with Annual Rate • HSD Growth in Constant-currency Segment Operating Profit* • DD Growth in Constant-currency Adjusted Diluted EPS* Annual Expectations in Consta
Slide 16: Operating Highlights
OPERATING HIGHLIGHTS Jeff Harmening EVP, Chief Operating Officer, U.S. Retai
Slide 17: Growing Share in Majority of Our Key Categories
Growing Share in Majority of Our Key Categories YTD Fiscal 2015 Dollar Share Change Share vs. LY (bps) Grain Snacks 43.2% +218 Frozen Hot Snacks 26.3 +103 Fruit Snacks 47.1 +96 Frozen Pizza 10.0 +77 Yogurt 24.7 +48 RTE Cereal 31.8 +46 Refrig. Baked Goods 68.8 +12 RTS Soup 38.5 -8 Mexican Products* 1
Slide 18: Improving Trade Merchandising Trends
Improving Trade Merchandising Trends General Mills U.S. Retail General Mills U.S. Retail F15 Average Unit Price F15 Merchandised Volume (Aggregate Categories, % vs LY) (Merch Unit Volume % vs LY) +0.3% +2.6% Q1 Q1 Q2 Q2 Q1 Q2 -0.7% -1.6% Source: Nielsen XAOC 7686-18
Slide 19: U.S. Cereal Summary
U.S. Cereal Summary General Mills General Mills RTE Cereal RTE Cereal F15 Dollar Share F15 Base Pound Volume (+/- vs LY) (% vs LY) +1.0% +0.6 Q1 +0.3 Q1 Q2 Q1 Q2 -1.3% Source: Nielsen XAOC 7686-19
Slide 20: Consumer-first News & Innovation Drives U.S. Cereal Growth
Consumer-first News & Innovation Drives U.S. Cereal Growth Gluten Free Granola Protein Taste General Mills General Mills Chex Franchise Granola Varieties Protein Varieties Cinnamon Toast Crunch +10% Retail Sales +27% Retail Sales FYTD Market Share FYTD Retail Sales +9% CGR Since F10 CGR Since F10 +1
Slide 21: Second Half Cereal Innovation
Second Half Cereal Innovation 7686-21
Slide 22: U.S. Yogurt Sales and Share Growing
U.S. Yogurt Sales and Share Growing Yoplait Dollar Share of Retail Sales Growth Greek Segment Original Style Yoplait (% vs LY) 12% 12% 12% 10% 10% 9% 9% 9% 8% 2% 2% Q1 F14 Q1 Q2 Q3 Q4 Q1 Q2 F14 F14 F14 F14 F15 F15 Q1 Q2 Q3 Q4 Q1 Q2 F14 F14 F14 F14 F15 F15 -6% F15 YTD Retail Sales +38% F15 YTD Retail
Slide 23: Second Half Yogurt News & Innovation
Second Half Yogurt News & Innovation 16 New Items Launching in 2H 7686-23
Slide 24: Continued Strong Snacks Momentum
Continued Strong Snacks Momentum Grain Snacks Fruit Snacks Natural/Organic Snacks FYTD Retail Sales +5% FYTD Retail Sales +4% FYTD Retail Sales +18% Source: Nielsen XAOC, FYTD ended 11.22.14; SPINS FYTD ended 11.02.14 7686-24
Slide 25: Second Half Snacks Innovation
Second Half Snacks Innovation Grain Snacks Fruit Snacks 7686-25
Slide 26: Other U.S. Retail Second Half News & Innovation
Other U.S. Retail Second Half News & Innovation Totino’s Old El Paso Progresso Baking Products 7686-26
Slide 27: Natural & Organic Industry Trends
Natural & Organic Industry Trends Natural & Organic Food Industry Dollar Growth vs LY 18% 16% 14% 12% CAGR = 12% 10% 8% 6% 4% 2% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Nutrition Business Journal, calendar years 7686-27
Slide 28: A Strong Platform in Natural & Organic
A Strong Platform in Natural & Organic Proforma Net Sales >$600MM 7686-28
Slide 29: Annie's Acquisition Enhances Our Natural & Organic Portfolio
Annie’s Acquisition Enhances Our Natural & Organic Portfolio Annie’s F14 Net Sales • F15 Will Include 6 Months of Results – Net Sales +$120MM – Adjusted Diluted EPS* +$0.01 Snacks Meals • Significant Topline Growth 39% 48% Opportunities – Distribution Upside Other 13% – New Categories • Cost Synergi
Slide 30: Annie's Priorities for Second Half Fiscal 2015
Annie’s Priorities for Second Half Fiscal 2015 • Accelerate Core Category Distribution Gains with Annie’s and General Mills Sales Organizations • National Expansion of Pizza Poppers & Pizza Bagels • Prioritize New Category Opportunities 7686-30
Slide 31: Other Second Half Natural & Organic News & Innovation
Other Second Half Natural & Organic News & Innovation 7686-31
Slide 32: Rewiring U.S. Marketing Organization
Rewiring U.S. Marketing Organization • Simplified Operating Unit Structure • “Central” Marketing Under Ann Simonds, CMO – Consumer Insights – Media – Centers of Excellence (e.g. Natural & Organic) • Focus Resources Against Best Future Growth Opportunities 7686-32
Slide 33: U.S. Retail Summary
U.S. Retail Summary • First Half Results Below Expectations, but Targeting Renewed Growth in Second Half • Continued Progress on F15 Top 3 U.S. Retail Priorities • Annie’s Acquisition Strengthens our Natural & Organic Platform • Re-wiring U.S. Retail Marketing to Accelerate Growth 7686-33
Slide 34: Operating Highlights
OPERATING HIGHLIGHTS Ken Powel Chairman and CEO
Slide 35: Key Foodservice Channels Prospects for Growth
Key Foodservice Channels Prospects for Growth (Food and Non-alcoholic Beverage Channel Sales) 2015 Est. 2014 Nominal Estimated Sales Growth ($ in Billions) (vs. LY) Total Foodservice $641 3% K-12 Schools $19 2% Colleges & Universities $16 3% Convenience Stores $51 3% Sources: Foodservice – Technomic
Slide 36: Convenience Stores & Foodservice Six Focus Platforms
Convenience Stores & Foodservice Six Focus Platforms (% of Total F14 Platform Sales) Frozen Breakfast Biscuits Snacks Baking Mixes Yogurt Cereal F14 Net Sales $875 Million 7686-36
Slide 37: Convenience Stores & Foodservice Yogurt Performance
Convenience Stores & Foodservice Yogurt Performance Second Quarter Net Sales Growth: +22% 7686-37
Slide 38: Convenience Stores & Foodservice Snacks Performance
Convenience Stores & Foodservice Snacks Performance Second Quarter Net Sales Growth: +15% More than 30 Items That Meet School Snack Requirements 7686-38
Slide 39: Convenience Stores & Foodservice Cereal Performance
Convenience Stores & Foodservice Cereal Performance Second Quarter Net Sales Growth: +13% K-12 Schools Colleges & Universities Healthcare 7686-39
Slide 40: International Highlights Europe Region
International Highlights Europe Region Second Quarter Constant Currency Net Sales: +4%* Old El Paso Häagen-Dazs Yoplait *Non-GAAP Measure. See Appendix for Reconciliation 7686-40
Slide 41: International Highlights Canada
International Highlights Canada Second Quarter Constant Currency Net Sales: -7%* Yogurt Retail Sales -3% Cereal Retail Sales -4% Mexican Meals Retail Sales +8% Snacks Retail Sales +7% *Non-GAAP Measure. See Appendix for Reconciliation Source: Nielsen latest 13 weeks ended11.22.14 7686-41
Slide 42: International Highlights Latin America
International Highlights Latin America Second Quarter Constant Currency Net Sales: +14%* Desserts Performing Well New Side Dishes Coming *Non-GAAP Measure. See Appendix for Reconciliation 7686-42
Slide 43: International Highlights Asia/Pacific
International Highlights Asia/Pacific Second Quarter Constant Currency Net Sales: +2%* Häagen-Dazs China • Q2 Constant Currency Net Sales: -6%** Reflecting Gifting Policy Impact • Shop and Retail Expansion Continuing • Expect to Re-accelerate Growth in 2H *Non-GAAP measure. See appendix for reconcil
Slide 44: Greater China - Wanchai Ferry
Greater China - Wanchai Ferry Second Quarter Constant Currency Net Sales +11%* *Actual net sales in local currency translated to USD at a fixed exchange rate. 7686-44
Slide 45: Greater China - Yoplait Update
Greater China - Yoplait Update • Consumer-first Launch Plan • Finalizing Product Formulations • Project on Schedule 7686-45
Slide 46: Cereal Partners Worldwide
Cereal Partners Worldwide RTE Cereal Performance (Latest 52 Weeks +/- LY) CPW Category Region Share Growth Sales Trend UK/Australia -0.3 pts. -2.6% New in Mexico and European Markets Europe -0.6 pts. -1.6% LATAM +0.4 pts. +2.7% Asia/Middle East +0.2 pts. +4.8% Total -0.2 pts. -0.9% New in Select Eur
Slide 47: Rewiring to Accelerate Growth
Rewiring to Accelerate Growth • Number One Priority is to Accelerate Topline Growth • Strong Levels of Product Innovation • Organization Focused on Generating Product Demand – Put the Consumer First – Innovate to Meet Changing Needs – Leverage Changes in the Marketplace 7686-47
Slide 48: General Mills Fiscal 2015 Second Quarter Results
GENERAL MILLS Fiscal 2015 Second Quarter Results
Slide 49: Reconciliation of Total Segment Operating Profit
Reconciliation of Total Segment Operating Profit (Fiscal Years, $ in Millions) Q2 2015 2014 U.S. Retail $616 $682 International 134 153 Convenience Stores & Foodservice 96 85 Total Segment Operating Profit $847 $920 Unallocated Corporate Items 73 49 Restructuring, Impairment, and Other Exit Costs 21
Slide 50: Reconciliation of Constant-currency Total Segment Operating Profit Growth
Reconciliation of Constant-currency Total Segment Operating Profit Growth (Fiscal Years) Q2 2015 % Change in % Change in Total Segment Total Segment Operating Profit Operating Profit Impact of Foreign on a Constant- as Reported Currency Exchange currency Basis Total Segment Operating Profit -8% -2 p
Slide 51: Reconciliation of Adjusted Diluted EPS and Related Constant-currency Growth Rate
Reconciliation of Adjusted Diluted EPS and Related Constant-currency Growth Rate (Fiscal Years) Q2 2015 2014 Change Diluted EPS $0.56 $0.84 -33% Mark-to-market Effects -- (.02) Restructuring .24 .01 Adjusted Diluted EPS $0.80 $0.83 -4% Impact of Foreign Currency Exchange -4 pts Adjusted Diluted EPS
Slide 52: Reconciliation of Constant-currency Net Sales Growth
Reconciliation of Constant-currency Net Sales Growth (Fiscal Years) Q2 2015 % Change in % Change in Net Sales Net Sales Impact of Foreign on a Constant- as Reported Currency Exchange currency Basis Europe Flat -4 pts 4% Canada -13% -6 -7 Asia/Pacific 1 -1 2 Latin America -17 -31 14 Total Internation
Slide 53: Reconciliation of Constant-currency International Segment Operating Profit Growth
Reconciliation of Constant-currency International Segment Operating Profit Growth (Fiscal Years) Q2 2015 % Change in % Change in Segment Segment Operating Profit Operating Profit Impact of Foreign on a Constant- as Reported Currency Exchange currency Basis International Segment Operating Profit -12%
Slide 54: Reconciliation of Adjusted Gross Margin
Reconciliation of Adjusted Gross Margin (Fiscal Years, $ in Millions) Q2 2015 Q2 2014 % of % of $ Net Sales $ Net Sales Net Sales $4,712 $4,876 Gross Margin as Reported 1,619 34.4% 1,762 36.1% Mark-to-market Effects 5 (21) Restructuring Costs 19 -- Adjusted Gross Margin $1,643 34.9% $1,741 35.7% 768
Slide 55: Reconciliation of Constant-currency After-tax JV Earnings
Reconciliation of Constant-currency After-tax JV Earnings (Fiscal Years) Q2 2015 % Change in % Change in After-tax After-tax JV Earnings JV Earnings Impact of Foreign on a Constant- as Reported Currency Exchange currency Basis Total After-tax Earnings from Joint Ventures 4% -9 pts 13% 7686-55
Slide 56: Reconciliation of Tax Rate Excluding Items
Reconciliation of Tax Rate Excluding Items (Fiscal Years, $ in Millions) Q2 2015 Q2 2014 Pre-tax Income Pre-tax Income Earnings* Taxes Earnings* Taxes As Reported $482 $153 $801 $267 Mark-to-market effects 5 2 (21) (8) Restructuring Costs 234 86 1 -- Acquisition Integration Costs 4 1 -- -- As Adjust