Mccormick & Company, Incorporated · NYSE:MKC
Mccormick & — Q2 2023 Earnings Presentation
35 slides from Mccormick &'s earnings presentation, Jun 29, 2023
Slide 1: 2nd Quarter 2023 Financial Results and Outlook
2 QUARTER nd 2023 Financial Results and Outlook McCORMICK & COMPANY, INC. June 29, 2023 The following slides accompany a June 29, 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 presentation, including statements concerning expected performance, such as those relating to net sales, gross margin, earnings, cost savings, special charges, acquisitions, brand marketing support, volume and product mix, income tax
Slide 3: Lawrence Kurzius, Chairman and CEO
Lawrence Kurzius Chairman and Chief Executive Officer 3
Slide 4: Strong Second Quarter 2023 Results
STRONG SECOND QUARTER 2023 RESULTS SUSTAINED DEMAND AND EFFECTIVE STRATEGY EXECUTION Delivered double-digit constant currency sales growth Drove meaningful year-over-year margin expansion Achieved GOE cost savings in line with expectations Grew adjusted earnings per share by 25% Generated more than
Slide 5: Second Quarter 2023 Financial Results
SECOND QUARTER 2023 FINANCIAL RESULTS 1 Net sales grew 10% Gross margin expanded 310 bps 1 Adjusted operating income increased 36% Adjusted earnings per share increased 25% STRONG SALES PERFORMANCE IN BOTH SEGMENTS AND ALL REGIONS CONSUMER FLAVOR SOLUTIONS Strong price realization and volume improve
Slide 6: Confident in Driving Continued Profitable Growth
CONFIDENT IN DRIVING CONTINUED PROFITABLE GROWTH Strong first half results Robust sustained demand Continued margin improvement Ongoing cost structure optimization SUCCESS DRIVEN BY COLLECTIVE POWER OF MCCORMICK EMPLOYEES 6
Slide 7: Brendan Foley, President and COO
Brendan Foley President and Chief Operating Officer 7
Slide 8: Second Quarter Consumer Segment Update – Americas
SECOND QUARTER CONSUMER SEGMENT UPDATE – AMERICAS DRIVING CONSUMPTION MOMENTUM Sequential dollar and unit improvement in Spices & Seasonings Lawry’s & Super Deal delivering incremental growth Renovation progressing as planned; 30% of SKUS on shelf Double-digit e-commerce growth KICKING-OFF EXPANDING
Slide 9: Second Quarter Consumer Segment Update – EMEA & APZ
SECOND QUARTER CONSUMER SEGMENT UPDATE – EMEA & APZ EMEA Strongest quarterly sales performance in two years Solid consumption and share performance Meaningful progress in fast growing discount channel New products and brand marketing driving growth APZ Robust China recovery but lower than expected D
Slide 10: Second Quarter Flavor Solutions Segment Update
SECOND QUARTER FLAVOR SOLUTIONS SEGMENT UPDATE AMERICAS Strong growth in snack seasonings driven by new products and base business Double-digit growth in performance nutrition beverages and health applications Share gains continued in branded foodservice EMEA Broad-based growth led by higher sales t
Slide 11: Mike Smith, EVP and CFO
Mike Smith Executive Vice President and Chief Financial Officer 11
Slide 12: 2Q 2023 Sales Results
2Q 2023 SALES RESULTS TOTAL COMPANY 9.5% constant currency 10.8% 8.0% -0.9% -0.4% -1.5% Acquisitions/ Volume/Mix Price Divestitures Currency Net Sales Divestitures CONSUMER FLAVOR SOLUTIONS 7.0% constant currency 12.7% constant currency 13.8% 8.5% 11.4% 5.3% 0.0% -0.8% -1.7% -1.1% -1.3% -0.7% Acquis
Slide 13: 2Q 2023 Sales Results: Consumer Segment – Americas
2Q 2023 SALES RESULTS: CONSUMER SEGMENT AMERICAS CONSUMER 3.6% constant currency Growth driven by grilling portfolio Pricing actions to offset cost inflation 8.1% 1% decline from Kitchen Basics divestiture 3.0% Volume and mix decline included: -1.0% -0.6% -3.5% – 2% impact from Hispanic prod
Slide 14: 2Q 2023 Sales Results: Consumer Segment – EMEA
2Q 2023 SALES RESULTS: CONSUMER SEGMENT EMEA CONSUMER 9.3% constant currency Broad-based growth across categories and markets 11.8% Pricing actions to offset cost inflation 7.2% Volume and mix decline included: 0.0% – 2% impact from exiting Russia -2.5% -2.1% – 1% decline in underlying volume
Slide 15: 2Q 2023 Sales Results: Consumer Segment – Asia/Pacific
2Q 2023 SALES RESULTS: CONSUMER SEGMENT ASIA / PACIFIC CONSUMER 27.4% constant currency Volume and mix growth driven by: – 20% impact from China recovery 21.4% 18.7% – 2% growth from markets outside of China 6.0% Pricing actions across entire region to offset cost inflation 0.0% -8.7% Acquisitio
Slide 16: 2Q 2023 Sales Results
2Q 2023 SALES RESULTS TOTAL COMPANY 9.5% constant currency 10.8% 8.0% -0.9% -0.4% -1.5% Acquisitions/ Volume/Mix Price Divestitures Currency Net Sales Divestitures CONSUMER FLAVOR SOLUTIONS 7.0% constant currency 12.7% constant currency 13.8% 8.5% 11.4% 5.3% 0.0% -0.8% -1.7% -1.1% -1.3% -0.7% Acquis
Slide 17: 2Q 2023 Sales Results: Flavor Solutions – Americas
2Q 2023 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT AMERICAS FLAVOR SOLUTIONS 11.0% constant currency Pricing actions to offset cost inflation Volume and mix decline included: 12.1% 11.9% – Impact of pruning low margin business 0.0% 0.9% – Strong volume growth in seasonings -1.1% Acquisitions/ Volum
Slide 18: 2Q 2023 Sales Results: Flavor Solutions – EMEA
2Q 2023 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT EMEA FLAVOR SOLUTIONS 14.6% constant currency Broad-based growth across portfolio led QSR customers 21.8% Pricing actions to offset cost inflation 8.8% Volume and mix decline included: 0.0% – 2% impact from discontinuing a foodservice product lin
Slide 19: 2Q 2023 Sales Results: Flavor Solutions – Asia/Pacific
2Q 2023 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT ASIA / PACIFIC FLAVOR SOLUTIONS 21.6% constant currency Volume and mix growth driven by: – 13% impact from China recovery 13.6% 13.4% 8.0% – 1% growth all other volume and mix driven by Australia 0.0% Pricing actions to offset cost inflation -8.2%
Slide 20: Gross Margin
GROSS MARGIN 2Q (in millions) 2Q 2023 2Q 2022 Fav/(Unfav) Change Gross Margin 37.1% 34.0% 310 bps Favorable gross margin impacts: − GOE and CCI-led savings programs − Recovery of cost inflation pricing lagged over the last two years, as planned − Product mix in Consumer and Flavor Solutions segmen
Slide 21: Operating Income
OPERATING INCOME 2Q (in millions) 2Q 2023 2Q 2022 Fav/(Unfav) Change Selling, general & administrative expenses as percent of net sales 22.9% 22.7% (20) bps Operating income $221.8 $157.2 41% Adjusted operating income $235.0 $173.8 35% Consumer 153.6 124.8 23% Flavor Solutions 81.4 49.0 66% Sellin
Slide 22: Interest Expense and Income Taxes
INTEREST EXPENSE AND INCOME TAXES 2Q (in millions) 2Q 2023 2Q 2022 Fav/(Unfav) Change Interest Expense $52.2 $33.7 (55%) Income tax rate 22.1% 16.7% (540 bps) Adjusted income tax rate 22.3% 18.6% (370 bps) Increased interest expense driven by the higher rate environment Higher adjusted effective
Slide 23: Earnings Per Share
EARNINGS PER SHARE 2Q 2Q 2023 2Q 2022 Fav/(Unfav) Change Earnings per share $0.56 $0.44 27% Adjusted earnings per share $0.60 $0.48 25% Change in adjusted earnings per share Increase in adjusted operating income 0.18 Increase in other income 0.02 Increase in interest expense (0.06) Increase in adjus
Slide 24: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW BALANCED USE OF CASH Year-to-date cash flow provided from operations was $394 million – Comparison to $154 million year-to-date in 2022 – Increase driven by higher net income and working capital improvements Drive growth $209 million of cash returned to shareholders
Slide 25: 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 26: 2023 Outlook
2023 OUTLOOK Current Prior Reported & Reported & Constant Currency Constant Currency Sales growth 5% to 7% 5% to 7% Adjusted operating income increase 10% to 12% 9% to 11% CCI-led cost savings Approximately $85M Approximately $85M Cost inflation Low to mid-teens increase Low to mid-teens increase Ad
Slide 27: Key Takeaways
KEY TAKEAWAYS Second quarter results reflect: Sustained demand and successful execution of strategies Price realization and improved volume performance Meaningful year-over-year margin expansion in both segments Confidence in delivering strong 2023 operating performance: Year-to-date perform
Slide 28: Brendan Foley, President and COO
Brendan Foley President and Chief Operating Officer 28
Slide 29: 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 30: Positioned to Deliver Long-Term Growth and Shareholder Return
POSITIONED TO DELIVER LONG-TERM GROWTH AND SHAREHOLDER RETURN AT AN INDUSTRY-LEADING PACE Compelling growth plans in place Commitment to increasing profit realization Long-term fundamentals remain strong Confidence in growth trajectory Relentless focus on growth, performance, and people 30
Slide 31: 2nd Quarter 2023 Financial Results and Outlook
2 QUARTER nd 2023 Financial Results and Outlook McCORMICK & COMPANY, INC. June 29, 2023 The following slides accompany a June 29, 2023, earnings release conference call. This information should be read in conjunction with the press release issued on that date.
Slide 32: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES The tables below include financial measures of adjusted operating income, adjusted operating income margin, adjusted income tax expense, adjusted income tax rate, adjusted net income and adjusted diluted earnings per share. These represent non-GAAP financial measures whic
Slide 33: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES (in millions except per share data) Three Months Ended 5/31/2023 5/31/2022 1) Adjusted operating income margin is calculated as adjusted operating income as a percentage of net sales for each period presented. Operating income $ 221.8 $ 157.2 Impact of transaction and int
Slide 34: 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 35: 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