ConAgra Brands, Inc. · NYSE:CAG
ConAgra Brands — Q1 FY2018 Earnings Presentation
37 slides from ConAgra Brands's earnings presentation, Sep 28, 2017
Slide 1: FY18 Q1 Earnings Presentation
FY18 Q1 Earnings Presentation September 28, 2017
Slide 2: Today's Presenters
Today’s Presenters Brian Kearney Investor Relations Sean Connolly President and Chief Executive Officer Dave Marberger Chief Financial Officer 2
Slide 3: Forward-Looking Statements & Non-GAAP Measures
Forward-Looking Statements & Non-GAAP Measures Forward-Looking Statements This document contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are based on management's current expectations and are subject to uncertainty and changes in
Slide 4: Sean Connolly
Sean Connolly President and Chief Executive Officer 4
Slide 5: Two Years of Aggressive Action
Two Years of Aggressive Action Divested non-branded businesses Built new management team Culture/ Organization Relocated headquarters to Chicago Created Growth Center of Excellence Drove significant margin expansion Overhauled revenue base Margins Completed $200 million SG&A program
Slide 6: Better Positioned for Value Creation
Better Positioned for Value Creation from to Conglomerate Pure Play Branded Food Company Focus on Volume Focus on Value Reliance on Trade/Push Reliance on Brand Strength/Pull SKU Proliferation SKU Optimization Erratic A&P/Innovation Disciplined A&P/Innovation Inefficient Cost Structure LEAN Cost Str
Slide 7: Conagra Transformation On Track
Conagra Transformation On Track FY16/17 FY18 FY19/20 • Reset top-line • Improve top-line • Accelerate growth • Expand margins • Expand margins • Expand margins 7
Slide 8: Q1 Key Takeaways
Q1 Key Takeaways • Strong start; adjusted EPS exceeded expectations • Margin progress continued • Sales trend improving • Modernizing portfolio through innovation and M&A • Repurchased $300 million of shares • Reaffirming FY18 guidance 8
Slide 9: Margin Progress Continued
Margin Progress Continued Adj. Gross Margin Adj. Operating Margin* +61 bps excluding the impact of incremental slotting 29.2% +26 bps 16.5% 29.0% +110 bps 15.4% Q1 FY17 Q1 FY18 Q1 FY17 Q1 FY18 * Adjusted Operating Margin excludes equity method investment earnings 9 Note: “Adjusted” financial measure
Slide 10: Higher Quality Revenue Base Emerging
Higher Quality Revenue Base Emerging Domestic Retail Scanner Data Avg. Weekly TPDs Base Sales Velocity Base Dollar Sales (% Change vs Year Ago) (% Change vs Year Ago) (% Change vs Year Ago) +3% +3% +1% +1% (0)% (2)% (3)% (3)% (5)% (5)% (3)% (5)% (4)% (4)% (6)% Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3
Slide 11: Clear Top-Line Progress; Trends Accelerated
Clear Top-Line Progress; Trends Accelerated Organic Net Sales1 FY17 Q1 FY18 (2.3)% (3.0)% (5.5)% Total CAG Total CAG Domestic Retail (Grocery & Snacks + Refrigerated & Frozen) 1. Organic net sales excludes the impact of foreign exchange and divested businesses, as well as acquisitions (until the ann
Slide 12: Strong Consumer Takeaway Trends
Strong Consumer Takeaway Trends Domestic Retail Scanner Data Conagra Domestic Retail Sales Frozen Single-Serve Meals Retail Sales (% Change vs Prior Year Period) (% Change vs Prior Year Period) 6.7% 4.4% (1.0)% (2.4)% (4.9)% (2.9)% Last 52 Weeks Last 13 Weeks Last 5 Weeks Last 52 Weeks Last 13 Weeks
Slide 13: Reinvigorating Iconic Brands
Reinvigorating Iconic Brands • Strong customer acceptance • Increasing distribution • Bringing new consumers to categories • Over-indexing to younger, higher-income consumers 13
Slide 14: Adding New Modern Brands
yY m= Adding New Modern Brands CONAGRA “BRANDS: n¢ CHICKEN POT PIE arden vegntahia pati sek > Las < vr = " “ee HATCH CHILE 14
Slide 15: Highly Disciplined Approach to Total Marketing Mix
Highly Disciplined Approach to Total Marketing Mix • Mix shift from A&P to Q1 Marketing Investments* (Dollars in Millions) slotting in Q1 $ Change vs YA • Mix will shift back as Slotting ("above the line") $ 9.0 new products achieve A&P ("below the line") (9.8) full distribution Net $ (0.8) 15 * Exc
Slide 16: Angie's BOOMCHICKAPOP Acquisition
Angie’s BOOMCHICKAPOP Acquisition 16
Slide 17: M&A Will Continue to Contribute
M&A Will Continue to Contribute Modernizing Synergistic Tend to be smaller Tend to be larger Consistent with emerging trends Can enhance network and capabilities Provide platform for expansion Can offer material economic benefit Strategic Financial Criteria Criteria Strong brands Att
Slide 18: Looking Ahead
Looking Ahead • Continue to focus on executional excellence • New innovation continues to build momentum • Continue to re-shape portfolio via disciplined M&A • Deliver long-term algorithm 18
Slide 19: Dave Marberger
Dave Marberger Chief Financial Officer 19
Slide 20: Performance Summary
Performance Summary dollars in millions, except per share data Inc/(Decr) Q1 FY18 Q1 FY17 vs YA Net Sales $1,804 $1,896 (4.8)% Organic Net Sales1 1,770 1,825 (3.0)% Adj. Gross Profit 527 549 (4.0)% Adj. Gross Margin 29.2% 29.0% +26 bps A&P 55 65 (15.2)% A&P % of NS 3.0% 3.4% (37) bps Adj. SG&A 174 1
Slide 21: Q1 Net Sales Bridge vs YA
Q1 Net Sales Bridge vs YA Organic Net Sales1 (3.0)% 4% +2.3% 2% +0.2% 0% (2)% (2.0)% (4)% (4.8)% (6)% (5.3)% (8)% Volume Price/Mix Foreign Exchange Acquisitions & Net Sales Divestitures* 1. Organic net sales excludes the impact of foreign exchange and divested businesses, as well as acquisitions (un
Slide 22: Q1 Financial Summary by Segment
Q1 Financial Summary by Segment dollars in millions, except per share data Inc/(Decr) Net Sales Adj. Op. Profit1 Adj. Op Margin1 Reported Organic2 Q1 FY18 Q1 FY18 vs YA Q1 FY18 vs YA vs YA vs YA Grocery & Snacks $746 (1.5)% (5.1)% $183 (1.2)% 24.6% +7 bps Refrigerated & Frozen 616 +1.8% +1.3% 102 +4
Slide 23: Adj. EPS Bridge
Adj. EPS Bridge FY18 Drivers of Adj. Diluted EPS From Cont. Ops. vs YA Adj. Gross Margin $0.03 $(0.02) $0.02 $(0.01) $0.46 $0.03 $0.05 $0.39 $(0.05) $0.02 Q1 FY17 Volume Gross SG&A Equity Interest Taxes Shares Acquisitions Q1 FY18 Adj. EPS Margin including Earnings & Adj. EPS Expansion A&P Divestitu
Slide 24: Key Balance Sheet & Cash Flow Metrics
Key Balance Sheet & Cash Flow Metrics YTD through Q1 FY18 (dollars in millions) Net Cash Flow from Operating Activities – cont. ops. $142 Capital Expenditures $43 Trade Working Capital $800 Dividends Paid $83 Share Repurchases $300 August 27, (dollars in millions) 2017 Debt $3,289 Cash 251 Ending Ne
Slide 25: FY18 Outlook
FY18 Outlook1,2 Key Financial Metrics FY18 Reported Net Sales Growth (2)% to Flat Organic Net Sales Growth3 (2)% to Flat Adj. Op. Margin4 15.9% to 16.3% Effective Tax Rate 32.5% to 33.5% Adj. Diluted EPS from cont. ops. $1.84 to $1.89 Share Repurchases5 $1.1 billion Inflation Rate 3.3% 1. The inabil
Slide 26: Summary
Summary • Strong Q1 results • Continuing to make progress on improving top line trends • Continuing to expand margins in inflationary environment • Strong balance sheet • Reiterating FY18 guidance 26
Slide 27: Q&A
<b VY wbx CONAGRA “BRANDS -° Q&A
Slide 28: Reconciliation Tables
Vy CONAGRA “BRANDS -° Reconciliation Tables
Slide 29: Reconciliation of organic net sales Q1 FY18
Reconciliation of organic net sales Domestic Retail Grocery & Refrigerated Total Conagra (Grocery & Snacks + Q1 FY18 (Dollars in millions) Snacks & Frozen International Foodservice Commercial Brands Refrigerated & Frozen) Net Sales $ 745.8 $ 615.7 $ 190.9 $ 251.8 $ - $ 1,804.2 $ 1,361.5 Impact of fo
Slide 30: Reconciliation of organic net sales FY17
Reconciliation of organic net sales Total Conagra FY17 (Dollars in millions) Brands Net Sales $ 7,826.9 Impact of foreign exchange 29.4 Net sales from acquired businesses (36.5) Net sales from divested businesses (71.1) Organic Net Sales $ 7,748.7 Total Conagra FY16 (Dollars in millions) Brands Net
Slide 31: Reconciliation of Adjusted Gross Profit and Adjusted Gross Margin
Reconciliation of Adjusted Gross Profit and Adjusted Gross Margin (dollars in millions) FY 18 FY 17 Q1 Q1 Net Sales $ 1,804.2 $ 1,895.6 Incremental slotting 9.0 Net Sales, excluding incremental slotting $ 1,813.2 $ 1,895.6 Gross Profit $ 519.0 $ 544.6 Net expense related to restructuring plans 2.3 5
Slide 32: Reconciliation of Adjusted Operating Profit and Adjusted Operating Margin
Reconciliation of Adjusted Operating Profit and Adjusted Operating Margin Company operating Profit: Total operating profit for segments consisting of earnings before interest expense and equity method investment earnings, and income taxes. Segment operating Profit: Total operating profit for segment
Slide 33: Adjusted operating margin by segment reconciliation
Adjusted operating margin (Adjusted operating profit / Net Sales) Grocery & Snacks Segment operating profit reconciliation FY 18 FY 17 (dollars in millions) Q1 Q1 Grocery & Snacks Segment operating profit $ 176.2 $ 180.5 Net expense related to restructuring plans 6.2 4.9 Net expense related to plann
Slide 34: Foodservice, Commercial and Corporate reconciliation
Foodservice Segment operating profit reconciliation FY 18 FY 17 (dollars in millions) Q1 Q1 Foodservice Segment operating profit $ 23.2 $ 21.7 Net expense related to restructuring plans - 1.8 Adjusted Foodservice operating Profit $ 23.2 $ 23.5 Adjusted Foodservice operating margin 9.2% 8.8% Year-ove
Slide 35: Reconciliation of Adjusted SG&A
Reconciliation of Adjusted SG&A (dollars in millions) FY 18 FY 17 Q1 Q1 Net Sales $ 1,804.2 $ 1,895.6 Selling, general, and administrative (SG&A) expenses $ 239.0 $ 231.7 Gain on sale of Spicetec and J.M. Swank businesses - (198.2) Advertising and promotion expenses 54.9 64.7 Net expense related to
Slide 36: Reconciliation of Adjusted Diluted EPS from continuing operations
Reconciliation of Adjusted Diluted EPS from continuing operations FY 18 FY 17 Q1 Q1 Diluted EPS from continuing operations $ 0.36 $ 0.22 Gain on sale of Spicetec and J.M. Swank businesses - (0.17) Net expense related to restructuring plans 0.02 0.02 Net expense related to goodwill and intangible imp
Slide 37: Effective tax rate reconciliation
Income from continuing Income from continuing operations before 1 FY18 Q1 operations Income Tax Expense income taxes Effective Tax Rate Reported $ 153.6 $ 120.0 $ 273.6 43.9% Restructuring plans 7.3 4.1 11.4 Costs Related to Planned Divestiture 0.5 0.3 0.8 Corporate Hedging Derivative Losses 3.7 2.3