Slide 1: General Mills Fiscal 2017 First Quarter Results
General Mills Fiscal 2017 First 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: First Quarter Fiscal 2017 Financial Review
First Quarter Fiscal 2017 Financial Review Don Mulligan EVP, Chief Financial Officer
Slide 4: First Quarter Fiscal 2017 Summary
First Quarter Fiscal 2017 Summary • Good Progress Against F17 Adjusted Operating Profit Margin* Expansion and Adjusted Diluted EPS* Goals • Slower Start for Net Sales; Actions in Place to Improve Performance • Additional Margin Expansion Initiatives Announced in July • On Track to Deliver F17 Growth
Slide 5: Financial Summary
First Quarter Fiscal 2017 Financial Summary ($ in Millions, Except per Share) Constant- Organic currency $ % Change % Change* % Change* Net Sales $3,908 -7% -4% Segment Operating Profit* 787 -5 -4% Net Earnings Attributable to General Mills 409 -4 Diluted EPS $0.67 -3 Certain Items Affecting Compara
Slide 6: Components of Net Sales Growth
First Quarter Fiscal 2017 Components of Net Sales Growth Organic Net Sales* = -4% +2 pts -1 pts -2 pts -6 pts -7% Organic Organic Foreign Acquisitions / Total Volume Price & Mix Exchange Divestitures Net Sales As Reported *Non-GAAP measure. 6
Slide 7: U.S. Retail Segment
First Quarter Fiscal 2017 U.S. Retail Segment Q1 Net Sales Growth Snacks +2% Cereal -4 Baking Products -4 Yogurt -15 Meals -19 Total U.S. Retail -8% Organic Growth* -5% *Non-GAAP measure. See appendix for reconciliation. 7
Slide 8: Convenience Stores & Foodservice Segment
First Quarter Fiscal 2017 Convenience Stores & Foodservice Segment Q1 Net Sales Growth 6 Focus Platforms -1% Other -12 Total CS&F -7% Organic Growth* -7% *Non-GAAP measure. See appendix for reconciliation. 8
Slide 9: International Segment
First Quarter Fiscal 2017 International Segment Q1 Constant-currency Net Sales Growth by Region* Latin America +3% Asia / Pacific +1 Canada -2 Europe -6 Total International -2% Organic Growth* -1% *Non-GAAP measures. See appendix for reconciliation. 9
Slide 10: Margin Results
First Quarter Fiscal 2017 Margin Results Adjusted Gross Margin* Adjusted Operating Profit Margin* (% of Net Sales) (% of Net Sales) • Cost Savings Offsetting 37.7% 37.4% 19.2% Input Cost Inflation 18.4% • Expect 2% Inflation for Full Year • Media Declines and Cost Savings Initiatives Reducing SG&A F
Slide 11: Segment Operating Profit
First Quarter Fiscal 2017 Segment Operating Profit ($ in Millions) Constant-currency $ % Change % Change* Total Segment Operating Profit* $787 -5% -4% U.S. Retail 594 -6 International 100 -14 -11 Convenience Stores & Foodservice 93 +16 *Non-GAAP measures. See appendix for reconciliation. 11
Slide 12: Joint Venture Results
First Quarter Fiscal 2017 Joint Venture Results After-tax Earnings: $24MM; -10% vs. LY in Constant Currency* Cereal Partners Worldwide Häagen-Dazs Japan Net Sales +1%** Net Sales Flat** *Non-GAAP measure. See appendix for reconciliation. **Growth rates in constant currency. 12
Slide 13: Other Income Statement Items
First Quarter Fiscal 2017 Other Income Statement Items • Restructuring & Project-related Charges of $86MM Pretax (Includes $27MM in Cost of Sales) • Unallocated Corporate Expense Decreased Excluding Certain Items • Net Interest Expense 2% Below Last Year • Adjusted Effective Tax Rate 31.4% vs 32.3%
Slide 14: Core Working Capital
Core Working Capital ($ in Millions) Q1 F17 F16 % Change Accounts Receivable $1,446 $1,532 Inventories 1,548 1,796 Accounts Payable 1,945 1,760 Total Core Working Capital $1,049 $1,568 -33% 14
Slide 15: Cash Flow Highlights
First Quarter Fiscal 2017 Cash Flow Highlights • Operating Cash Flow Impacted by Operating Cash Flow Timing of Payables ($ in Millions) $431 • Fixed Asset Investment = $154MM • On Track to Grow F17 Free Cash $288 Flow* +MSD • Dividends Paid = $291MM F16 F17 • Net Share Repurchases = $336MM *Non-GAAP
Slide 16: Incremental Restructuring Initiatives Announced in First Quarter 2017
Incremental Restructuring Initiatives Announced in First Quarter 2017 • Soup Factory Closure in Vineland, NJ • Snacks & Meals Supply Chain Restructuring in Brazil • China Snacks Restructuring 16
Slide 17: Remain on Track to Deliver 20% Adjusted Operating Profit Margin by Fiscal 2018
Remain on Track to Deliver 20% Adjusted Operating Profit Margin* by Fiscal 2018 Adjusted Operating Profit Margin* Drivers of Margin Expansion (% of Net Sales) 20% 16.8% Spending Optimization, F17 HMM > SKU Rationalization, Inflation Other Previously Announced Projects F16 F18 Target *Non-GAAP measur
Slide 18: Reaffirming Fiscal 2017 Guidance
Reaffirming Fiscal 2017 Guidance Fiscal 2017 vs. Fiscal 2016 Organic Net Sales* -2% to Flat Total Segment Operating Profit* +6 to 8%¹ Adjusted Operating Profit Margin* +150bps Adjusted Diluted EPS* +6 to 8%¹ *Non-GAAP measures. ¹Constant-currency growth rate. 18
Slide 19: Operating Highlights
First Quarter Fiscal 2017 Operating Highlights Ken Powell Chairman and Chief Executive Officer
Slide 20: Update on U.S. Food and Beverage Retail Sales
Update on U.S. Food and Beverage Retail Sales Food and Beverage Retail Sales Growth (% vs. LY) 2.4% 2.0% 1.3% 1.1% 0.4% Q1 Q2 Q3 Q4 Q1 F16 F17 Units Flat 0.2% -0.2% 0.1% 0.1% Price 2.0% 2.2% 1.4% 1.0% 0.4% Source: Nielsen XAOC 20
Slide 21: General Mills First Quarter U.S. Retail Sales Performance
General Mills First Quarter U.S. Retail Sales Performance • Slower Start on Yoplait, Fiber One Bars, and Cereal • Taking Actions to Improve Performance • Foundation Businesses Largely on Track • Excellent Momentum on Natural & Organic 21
Slide 22: Yoplait Light and Greek Driving Majority of Declines in Yogurt
Yoplait Light and Greek 100 Driving Majority of Declines in Yogurt Yoplait Light Greek 100 F17 Q1 Retail Sales: -29% vs. LY F17 Q1 Retail Sales: -33% vs. LY Source: Nielsen XAOC, Yoplait Light 6 oz. and Multipack Source: Nielsen XAOC, Yoplait Greek 100 Single Serve and Multipack 22
Slide 23: Renovating 60% of Yogurt Portfolio in Fiscal 2017
Renovating 60% of Yogurt Portfolio in Fiscal 2017 Greek 100 Kid Original Style Yoplait 23
Slide 24: U.S. Yogurt Innovation
U.S. Yogurt Innovation Organic Yogurt Beverage 2% Greek Whips 24
Slide 25: General Mills Cereal Retail Sales Improving
General Mills Cereal Retail Sales Improving General Mills Cereal Retail Sales Growth (% vs. LY, Rolling 12 Months) -0.9% -1.1% -2.0% -2.3% Q2 Q3 Q4 Q1 F16 F17 Source: Nielsen XAOC 25
Slide 26: Renovated Cereals Continue to Grow
Renovated Cereals Continue to Grow Fiscal 2017 First Quarter Cereal Retail Sales Growth (% vs. LY) 3% 2% GF Cheerios No Artificial Varieties Flavors or Colors Varieties* *Includes 7 Featured Varieties Pictured at Left Source: Nielsen XAOC 26
Slide 27: Strong Retailer Acceptance of Annie's Cereal
Strong Retailer Acceptance of Annie’s Cereal 27
Slide 28: Strategic Revenue Management
Strategic Revenue Management Optimal Price Pack Mix Promotion Price Architecture Management Management Price Value Capture Full Value Deliver the Right Drive Mix to Focus Spending On of Our Brands in Product For Each Maximize Profitable Highest Return Each Channel Occasion Growth Vehicles & Strategi
Slide 29: Nature Valley Renovation and Innovation Driving Growth
Nature Valley Renovation and Innovation Driving Growth Crunchy Bars Gluten Free Protein Nut Butter Biscuits F17 Q1 Retail Sales: +2% vs. LY F17 Q1 Retail Sales: +5% vs. LY Top-turning Item Source: Nielsen XAOC 29
Slide 30: More Nature Valley News and Support in Fiscal 2017
More Nature Valley News and Support in Fiscal 2017 Messaging New Products 30
Slide 31: Bringing News to Improve Fiber One Trends
Bringing News to Improve Fiber One Trends Messaging New Products Renovation New Media Campaign Layered Bars No Artificial Flavors Reinforcing Taste Messaging or Colors Reduced Sugar 31
Slide 32: Natural & Organic Portfolio Delivering Double-digit Growth
Natural & Organic Portfolio Delivering Double-digit Growth Retail Sales Growth: +12% vs. LY Source: Nielsen XAOC + Natural Supermarkets + Whole Foods for 3 months ending July 32
Slide 33: Annie's and Lärabar Leading Natural & Organic Growth
Annie’s and Lärabar Leading Natural & Organic Growth Annie’s Annie’s Established Business Category Expansion Lärabar F17 Q1 Retail Sales: Yogurt, Cereal, Baked F17 Q1 Retail Sales: +20% vs. LY Goods, Snack Bars, Soup +48% vs. LY Source: Nielsen XAOC 33
Slide 34: Bringing Targeted News to Foundation Businesses for Key Seasons
Bringing Targeted News to Foundation Businesses for Key Seasons Refrigerated Dough Soup Baking Mixes Renovated Shelf Set Antibiotic-free Chicken Renovated Brownies 34
Slide 35: Convenience Stores & Foodservice Highlights
Convenience Stores & Foodservice Highlights Cereal Yogurt 35
Slide 36: International Highlights - Canada
International Highlights - Canada (F17 Q1 Retail Sales Growth) Cereal Wholesome Snacks Mexican +6% vs. LY +5% vs. LY +11% vs. LY Source: Nielsen, 12 weeks ending July 2016 36
Slide 37: International Highlights - Europe
International Highlights - Europe (F17 Q1 Retail Sales Growth) Wholesome Snacks Old El Paso +13% vs. LY +5% vs. LY Source: Nielsen/IRI, 12 weeks ending July 2016 37
Slide 38: International Highlights - Asia/Pacific Region
International Highlights - Asia/Pacific Region China AMEA • Yoplait Launch in Beijing • Stick Bar Launch • Good Performance on • Continued Growth in India Häagen-Dazs & Wanchai Ferry 38
Slide 39: International Highlights - Latin America
International Highlights - Latin America (F17 Q1 Retail Sales Growth) Mexico Brazil Wholesome Snacks Snacks +15% vs. LY +5% vs. LY Source: Nielsen/IRI, 12 weeks ending July 2016 39
Slide 40: Focused on Improving Organic Net Sales Performance
Focused on Improving Organic Net Sales Performance • Easier Net Sales Comparisons in Remainder of Year • Continue to Invest in What’s Working • Actions In Place to Improve Performance on Specific Businesses • Implementing Strategic Revenue Management 40
Slide 41: Summary
General Mills First Quarter Fiscal 2017 Summary • Good Progress Against F17 Adjusted Operating Profit Margin* Expansion and Adjusted Diluted EPS* Goals • Slower Start for Net Sales; Actions in Place to Improve Performance • Additional Margin Expansion Initiatives Announced in July • On Track to Deli
Slide 42: Reconciliation of Total Segment Operating Profit
Reconciliation of First Quarter Fiscal 2017 Total Segment Operating Profit (Fiscal Years, $ in Millions) Q1 2017 2016 % Change U.S. Retail $594.4 $629.7 (6)% International 100.0 117.0 (15) Convenience Stores and Foodservice 92.7 79.8 16 Total segment operating profit $787.1 $826.5 (5)% Unallocated C
Slide 43: Reconciliation of Constant-currency Total Segment Operating Profit Growth
Reconciliation of First Quarter Constant-currency Total Segment Operating Profit Growth (Fiscal Years) Q1 Percentage Change Percentage Change Impact of in Total Segment in Total Segment Foreign Operating Profit on a Operating Profit as Currency Constant-Currency Reported Exchange Basis F17 (5) % (1)
Slide 44: Reconciliation of Adjusted Diluted EPS and Constant-currency Growth
Reconciliation of First Quarter Fiscal 2017 Adjusted Diluted EPS and Related Constant-currency Growth Rate (Fiscal Years) Q1 Per Share Data 2017 2016 Change Diluted earnings per share, as reported $ 0.67 $ 0.69 (3) % Mark-to-market effects* 0.02 - Restructuring charges* 0.08 0.09 Project-related cos
Slide 45: Reconciliation of First Quarter Fiscal 2016 Adjusted Diluted EPS
Reconciliation of First Quarter Fiscal 2016 Adjusted Diluted EPS and Related Constant-currency Growth Rate (Fiscal Years) Q1 Per Share Data 2016 2015 Change Diluted earnings per share, as reported $ 0.69 $ 0.55 25 % Mark-to-market effects* - 0.05 Restructuring charges* 0.09 0.01 Project-related cost
Slide 46: Reconciliation of Organic Net Sales Growth
Reconciliation of First Quarter Fiscal 2017 Organic Net Sales Growth (Fiscal Year) Q1 2017 Reported Organic Organic Organic Foreign Acquisitions & Net Sales Volume Price/Mix Net Sales Exchange Divestitures Growth U.S. Retail (7) pts 2 pts (5) % -- (3) pts (8) % International (4) pts 3 pts (1) % (4)
Slide 47: Reconciliation of First Quarter Fiscal 2016 Organic Net Sales Growth
Reconciliation of First Quarter Fiscal 2016 Organic Net Sales Growth (Fiscal Year) Q1 2016 Reported Organic Organic Organic Foreign Acquisitions & Net Sales Volume Price/Mix Net Sales Exchange Divestitures Growth U.S. Retail (1) pt 2 pts 1% -- 3 pts 4% International 4 pts 1 pt 5% (16) pts -- (11) %
Slide 48: Reconciliation of International Constant-Currency Net Sales Growth Rates
Reconciliation of First Quarter Fiscal 2017 International Constant-Currency Net Sales Growth Rates (Fiscal Year) Q1 2017 Impact of Percentage Change Foreign Percentage Change in in Net Sales Currency Net Sales on Constant- as Reported Exchange Currency Basis Europe (9) % (3) pts (6) % Canada (4) (2)
Slide 49: Reconciliation of Adjusted Gross Margin
Reconciliation of First Quarter Fiscal 2017 Adjusted Gross Margin (Fiscal Years) Q1 2017 2016 % of % of Net Sales Net Sales Gross margin as reported 36.3 % 36.9 % Mark-to-market effects 0.4 - Restructuring charges 0.3 0.5 Project-related costs 0.4 0.3 Adjusted gross margin 37.4 % 37.7 % 49
Slide 50: Reconciliation of First Quarter Fiscal 2016 Adjusted Gross Margin
Reconciliation of First Quarter Fiscal 2016 Adjusted Gross Margin (Fiscal Years) Q1 2016 2015 % of % of Net Sales Net Sales Gross margin as reported 36.9 % 33.7 % Mark-to-market effects - 1.0 Restructuring charges 0.5 - Project-related costs 0.3 - Adjusted gross margin 37.7 % 34.8 % 50
Slide 51: Reconciliation of Adjusted Operating Profit Margin
Reconciliation of First Quarter Fiscal 2017 Adjusted Operating Profit Margin (Fiscal Years) Q1 2017 2016 % of % of Net Sales Net Sales Operating profit as reported 16.5 % 16.2 % Mark-to-market effects 0.4 - Restructuring charges 1.9 1.9 Project-related costs 0.4 0.3 Adjusted operating profit margin
Slide 52: Reconciliation of First Quarter Fiscal 2016 Total Segment Operating Profit
Reconciliation of First Quarter Fiscal 2016 Total Segment Operating Profit (Fiscal Years, $ in Millions) Q1 2016 2015 % Change U.S. Retail $629.7 $457.2 38% International 117.0 146.0 (20) Convenience Stores and Foodservice 79.8 87.3 (9) Total segment operating profit $826.5 $690.5 20% Unallocated Co
Slide 53: Reconciliation of Constant-currency International Segment Operating Profit Growth
Reconciliation of First Quarter Fiscal 2017 Constant-currency International Segment Operating Profit Growth (Fiscal Year) 2017 Percentage Change Impact of Percentage Change in in International Foreign International Segment Segment Operating Currency Operating Profit on Profit as Reported Exchange Co
Slide 54: Reconciliation of Constant-currency After-tax JV Earnings
Reconciliation of First Quarter Constant-currency After-tax JV Earnings (Fiscal Years) Q1 Percentage Change in Impact of Percentage Change in After-tax Earnings from Foreign After-tax Earnings from Joint Joint Ventures Currency Ventures on Constant- as Reported Exchange Currency Basis F17 (6) % 4 pt
Slide 55: Reconciliation of Tax Rate Excluding Items
Reconciliation of First Quarter Fiscal 2017 Tax Rate Excluding Items (Fiscal Years, $ in Millions) Q1 2017 2016 Pretax Income Pretax Income Earnings Taxes Earnings Taxes As reported $571.9 $176.6 $608.0 $198.6 Mark-to-market effects 16.6 6.1 (2.7) (1.0) Restructuring charges 72.5 24.2 81.9 23.6 Proj
Slide 56: Reconciliation of First Quarter Fiscal 2016 Tax Rate Excluding Items
Reconciliation of First Quarter Fiscal 2016 Tax Rate Excluding Items (Fiscal Years, $ in Millions) Q1 2016 2015 Pretax Income Pretax Income Earnings Taxes Earnings Taxes As reported $608.0 $198.6 $479.0 $152.6 Mark-to-market effects (2.7) (1.0) 49.2 18.2 Restructuring charges 81.9 23.6 14.0 4.6 Proj
Slide 57: Reconciliation of Full Year Fiscal 2016 Adjusted Operating Profit Margin
Reconciliation of Full Year Fiscal 2016 Adjusted Operating Profit Margin (Fiscal Year) Full Year 2016 % of Net Sales Operating profit as reported 16.3 % Mark-to-market effects (0.4) Divestitures (gain) (0.9) Restructuring charges 1.4 Project-related costs 0.4 Adjusted operating profit margin 16.8 %