Mccormick & Company, Incorporated · NYSE:MKC
Mccormick & — Q3 2020 Earnings Presentation
36 slides from Mccormick &'s earnings presentation, Sep 29, 2020
Slide 1: 3rd Quarter 2020 Financial Results
McCormick & Company, Inc. 3rd Quarter 2020 Financial Results September 29, 2020 BUILDING THE McCORMICK OF THE FUTURE The following slides accompany a September 29th, 2020, 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 release, including statements concerning expected performance, such as those relating to net sales, volume and product mix, gross margins, earnings, cost savings, brand marketing support, special charges, acquisitions, income tax expe
Slide 3: Lawrence Kurzius
ilk LAWRENCE KURZIUS
Slide 4: Current Conditions
CURRENT CONDITIONS CONSUMER FLAVOR SOLUTIONS ▪ Strong sustained global consumer demand reflects ▪ Quick service restaurant customers showing strong trend of consumers eating more at home signs of recovery ▪ Behavior has persisted long enough to be a habit ▪ Rest of foodservice recovering at a slower
Slide 5: Confident in Our Capabilities to Perform
CONFIDENT IN OUR CAPABILITIES TO PERFORM GLOBAL SUPPLY CHAIN POSITIVE FUNDAMENTALS ▪ Sustained high level of demand challenged U.S. ▪ Executing from a position of strength through a manufacturing operations period of volatility ‒ Service stressed in some areas ▪ Well prepared through investments mad
Slide 6: Global Footprint & Portfolio
GLOBAL FOOTPRINT & PORTFOLIO 1 GLOBAL FOOTPRINT BROAD & ADVANTAGED GLOBAL FLAVOR PORTFOLIO U.S. Spices & Seasonings Flavors Americas Americas International Spices & Seasonings Branded Foodservice 2019 2019 NET SALES NET SALES Recipe Mixes Custom Condiments EMEA Ingredients & Coatings APZ Condiments
Slide 7: Third Quarter 2020 Financial Results
THIRD QUARTER 2020 FINANCIAL RESULTS GREW NET SALES 9%* ▪ Higher volume and product mix in consumer segment ▪ Partial offset from low single digit decline in flavor solutions segment GREW ADJUSTED OPERATING INCOME 6%* ▪ Higher sales, favorable mix and CCI-led cost savings ▪ Partially offset by highe
Slide 8: Consumer Segment Update – Americas
CONSUMER SEGMENT UPDATE – AMERICAS AMERICAS ▪ U.S. Branded portfolio consumption growth 28% ▪ Double-digit growth in all key categories ▪ Growth 2.5X center of store rate ▪ Share gains in 7 of 11 categories ▪ 8% increase in household penetration ▪ Repeat buyers rate increased 7% ▪ High level of effe
Slide 9: Consumer Segment Update – EMEA & APZ
CONSUMER SEGMENT UPDATE – EMEA & APZ EMEA APZ ▪ Broad based consumption growth across the region ▪ China declines driven by branded foodservice ▪ Share gains in key categories ▪ China demand strong for convenient solutions and condiments ▪ Double digit household penetration and repeat buyer rate inc
Slide 10: Flavor Solutions Segment Update
FLAVOR SOLUTIONS SEGMENT UPDATE AMERICAS ▪ Demand declines across branded foodservice and restaurant customers ▪ Branded foodservice impact more significant due to portfolio mix ▪ Continued collaboration with customers on recovery efforts EMEA ▪ Restaurant and other foodservice demand rebound from Q
Slide 11: Stock Split Announcement
STOCK SPLIT ANNOUNCEMENT MKC Share Price 2002-2020 ▪ 2 for 1 stock split distributed 11/30/2020 $225 $200 ▪ Reflects sustained positive performance and continued $175 growth outlook $150 USD $125 $100 ▪ Last stock split 18 years ago at $52.32 pre-split share price $75 $50 ▪ Provides greater liquidit
Slide 12: Solid Foundation in Dynamic Environment
SOLID FOUNDATION IN DYNAMIC ENVIRONMENT ▪ Aligned with consumer demands and preferences, which have accelerated ▪ Agile, relevant and focused on long-term sustainable growth ▪ Strategies are effective and reinforce confidence in driving future growth ▪ Outstanding year-to-date results, during a peri
Slide 13: Mike Smith
MIKE SMITH Executive Vice President and Chief Financial Officer 13 13
Slide 14: 3Q 2020 Sales Results
3Q 2020 SALES RESULTS CONSUMER 15.1% constant currency TOTAL COMPANY 13.6% 14.7% 8.6% constant currency 1.5% 0.0% -0.4% 6.8% 7.6% 1.8% Volume/Mix Price Acquisitions Currency Net Sales 0.0% -1.0% FLAVOR SOLUTIONS Volume/Mix Price Acquisitions Currency Net sales -1.1% constant currency Volume/Mix Pric
Slide 15: 3Q 2020 Sales Results: Consumer Segment – Americas
3Q 2020 SALES RESULTS: CONSUMER SEGMENT AMERICAS 17.5% constant currency ▪ Significant growth across branded portfolio ▪ Pricing actions taken prior to COVID-19 to partially offset increased costs 17.2% 15.2% 2.3% 0.0% -0.3% Volume/Mix Price Acquisitions Currency Net sales 15 The non-GAAP measure in
Slide 16: 3Q 2020 Sales Results: Consumer Segment – EMEA
3Q 2020 SALES RESULTS: CONSUMER SEGMENT EMEA 22.6% constant currency ▪ Double digit volume and mix growth across the region ▪ Significant growth drivers: 23.0% 23.0% ‒ Schwartz and Ducros branded spices and seasonings ‒ Vahine homemade dessert products 0.0% 0.4% ‒ Schwartz dry recipe mixes -0.4% Vol
Slide 17: 3Q 2020 Sales Results: Consumer Segment – Asia/Pacific
3Q 2020 SALES RESULTS: CONSUMER SEGMENT ASIA / PACIFIC -6.2% constant currency ▪ Decline driven by branded foodservice ▪ Partially offset by increased consumer demand led by: ‒ China recipe mixes, sauces and condiments 0.1% 0.0% ‒ Australia branded spices and seasonings and -2.5% condiments -6.3% -8
Slide 18: 3Q 2020 Sales Results
3Q 2020 SALES RESULTS CONSUMER 15.1% constant currency TOTAL COMPANY 13.6% 14.7% 8.6% constant currency 1.5% 0.0% -0.4% 6.8% 7.6% 1.8% Volume/Mix Price Acquisitions Currency Net Sales 0.0% -1.0% FLAVOR SOLUTIONS Volume/Mix Price Acquisitions Currency Net sales -1.1% constant currency Volume/Mix Pric
Slide 19: 3Q 2020 Sales Results: Flavor Solutions – Americas
3Q 2020 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT AMERICAS -3.1% constant currency ▪ Decline driven by branded foodservice and quick service restaurant customers ▪ Partially offset by: 2.2% 0.0% ‒ Growth with packaged food companies -5.3% -1.6% -4.7% ‒ Pricing to offset cost increases Volume/Mix Price
Slide 20: 3Q 2020 Sales Results: Flavor Solutions – EMEA
3Q 2020 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT EMEA 1.2% constant currency ▪ Pricing to offset cost increases ▪ Volume and mix decline driven by: ‒ Lower sales to branded foodservice and quick 3.3% 0.0% service restaurant customers -2.1% -2.2% -1.0% ‒ Partially offset by growth with packaged food c
Slide 21: 3Q 2020 Sales Results: Flavor Solutions – Asia/Pacific
3Q 2020 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT ASIA / PACIFIC 7.0% constant currency ▪ Growth with quick service restaurant customers in China and Australia 7.6% 4.9% 0.0% -0.6% -2.1% Volume/Mix Price Acquisitions Currency Net sales 21 The non-GAAP measure included herein, which we refer to as “con
Slide 22: Operating Income
OPERATING INCOME 3Q 2020 3Q 2019 Fav/(Unfav) (in millions) Change Operating income $273.0 $253.5 8% Adjusted operating income $273.1 $261.2 5% Consumer 209.0 176.5 18% Flavor solutions 64.1 84.7 (24%) ▪ 6% constant currency adjusted operating income increase for total company ‒ Consumer segment grow
Slide 23: Operating Margin
OPERATING MARGIN 3Q 2020 3Q 2019 Fav/(Unfav) (in millions) Change Gross margin 41.3% 40.6% 70 bps Selling, general & administrative expenses as percent of net sales 22.2% 20.9% (130) bps Operating margin 19.1% 19.1% 0 bps Adjusted operating margin 19.1% 19.7% (60) bps ▪ Gross margin expansion of 70
Slide 24: Income Taxes
INCOME TAXES (in millions) 3Q 2020 3Q 2019 Income tax rate 19.3% 16.8% Adjusted income tax rate 19.3% 17.6% ▪ Adjusted income tax rate increased versus the year-ago period ▪ Both quarters’ favorably impacted by discrete tax items, principally stock option exercises 24 The non-GAAP measures included
Slide 25: Income from Unconsolidated Operations
INCOME FROM UNCONSOLIDATED OPERATIONS 3Q 2020 3Q 2019 Fav/(Unfav) (in millions) Change Income from unconsolidated operations $9.6 $9.6 0% ▪ Income from unconsolidated operations was comparable to 3Q 2019 25
Slide 26: Earnings Per Share
EARNINGS PER SHARE Fav(Unfav) 3Q 2020 3Q 2019 Change Earnings per share $1.53 $1.43 7% Adjusted earnings per share 1.53 1.46 5% Change in adjusted earnings per share Increase in adjusted operating income $0.07 Decrease in interest expense 0.05 Increase in adjusted tax rate (0.03) Other impacts, net
Slide 27: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW ▪ Cash flow provided from operations $627 million vs $495 million in 2019 Balanced Use of Cash ▪ Cash conversion cycle improved 7 days from 2019 year end ▪ Returned $247 million of cash to shareholders through dividends ▪ Capital expenditures of $146 million through third
Slide 28: 2020 Financial Outlook
2020 FINANCIAL OUTLOOK Reported Currency Constant Currency Sales growth Upper end of 4% to 5% Upper end of 5% to 6% Adjusted operating income increase 4% to 5% 5% to 6% CCI-led cost savings Approximately $105M Cost inflation Mid single digit increase Gross profit margin 75 to 100 bps increase Brand
Slide 29: Third Quarter Key Takeaways
THIRD QUARTER KEY TAKEAWAYS ▪ Year-to-date results prove strength of business model, the value of our products and our capabilities as a company ▪ Solid foundation and effective strategies ▪ 2020 outlook reflects strong operating performance while doing what is right for our employees and communitie
Slide 30: 3rd Quarter 2020 Financial Results
McCormick & Company, Inc. 3rd Quarter 2020 Financial Results September 29, 2020 BUILDING THE McCORMICK OF THE FUTURE 30following slides accompany a September 29th, 2020, earnings release conference call. This information should be read in conjunction with the The press release issued on that date.
Slide 31: 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, each excluding the impact of special charges for
Slide 32: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES (in millions except per share data) Three Months Ended Nine Months Ended 8/31/2020 8/31/2019 8/31/2020 8/31/2019 Operating income $ 273.0 $ 253.5 $ 724.6 $ 658.5 Impact of special charges 0.1 7.7 4.0 16.9 operating income margin is calculated as adjusted operating 1) Adju
Slide 33: 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 34: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES To present “constant currency” information for the fiscal year 2020 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 2020
Slide 35: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES In addition to the preceding non-GAAP financial measures, we use a leverage ratio that is determined using non-GAAP measures. A leverage ratio is a widely-used measure of ability to repay outstanding debt obligations. We believe that our leverage ratio is a meaningful met
Slide 36: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES The following provides a reconciliation of our estimated earnings per share to adjusted earnings per share for 2020 and actual results for 2019: Twelve Months Ended 2020 Projection 11/30/19 Earnings per share - diluted $5.60 to $5.68 $ 5.24 Impact of special charges 0.04