Mccormick & Company, Incorporated · NYSE:MKC
Mccormick & — Q1 2023 Earnings Presentation
34 slides from Mccormick &'s earnings presentation, Mar 28, 2023
Slide 1: First Quarter 2023 Financial Results and Outlook
1 QUARTER st 2023 Financial Results and Outlook McCORMICK & COMPANY, INC. MARCH 28, 2023 The following slides accompany a March 28, 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 release, 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 expen
Slide 3: Lawrence Kurzius, Chairman and Chief Executive Officer
Lawrence Kurzius Chairman and Chief Executive Officer 3
Slide 4: Solid First Quarter 2023 Results
SOLID FIRST QUARTER 2023 RESULTS STRONG DEMAND AND INCREASING PROFIT REALIZATION SALES PERFORMANCE Strength of broad global portfolio Strong demand Effective execution of strategies GROSS MARGIN IMPROVEMENT Global Operating Effectiveness program cost savings in line with expectations Press
Slide 5: First Quarter 2023 Financial Results
FIRST QUARTER 2023 FINANCIAL RESULTS 1 NET SALES GREW 5% Strong underlying business performance – 11% growth from pricing actions – 3% decline in underlying volume and mix decline Other impacts contributing to volume decline – 1% from Kitchen Basics divestiture and exit of Consumer business in R
Slide 6: First Quarter Consumer Segment Update
FIRST QUARTER CONSUMER SEGMENT UPDATE STRONG UNDERLYING PERFORMANCE AND POSITIVE CONSUMPTION MOMENTUM AMERICAS U.S. branded portfolio consumption growth versus 1Q 2022 Volume performance better than 4Q 2022 on higher price realization Acceleration in U.S. spices and seasonings dollars and unit
Slide 7: Consumer Segment Growth Plans
CONSUMER SEGMENT GROWTH PLANS RENOVATING OUR U.S. EVERYDAY SPICE & SEASONINGS LINE 7
Slide 8: Consumer Segment Growth Plans: New Products and Brand Marketing
CONSUMER SEGMENT GROWTH PLANS DRIVING GROWTH WITH NEW PRODUCTS AND BRAND MARKETING INVESTMENTS LAUNCHING NEW PRODUCTS INVESTING IN BRAND MARKETING Inspiring flavor exploration and Supporting our brands with increased delivering convenience investments BUILDING OUR HEAT PLATFORM Launching hot new pro
Slide 9: First Quarter Flavor Solutions Segment Update
FIRST QUARTER FLAVOR SOLUTIONS SEGMENT UPDATE CONTINUATION OF OUTSTANDING SALES PERFORMANCE AMERICAS Strong growth in snack seasonings driven by new products and base business Double-digit growth in flavors for performance nutrition and health applications EMEA Broad-based growth across the po
Slide 10: Flavor Solutions Growth Plans
FLAVOR SOLUTIONS GROWTH PLANS ENTERED 2023 WITH ROBUST NEW PRODUCT PIPELINE FUELING GROWTH WITH TARGETING OPPORTUNITIES IN OUR DIFFERENTIATION HIGH-GROWTH AREAS Culinary Consumer Foundation Insights Alcoholic Savory Performance Differentiated Beverages Snacks Nutrition Proprietary Customer Technolog
Slide 11: 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 12: Confidence in Driving Total Shareholder Return
CONFIDENCE IN DRIVING TOTAL SHAREHOLDER RETURN Confidence in growth momentum and ability to navigate environment with: Strength of business model and value of products and capabilities Execution of proven strategies Well-positioned to drive profitable growth in 2023 with three focused priorities
Slide 13: Mike Smith, Executive Vice President and Chief Financial Officer
Mike Smith Executive Vice President and Chief Financial Officer 13
Slide 14: 1Q 2023 Sales Results
1Q 2023 SALES RESULTS TOTAL COMPANY 5.3% constant currency 10.6% 2.8% -0.7% -2.5% -4.6% Acquisitions/ Volume/Mix Price Divestitures Currency Net Sales Divestitures CONSUMER FLAVOR SOLUTIONS 0.8% constant currency 12.3% constant currency 13.5% 8.7% 10.0% 0.0% -1.1% -1.2% -2.6% -1.8% -2.3% -6.8% Acqui
Slide 15: 1Q 2023 Sales Results: Consumer Segment, Americas
1Q 2023 SALES RESULTS: CONSUMER SEGMENT AMERICAS CONSUMER 3.8% constant currency Pricing actions to offset cost increases Broad-based growth across all product categories 10.0% Volume decline impacted by lapping elevated demand due to 3.3% Omicron in 1Q 2022 -1.7% -0.5% 2% decline from Kitch
Slide 16: 1Q 2023 Sales Results: Consumer Segment, EMEA
1Q 2023 SALES RESULTS: CONSUMER SEGMENT EMEA CONSUMER -2.1% constant currency Pricing actions to offset cost increases Volume and mix decline included: 7.3% – 4% impact from lower sales in Russia 0.0% – Impact of lapping elevated demand due to Omicron in 1Q 2022 -6.7% -8.8% -9.4% Acquisitions/ V
Slide 17: 1Q 2023 Sales Results: Consumer Segment, Asia/Pacific
1Q 2023 SALES RESULTS: CONSUMER SEGMENT ASIA / PACIFIC CONSUMER -8.1% constant currency Volume and mix includes a 11% decline driven by: − Consumption disruption in China related to COVID 4.7% 0.0% − Exit of low margin business in India Pricing actions to offset cost inflation -7.0% -12.8% -15.1
Slide 18: 1Q 2023 Sales Results
1Q 2023 SALES RESULTS TOTAL COMPANY 5.3% constant currency 10.6% 2.8% -0.7% -2.5% -4.6% Acquisitions/ Volume/Mix Price Divestitures Currency Net Sales Divestitures CONSUMER FLAVOR SOLUTIONS 0.8% constant currency 12.3% constant currency 13.5% 8.7% 10.0% 0.0% -1.1% -1.2% -2.6% -1.8% -2.3% -6.8% Acqui
Slide 19: 1Q 2023 Sales Results: Flavor Solutions, Americas
1Q 2023 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT AMERICAS FLAVOR SOLUTIONS 12.2% constant currency Pricing actions to offset cost inflation 12.9% Volume and mix impacted by: 12.7% − Strong volume growth in snack seasonings and flavors for performance nutrition and health applications 0.0% 0.5% -0
Slide 20: 1Q 2023 Sales Results: Flavor Solutions, EMEA
1Q 2023 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT EMEA FLAVOR SOLUTIONS 16.8% constant currency Pricing actions to offset cost inflation 19.4% Broad-based growth across portfolio led by higher sales to quick service restaurant customers 6.8% Volume decline driven primarily by lower volume in the
Slide 21: 1Q 2023 Sales Results: Flavor Solutions, Asia/Pacific
1Q 2023 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT ASIA / PACIFIC FLAVOR SOLUTIONS 5.1% constant currency Pricing actions to offset cost inflation Volume and product mix decline driven by: 6.2% − Scaled back quick service restaurant activities in China due to COVID-related disruptions 0.0% -1.1% -1
Slide 22: Gross Margin
GROSS MARGIN 1Q (in millions) 1Q 2023 1Q 2022 Fav/(Unfav) Change Gross Margin 36.0% 36.8% (80) bps Adjusted Gross Margin 36.0% 36.8% (80) bps Unfavorable gross margin impacts − Elevated costs to meet high Flavor Solutions demand in certain parts of business − Dual running costs related to Flavor S
Slide 23: Operating Income
OPERATING INCOME 1Q (in millions) 1Q 2023 1Q 2022 Fav/(Unfav) Change Selling, general & administrative expenses as percent of net sales 21.5% 21.9% 40 bps Operating income $199.0 $206.9 (4%) Adjusted operating income $226.8 $227.1 0% Consumer 173.4 167.0 4% Flavor Solutions 53.4 60.1 (11%) Selling
Slide 24: Interest Expense and Income Taxes
INTEREST EXPENSE AND INCOME TAXES 1Q (in millions) 1Q 2023 1Q 2022 Fav/(Unfav) Change Interest Expense $50.6 $33.1 (53%) Income tax rate 21.6% 19.1% (246 bps) Adjusted income tax rate 21.8% 19.7% (211 bps) Increased interest expense driven by the higher rate environment Higher adjusted effective
Slide 25: Earnings Per Share
EARNINGS PER SHARE 1Q 1Q 2023 1Q 2022 Fav/(Unfav) Change Earnings per share $0.52 $0.57 (9%) Adjusted earnings per share $0.59 $0.63 (6%) Change in adjusted earnings per share Increase in interest expense (0.05) Increase in adjusted income tax rate (0.02) Increase in unconsolidated income 0.02 Incre
Slide 26: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW BALANCED USE OF CASH Cash flow provided from operations was $103 million – Comparison to $18 million in 1Q 2022 – Increase driven by lower incentive compensation payments $105 million of cash returned to shareholders through dividends Drive growth Return to shareh
Slide 27: 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 28: 2023 Outlook
2023 OUTLOOK Reported Currency Constant Currency Sales growth 5% to 7% 5% to 7% Adjusted operating income increase 9% to 11% 9% to 11% CCI-led cost savings Approximately $85M Cost inflation Low to mid-teens increase Adjusted gross profit margin Up 25 to 75 bps Brand marketing Low single-digit increa
Slide 29: Confident in Delivering 2023 Outlook and Building Shareholder Value
CONFIDENT IN DELIVERING 2023 OUTLOOK AND BUILDING SHAREHOLDER VALUE First quarter performance reflects: Sales growth from strength of portfolio and pricing catching up with inflation Gross margin improvement and urgency in addressing pressure points Effective execution of strategies Balance of
Slide 30: First Quarter 2023 Financial Results and Outlook
1 QUARTER st 2023 Financial Results and Outlook McCORMICK & COMPANY, INC. MARCH 28, 2023 The following slides accompany a March 28, 2023, earnings release conference call. This information should be read in conjunction with 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. These represent non-GAAP financial measures whic
Slide 32: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES (in millions except per share data) Three Months Ended 2/28/2023 2/28/2022 1) Adjusted operating income margin is calculated as adjusted operating income as a percentage of net sales for each period presented. Operating income $ 199.0 $ 206.9 Impact of transaction and int
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 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