Mccormick & Company, Incorporated · NYSE:MKC
Mccormick & — Q3 2022 Earnings Presentation
32 slides from Mccormick &'s earnings presentation, Oct 6, 2022
Slide 1: Third Quarter 2022 Financial Results and Outlook
3 QUARTER rd 2022 Financial Results and Outlook McCORMICK & COMPANY, INC. OCTOBER 6, 2022 The following slides accompany a October 6, 2022, 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, transaction and integration expenses, special charges, acquisitions, brand marketing suppor
Slide 3: Lawrence Kurzius, Chairman and Chief Executive Officer
Lawrence Kurzius Chairman and Chief Executive Officer 3
Slide 4: Third Quarter 2022 Financial Results
THIRD QUARTER 2022 FINANCIAL RESULTS SALES GROWTH AGAINST THE BACKDROP OF A VOLATILE OPERATING ENVIRONMENT STRENGTH OF PROFIT PRESSURED BY BROAD GLOBAL PORTFOLIO SUPPLY CHAIN CHALLENGES 1 1 NET SALES GREW 6% ADJUSTED OPERATING INCOME DECLINED 11% Growth from pricing actions of 10% partially offset
Slide 5: Focused Supply Chain Plan Underway
FOCUSED SUPPLY CHAIN PLAN UNDERWAY TAKING A DISCIPLINED APPROACH TO ENHANCING OUR OPERATIONAL PERFORMANCE AND OPTIMIZING OUR COST STRUCTURE INITIATIVES IN PROGRESS EXPECTED RESULTS Keep customers in supply and support their growth Investing in capacity and reliability Increased capacity Repatriati
Slide 6: Third Quarter Consumer Segment Update
THIRD QUARTER CONSUMER SEGMENT UPDATE PRICING ACTIONS IN ALL REGIONS WITH LOWER THAN HISTORICAL PRICE ELASTICITY AMERICAS 4% U.S. branded portfolio consumption growth versus 3Q 2021 8% 3-year compounded annual consumption growth rate since 2019 Recent new distribution wins EMEA Solid herbs,
Slide 7: Consumer Segment Growth Plans
CONSUMER SEGMENT GROWTH PLANS DRIVING STRONG GROWTH WITH BRAND MARKETING, NEW PRODUCTS AND CATEGORY MANAGEMENT INCREASING BRAND MARKETING LAUNCHING NEW INVESTMENTS PRODUCTS Emphasizing the Meeting Value of Our Products Consumer Needs Branded Opening Price Point Range with Budget Friendly and Value O
Slide 8: Third Quarter Flavor Solutions Segment Update
THIRD QUARTER FLAVOR SOLUTIONS SEGMENT UPDATE EFFECTIVE PRICING INCREASED IN ALL REGIONS VERSUS FIRST HALF OF THE YEAR AMERICAS Strong growth driven by snack seasonings and savory flavors Expanded distribution contributed to branded foodservice strength Beverage, savory snacks, and performance
Slide 9: 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 U.S. Spices & Flavors Seasonings HEALTHY AND FLAVORFUL COOKING International Branded Spices & Foodservice DIGI
Slide 10: Focused on Long-Term Goals, Strategies and Values
FOCUSED ON LONG-TERM GOALS, STRATEGIES AND VALUES THAT HAVE DRIVEN COMPOUNDING GROWTH Solid track record of achieving long-term objectives highlights: Resiliency of our business through a variety of market conditions Our focus on sales growth and profit realization Long-term fundamentals that dr
Slide 11: Mike Smith, Executive Vice President and Chief Financial Officer
Mike Smith Executive Vice President and Chief Financial Officer
Slide 12: 3Q 2022 Sales Results
3Q 2022 SALES RESULTS TOTAL COMPANY 6.1% constant currency 9.7% 3.0% -0.5% -3.1% -3.1% Acquisitions/ Volume/Mix Price Divestitures Currency Net Sales Divestitures CONSUMER FLAVOR SOLUTIONS 3.4% constant currency 10.1% constant currency 10.0% 9.3% 6.4% 0.7% 0.8% 0.0% -0.9% -2.7% -3.7% -5.7% Acquisiti
Slide 13: 3Q 2022 Sales Results: Consumer Segment, Americas
3Q 2022 SALES RESULTS: CONSUMER SEGMENT AMERICAS 3Q compared to 2021 3.1% constant currency − Pricing actions to offset cost increases 11.9% − 1% decline from Kitchen Basics divestiture − Lower volume and mix impacted by: 2.8% • Price elasticities -1.3% -0.3% • Constrained supply of certain input
Slide 14: 3Q 2022 Sales Results: Consumer Segment, EMEA
3Q 2022 SALES RESULTS: CONSUMER SEGMENT EMEA 3Q compared to 2021 -0.6% constant currency − Pricing actions to offset cost increases − Lower volume and mix impacted by: 6.8% • 3% impact from lower sales in Russia 0.0% • Decline in Vahine homemade desserts 3-Year CAGR since 2019 -7.4% -12.1% -12.7
Slide 15: 3Q 2022 Sales Results: Consumer Segment, Asia/Pacific
3Q 2022 SALES RESULTS: CONSUMER SEGMENT ASIA / PACIFIC 3Q compared to 2021 10.1% constant currency − Volume and mix growth due to: • China trade and pantry replenishments following 2Q lockdowns 6.9% 3.2% 5.4% • Supply chain challenges from year-ago period lapped 0.0% • Partial offset of 7% due to
Slide 16: 3Q 2022 Sales Results
3Q 2022 SALES RESULTS TOTAL COMPANY 6.1% constant currency 9.7% 3.0% -0.5% -3.1% -3.1% Acquisitions/ Volume/Mix Price Divestitures Currency Net Sales Divestitures CONSUMER FLAVOR SOLUTIONS 3.4% constant currency 10.1% constant currency 10.0% 9.3% 6.4% 0.7% 0.8% 0.0% -0.9% -2.7% -3.7% -5.7% Acquisiti
Slide 17: 3Q 2022 Sales Results: Flavor Solutions, Americas
3Q 2022 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT AMERICAS 3Q compared to 2021 9.6% constant currency − Higher sales to packaged food and beverage companies • Strength in snack seasonings 10.3% 9.2% • Pricing actions to offset cost inflation 0.0% − Higher branded foodservice demand and pricing actio
Slide 18: 3Q 2022 Sales Results: Flavor Solutions, EMEA
3Q 2022 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT EMEA 3Q compared to 2021 11.2% constant currency − Broad-based growth, including pricing actions, driven by: • Quick service restaurant customers 7.5% 3.7% • Branded foodservice customers 0.0% • Packaged food and beverage customers -1.3% • Partially
Slide 19: 3Q 2022 Sales Results: Flavor Solutions, Asia/Pacific
3Q 2022 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT ASIA / PACIFIC 3Q compared to 2021 11.1% constant currency − Pricing actions to offset cost inflation − Quick service restaurants drove volume and mix growth 6.1% • Partially impacted by the timing of their promotional activities 5.0% 4.8% 0.0% 3-Y
Slide 20: Gross Margin
GROSS MARGIN 3Q YTD 2022 (in millions) 3Q 2022 3Q 2021 Fav/(Unfav) Fav/(Unfav) Change Change Gross Margin 35.5% 38.7% (320) bps (370) bps Adjusted Gross Margin 35.5% 38.7% (320) bps (380) bps Approximately 250 basis point dilutive impact of pricing to offset dollar cost inflation Normalization o
Slide 21: Operating Income
OPERATING INCOME 3Q YTD 2022 (in millions) 3Q 2022 3Q 2021 Fav/(Unfav) Fav/(Unfav) Change Change Selling, general & administrative expenses as percent of net sales 20.5% 21.1% 60 bps 20 bps Operating income $235.2 $265.2 (11%) (19%) Adjusted operating income $238.6 $272.3 (12%) (19%) Consumer 183.7
Slide 22: Income Taxes
INCOME TAXES (in millions) 3Q 2022 3Q 2021 YTD 2022 YTD 2021 Income tax rate 21.6% 13.4% 19.7% 20.9% Adjusted income tax rate 21.2% 14.1% 20.0% 19.6% Higher level of discrete tax items in 2021 22 The non-GAAP measures included herein, which we refer to as “adjusted”, exclude the impact of items af
Slide 23: Earnings Per Share
EARNINGS PER SHARE Fav/(Unfav) 3Q 2022 3Q 2021 Change Earnings per share $0.82 $0.79 4% Adjusted earnings per share $0.69 $0.80 (14%) Change in adjusted earnings per share Decrease in adjusted operating income ($0.10) Decrease in interest expense and 0.06 other income, net Increase in adjusted incom
Slide 24: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW Cash flow provided from operations of $250 million through 3Q 2022 BALANCED USE OF CASH − Lower than the year-ago period − Impacted by lower net income and higher inventory levels $298 million of cash returned to shareholders through dividends Drive growth Return
Slide 25: 2022 Outlook Growth Rates
2022 OUTLOOK GROWTH RATES Reported Currency Constant Currency Sales growth Comparable to 2% 3% to 5% Adjusted operating income increase -13% to -11% -11% to -9% CCI-led cost savings Approximately $85M Cost inflation High-teens increase Adjusted gross profit margin 350 bps to 300 bps decrease Brand m
Slide 26: Key Takeaways
KEY TAKEAWAYS Our sales growth momentum is strong We have passed an inflection point Beginning to recover cost inflation that had outpaced our pricing actions Executing on a plan to aggressively eliminate supply chain costs Expecting 4Q operating margin expansion and continued improvement into
Slide 27: Third Quarter 2022 Financial Results and Outlook
3 QUARTER rd 2022 Financial Results and Outlook McCORMICK & COMPANY, INC. OCTOBER 6, 2022 The following slides accompany a October 6, 2022, earnings release conference call. This information should be read in conjunction with the press release issued on that date.
Slide 28: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES The tables below include financial measures of adjusted gross profit, adjusted gross profit margin, adjusted operating income, adjusted operating income margin, adjusted income tax expense, adjusted income tax rate, adjusted net income and adjusted diluted earnings per sh
Slide 29: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES (in millions except per share data) Three Months Ended 8/31/2022 8/31/2021 Gross profit $ 566.7 $ 599.6 1) Transaction and integration expenses include transaction and integration expenses associated with our acquisitions of Cholula and FONA. These expenses include the im
Slide 30: 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 31: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES To present “constant currency” information for the fiscal year 2022 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 2022
Slide 32: 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 2022 and actual results for 2021: Twelve Months Ended 2022 Projection 11/30/21 Earnings per share - diluted $2.64 to $2.69 $ 2.80 Impact of transaction and integ