General Mills, Inc. · NYSE:GIS
General Mills — Q3 FY2017 Earnings Presentation
52 slides from General Mills's earnings presentation, Mar 21, 2017
Slide 1: General Mills Fiscal 2017 Third Quarter Results
General Mills Fiscal 2017 Third Quarter Results March 21, 2017
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: Third Quarter Fiscal 2017 Summary - Ken Powell
Third Quarter Fiscal 2017 Summary Ken Powell Chairman and Chief Executive Officer
Slide 4: Third Quarter Fiscal 2017 Summary
Third Quarter Fiscal 2017 Summary • Q3 Results In Line With Updated Expectations • Added Support to Strengthen Q4 Topline • Reaffirming Full-year F17 Guidance 4
Slide 5: Financial Review - Don Mulligan
Third Quarter Fiscal 2017 Financial Review Don Mulligan EVP, Chief Financial Officer
Slide 6: Third Quarter Fiscal 2017 Financial Summary
Third Quarter Fiscal 2017 Financial Summary ($ in Millions, Except per Share) Constant- Organic currency $ % Change % Change* % Change* Net Sales $3,793 -5% -5% Segment Operating Profit* 662 -2 -2% Net Earnings Attributable to 358 -1 General Mills Diluted EPS $0.61 +3 Certain Items Affecting Compara
Slide 7: Components of Net Sales Growth
Third Quarter Fiscal 2017 Components of Net Sales Growth Organic Net Sales* = -5% +2 pts Flat Flat -5% -7 pts Organic Organic Foreign Acquisitions / Total Volume Price & Mix Exchange Divestitures Net Sales As Reported *Non-GAAP measure. 7
Slide 8: New Reporting Segments
New Reporting Segments Convenience North America Stores & Europe & Asia & Retail Foodservice Australia Latin America Fiscal 2016 % of Net Sales 66% 12% 12% 10% % of Total SOP* 78% 13% 7% 2% Op. Profit Margin 22% 20% 10% 4% *Total Segment Operating Profit. Non-GAAP measure. See appendix for reconcili
Slide 9: Financial Summary by Segment
Third Quarter Fiscal 2017 Financial Summary by Segment ($ in Millions) Net Sales Segment Operating Profit Constant- Organic currency $ % Change* $ % Change* North America Retail $2,499 -8% $517 -7% Convenience Stores & 448 -1 94 +3 Foodservice Europe & Australia 424 +2 42 +39 Asia & Latin America 42
Slide 10: Joint Venture Results
Third Quarter Fiscal 2017 Joint Venture Results After-tax Earnings: $11MM; -35% vs. LY in Constant Currency* Cereal Partners Worldwide Häagen-Dazs Japan Net Sales: +4%** Net Sales: -5%** *Non-GAAP measure. See appendix for reconciliation. **Growth rates in constant currency. 10
Slide 11: Margin Results
Third Quarter Fiscal 2017 Margin Results Adjusted Gross Margin* Adjusted Operating Profit Margin* (% of Net Sales) (% of Net Sales) • Cost Savings Offsetting 35.0% 34.8% 16.9% Input Cost Inflation 15.9% • Expect 2% Inflation for Full Year F16 F17 F16 F17 *Non-GAAP measures. See appendix for reconcil
Slide 12: Other Income Statement Items
Third Quarter Fiscal 2017 Other Income Statement Items • Restructuring & Project-related Charges of $106MM Pretax (Includes $28MM in Cost of Sales) • Unallocated Corporate Expense Decreased Excluding Certain Items • Net Interest Expense 1% Below Last Year • Adjusted Effective Tax Rate 24.7% vs 30.8%
Slide 13: Nine-month Fiscal 2017 Financial Summary
Nine-month Fiscal 2017 Financial Summary ($ in Millions, Except per Share) Constant- Organic currency $ % Change % Change* % Change* Net Sales $11,813 -7% -5% Segment Operating Profit* 2,280 -3 -2% Net Earnings Attributable to General Mills 1,249 -5 Diluted EPS $2.08 -3 Certain Items Affecting Compa
Slide 14: Core Working Capital
Core Working Capital ($ in Millions) Q3 F17 F16 % Change Accounts Receivable $1,428 $1,391 Inventories 1,461 1,350 Accounts Payable 1,855 1,726 Total Core Working Capital $1,033 $1,015 +2% Table does not foot due to rounding. 14
Slide 15: Nine-month Fiscal 2017 Cash Flow Highlights
Nine-month Fiscal 2017 Cash Flow Highlights Nine-month Operating Cash Flow ($ in Millions) • Fixed Asset Investment = $1,862 $475MM $1,559 • Dividends Paid = $856MM • Net Share Repurchases = $1,560MM F16 F17 15
Slide 16: Fourth Quarter Fiscal 2017 Expectations
Fourth Quarter Fiscal 2017 Expectations • Modest Improvement in Organic Net Sales* Trends • Significant Expansion in Adjusted Operating Profit Margin* − Favorable Mix − Comparison to Margin Contraction in Last Year’s Q4 − Strong Level of Cost Savings (HMM and Restructuring Projects) *Non-GAAP measur
Slide 17: Reaffirming Fiscal 2017 Guidance
Reaffirming Fiscal 2017 Guidance (Fiscal 2017 vs. Fiscal 2016) Organic Net Sales* -4% Total Segment Operating Profit* -1 to +1%¹ Adjusted Operating Profit Margin* ≥18% Adjusted Diluted EPS* +5 to 7%¹ *Non-GAAP measures. ¹Constant-currency growth rate. 17
Slide 18: Jeff Harmening
Jeff Harmening EVP, Chief Operating Officer – U.S. Retail President and Chief Operating Officer
Slide 19: North America Retail Segment
Third Quarter Fiscal 2017 North America Retail Segment Q3 Net Sales Growth Q3 Segment Growth by Operating Unit Constant Reported Currency* Organic Net Sales* -8% Canada +4% -1% U.S. Cereal -1 U.S. Snacks -4 Constant-currency -7% U.S. Meals & Baking -10 Segment Operating Profit* U.S Yogurt -20 *Non-G
Slide 20: U.S. Cereal Key Initiatives
Fourth Quarter Fiscal 2017 U.S. Cereal Key Initiatives Build on Taste News Momentum Wellness News 20
Slide 21: U.S. Snack Bar Key Initiatives
Fourth Quarter Fiscal 2017 U.S. Snack Bar Key Initiatives Increasing Lärabar and Nature Valley Innovation EPIC Penetration 21
Slide 22: U.S. Yogurt Key Initiatives
U.S. Yogurt Key Initiatives Core Renovation Innovation Snacking Natural & Organic New Segments New Product Launch Coming in F18 22
Slide 23: U.S. Meals & Baking Key Initiatives
Fourth Quarter Fiscal 2017 U.S. Meals & Baking Key Initiatives Old El Paso Frozen Hot Snacks Baking 23
Slide 24: Continue Momentum on Annie's in Fourth Quarter
Continue Momentum on Annie’s in Fourth Quarter Fiscal 2017 Annie’s F17 YTD Retail Sales Growth: +39% Annie’s Increase Penetration in Established Business New Categories F17 YTD Retail Sales: Yogurt, Cereal, Soup, +18% vs. LY Baked Goods, Grain Snacks, R-T-E Popcorn Source: Nielsen XAOC FYTD through
Slide 25: Canada Key Initiatives
Fourth Quarter Fiscal 2017 Canada Key Initiatives Mexican Meals Grain Snacks Natural & Organic Yogurt Cereal Canada’s 150th Anniversary 25
Slide 26: North America Retail Performance Drivers
Fourth Quarter Fiscal 2017 North America Retail Performance Drivers • Product Innovation and Renovation on Growth Businesses • Added Consumer and Trade Support on Cereal, Snacks, Old El Paso, and Totino’s Hot Snacks • Segment Operating Profit Growth Due to Restructuring Savings and Year-ago Comparis
Slide 27: Convenience Stores & Foodservice Segment
Third Quarter Fiscal 2017 Convenience Stores & Foodservice Segment Q3 Net Sales Growth Q3 Segment Growth by Platform % Organic Net Sales* -1% Focus 6 Platforms +2% Other -5 Segment Operating Profit +3% *Non-GAAP measure. See appendix for reconciliation 27
Slide 28: Convenience & Foodservice Performance Drivers
Convenience & Foodservice Segment Fourth Quarter Fiscal 2017 Performance Drivers F17 Organic Net Sales Growth* • Growth on Focus 6 Platforms Q1 Q2 Q3 • Increased Bread Distribution -1% • Reduced Bakery Flour Index -4% Pricing Headwind -7% *Non-GAAP measure. See appendix for reconciliation 28
Slide 29: Europe & Australia Segment
Third Quarter Fiscal 2017 Europe & Australia Segment Q3 Segment Growth F17 Organic Net Sales Growth* Q1 Q2 Q3 +2% Organic Net Sales* +2% Constant-currency +39% -3% Segment Operating Profit* -6% *Non-GAAP measure. See appendix for reconciliation 29
Slide 30: Häagen-Dazs Momentum Strengthening
Europe & Australia Häagen-Dazs Momentum Strengthening Fiscal 2017 Year-to-date Drivers Fiscal 2017 Q4 News 30
Slide 31: Asia & Latin America
Third Quarter Fiscal 2017 Asia & Latin America Q3 Segment Growth Organic Net Sales* -2% Constant-currency +316% Segment Operating Profit* *Non-GAAP measure. See appendix for reconciliation 31
Slide 32: Asia & Latin America Performance Drivers
Asia & Latin America Fourth Quarter Fiscal 2017 Performance Drivers China Latin America Häagen-Dazs Wanchai Ferry Yoplait 32
Slide 33: Fourth Quarter Fiscal 2017 Outlook
Fourth Quarter Fiscal 2017 Outlook • Modest Improvement in Topline Trends • Increased Consumer and Trade Support on Key Brands in NAR • Continued Growth in Europe, China, and Focus 6 Platforms in Convenience Stores & Foodservice • Significant Expansion in Adjusted Operating Profit Margin* *Non-GAAP
Slide 34: Today's General Mills Summary
Today’s General Mills Summary • Q3 Results In Line With Updated Expectations • Added Support to Strengthen Q4 Topline • Reaffirming Full-year F17 Guidance • Focused on Four Levers to Generate Shareholder Returns: Sales Margin Cash Cash Growth Expansion Conversion Returns 34
Slide 35: A Reminder on Non-GAAP Guidance
A Reminder on Non-GAAP Guidance Our fiscal 2017 outlook for organic net sales growth, constant-currency total segment operating profit and adjusted diluted EPS, and adjusted operating profit margin are non-GAAP financial measures that exclude, or have otherwise been adjusted for, items impacting com
Slide 36: Reconciliation of Organic Net Sales Growth
Reconciliation of Third Quarter Fiscal 2017 Organic Net Sales Growth (Fiscal Year) Q3 2017 Reported Organic Organic Organic Foreign Acquisitions & Net Sales Volume Price/Mix Net Sales Exchange Divestitures Growth North America Retail (10) pts 2 pts (8) % - 1 pt (7) % Convenience Stores & 1 pt (2) pt
Slide 37: Reconciliation of Total Segment Operating Profit
Reconciliation of Third Quarter Fiscal 2017 Total Segment Operating Profit (Fiscal Years, $ in Millions) Q3 2017 2016 % Change North America Retail $516.7 $552.7 (7)% Convenience Stores & Foodservice 93.6 90.6 3 Europe & Australia 42.0 33.6 25 Asia & Latin America 10.0 2.5 302 Total Segment Operatin
Slide 38: Reconciliation of Constant-currency Total Segment Operating Profit Growth
Reconciliation of Fiscal 2017 Constant-currency Total Segment Operating Profit Growth (Fiscal Year) 2017 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 Q3 (2) % - (2)
Slide 39: Reconciliation of Adjusted Diluted EPS
Reconciliation of Third Quarter Fiscal 2017 Adjusted Diluted EPS and Related Constant-currency Growth Rate (Fiscal Years) Q3 Per Share Data 2017 2016 Change Diluted earnings per share, as reported $ 0.61 $ 0.59 3% Mark-to-market effects* (0.01) - Restructuring charges* 0.11 0.05 Project-related cost
Slide 40: Reconciliation of Fiscal 2016 Total Segment Operating Profit
Reconciliation of Fiscal 2016 Total Segment Operating Profit (Fiscal Year, $ in Millions) Percentage of Total Segment 2016 Operating Profit North America Retail $2,351 78% Convenience Stores & Foodservice 379 13% Europe & Australia 200 7% Asia & Latin America 69 2% Total Segment Operating Profit $3,
Slide 41: Reconciliation of Constant-currency Operating Profit Growth by Segment
Reconciliation of Third Quarter Fiscal 2017 Constant-currency Operating Profit Growth by Segment (Fiscal Year) Q3 2017 Percentage Change Impact of Percentage Change in in Segment Foreign Segment Operating Profit Operating Profit as Currency on a Constant-currency Reported Exchange Basis North Americ
Slide 42: Reconciliation of Constant-currency After-tax JV Earnings
Reconciliation of Fiscal 2017 Constant-currency After-tax JV Earnings (Fiscal Year) 2017 Percentage Change Impact of Percentage Change in in After-tax Earnings Foreign After-tax Earnings from from Joint Ventures Currency Joint Ventures on a as Reported Exchange Constant-currency Basis Q3 (32) % 3 pt
Slide 43: Reconciliation of Adjusted Gross Margin
Reconciliation of Third Quarter Fiscal 2017 Adjusted Gross Margin (Fiscal Years) Q3 2017 2016 % of % of Net Sales Net Sales Gross margin as reported 34.5 % 33.9 % Mark-to-market effects (0.2) 0.2 Restructuring charges 0.4 0.4 Project-related costs 0.3 0.3 Adjusted gross margin 35.0 % 34.8 % 43
Slide 44: Reconciliation of Adjusted Operating Profit Margin
Reconciliation of Third Quarter Fiscal 2017 Adjusted Operating Profit Margin (Fiscal Years) Q3 2017 2016 % of % of Net Sales Net Sales Operating profit as reported 14.3 % 14.6 % Mark-to-market effects (0.2) 0.2 Restructuring charges 2.5 0.8 Project-related costs 0.3 0.3 Adjusted operating profit mar
Slide 45: Reconciliation of Tax Rate Excluding Items
Reconciliation of Third Quarter Fiscal 2017 Tax Rate Excluding Items (Fiscal Years, $ in Millions) Q3 2017 2016 Pretax Income Pretax Income Earnings* Taxes Earnings* Taxes As reported $466.1 $107.0 $509.1 $157.6 Mark-to-market effects (8.2) (3.1) 7.3 2.7 Restructuring charges 94.0 31.0 34.2 8.0 Proj
Slide 46: Reconciliation of Nine-month Organic Net Sales Growth
Reconciliation of Nine-month Fiscal 2017 Organic Net Sales Growth (Fiscal Year) Nine Months 2017 Reported Organic Organic Organic Foreign Acquisitions & Net Sales Volume Price/Mix Net Sales Exchange Divestitures Growth North America Retail (9) pts 3 pts (6) % - (2) pts (8) % Convenience Stores & - (
Slide 47: Reconciliation of Nine-month Total Segment Operating Profit
Reconciliation of Nine-month Fiscal 2017 Total Segment Operating Profit (Fiscal Years, $ in Millions) Nine Months 2017 2016 % Change North America Retail $1,795.9 $1,886.0 (5)% Convenience Stores & Foodservice 295.4 273.2 8 Europe & Australia 127.2 143.9 (12) Asia & Latin America 61.3 42.2 45 Total
Slide 48: Reconciliation of Nine-month Adjusted Diluted EPS
Reconciliation of Nine-month Fiscal 2017 Adjusted Diluted EPS and Related Constant-currency Growth Rate (Fiscal Years) Nine Months Per Share Data 2017 2016 Change Diluted earnings per share, as reported $ 2.08 $ 2.15 (3) % Mark-to-market effects* (0.02) (0.01) Divestitures loss (gain)* 0.01 (0.14) R
Slide 49: Reconciliation of Canada Constant-currency Net Sales Growth
Reconciliation of Third Quarter Fiscal 2017 Canada Operating Unit Constant-currency Net Sales Growth (Fiscal Year) 2017 Impact of Percentage Change in Percentage Change Foreign Canada Net Sales in Canada Net Sales Currency on a Constant-currency as Reported Exchange Basis Q3 4% 5 pts (1) % 49
Slide 50: Reconciliation of Nine-month Tax Rate Excluding Items
Reconciliation of Nine-month Fiscal 2017 Tax Rate Excluding Items (Fiscal Years, $ in Millions) Nine Months 2017 2016 Pretax Income Pretax Income Earnings* Taxes Earnings* Taxes As reported $1,731.4 $511.0 $1,949.0 $667.7 Mark-to-market effects (20.7) (7.7) (3.1) (1.1) Restructuring charges 208.3 66
Slide 51: Reconciliation of First Quarter 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 North America Retail (6) pts 2 pts (4) % (1) pt (3) pts (8) % Convenience Stores & (2)
Slide 52: Reconciliation of Second Quarter Organic Net Sales Growth
Reconciliation of Second Quarter Fiscal 2017 Organic Net Sales Growth (Fiscal Year) Q2 2017 Reported Organic Organic Organic Foreign Acquisitions & Net Sales Volume Price/Mix Net Sales Exchange Divestitures Growth North America Retail (10) pts 4 pts (6) % - (3) pts (9) % Convenience Stores & - (4) p