Slide 1: Fiscal 2018 Third Quarter Results
GENERAL MILLS Fiscal 2018 Third Quarter Results March 21, 2018
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: Jeff Harmening
Jeff Harmening Chairman and Chief Executive Officer
Slide 4: Third Quarter Fiscal 2018 Summary
Third Quarter Fiscal 2018 Summary • Competing More Effectively; Organic Net Sales* +1% vs. LY • Disappointing Q3 Profit Results; Lower Annual Profit Outlook Driven by Higher Supply Chain Costs • Moving Urgently to Address Rising Costs and Support Profitability • Remain Confident in Value Creation Op
Slide 5: Change to Fiscal 2018 Profit Outlook
Change to Fiscal 2018 Profit Outlook • Full-year Total Segment Operating Profit* Growth Outlook Now -5 to -6% vs LY in Constant Currency • Key Driver is Increased Supply Chain Costs • Input Costs Rising Faster than Anticipated • Increased Operational Costs: External Manufacturing, Intra- Network Shi
Slide 6: Moving Urgently to Address Rising Costs and Support Profitability
Moving Urgently to Address Rising Costs and Support Profitability • Initiatives Impacting Fiscal 2018: • Transportation Carrier Changes • Increasingly Tight Control of Expenditures in Balance of Year • Targeted Strategic Revenue Management Actions • Initiatives Impacting Fiscal 2019: • Distribution
Slide 7: Don Mulligan
Don Mulligan EVP, Chief Financial Officer
Slide 8: Third Quarter Fiscal 2018 Financial Summary
Third Quarter Fiscal 2018 Financial Summary ($ IN MILLIONS, EXCEPT PER SHARE) CONSTANT- ORGANIC CURRENCY $ % CHANGE % CHANGE* % CHANGE* Net Sales $3,882 +2% +1% Total Segment Operating Profit* 628 -5 -6% Net Earnings Attributable to General Mills 941 +163 Diluted EPS $1.62 +166 Certain Items Affecti
Slide 9: Components of Net Sales Growth
Third Quarter Fiscal 2018 Components of Net Sales Growth Organic Net Sales* = +1% +2 pts +2% +1 pt Flat -1 pt Organic Organic Foreign Acquisitions / Total Volume Price & Mix Exchange Divestitures Net Sales As Reported *Non-GAAP measure. 9
Slide 10: Margin Results
Third Quarter Fiscal 2018 Margin Results ADJUSTED GROSS ADJUSTED OPERATING MARGIN* PROFIT MARGIN* • Higher Supply Chain Costs (% of Net Sales) (% of Net Sales) • Annual Input Cost 35.0% 16.9% Inflation Now 4% 32.5% 15.7% • Stronger Merchandising Performance • Lower SG&A Spend F17 F18 F17 F18 *Non-GA
Slide 11: Joint Venture Results
Third Quarter Fiscal 2018 Joint Venture Results AFTER-TAX EARNINGS: $17MM; +30% VS. LY IN CONSTANT CURRENCY* Cereal Partners Worldwide Häagen-Dazs Japan Net Sales +2%** Net Sales -3%** *Non-GAAP measure. See appendix for reconciliation. **Growth rates in constant currency. 11
Slide 12: Other Income Statement Items
Third Quarter Fiscal 2018 Other Income Statement Items • Restructuring & Project-related Charges of $11MM Pretax (Includes $3MM in Cost of Sales) • Unallocated Corporate Expense Decreased Excluding Certain Items • Net Interest Expense Up $13MM vs. LY Due to M&A Timing • Adjusted Effective Tax Rate 1
Slide 13: Nine-month Fiscal 2018 Financial Summary
Nine-month Fiscal 2018 Financial Summary ($ IN MILLIONS, EXCEPT PER SHARE) CONSTANT- ORGANIC CURRENCY $ % CHANGE % CHANGE* % CHANGE* Net Sales $11,850 Flat -1% Total Segment Operating Profit* 2,065 -9% -10% Net Earnings Attributable to General Mills 1,777 +42 Diluted EPS $3.05 +47 Certain Items Affe
Slide 14: Core Working Capital
Core Working Capital ($ IN MILLIONS) Q3 F18 F17 % Change Accounts Receivable $1,496 $1,428 Inventories 1,452 1,461 Accounts Payable 2,506 1,855 Total Core Working Capital $443 $1,033 -57% Table does not foot due to rounding. 14
Slide 15: Nine-month Fiscal 2018 Cash Flow Highlights
Nine-month Fiscal 2018 Cash Flow Highlights NINE-MONTH OPERATING CASH FLOW ($ IN MILLIONS) • Fixed Asset Investment = $398MM • Dividends Paid = $846MM $2,135 $1,659 • Net Share Repurchases = $510MM F17 F18 15
Slide 16: Fourth Quarter Fiscal 2018 Expectations
Fourth Quarter Fiscal 2018 Expectations* • Organic Net Sales¹ Growth +Favorable Price/Mix Across All Segments –Asia & Latin America Comparing Against Extra Period in Brazil LY • Increased Cost Savings, Including Global Sourcing Benefits • Constant-currency Growth in Total Segment Operating Profit¹ a
Slide 17: Updating Fiscal 2018 Guidance
Updating Fiscal 2018 Guidance* PREVIOUS REVISED GUIDANCE MEASURE F18 GUIDANCE F18 GUIDANCE Organic Net Sales¹ Growth Flat Flat Total Segment Operating Profit¹ Growth -1% to Flat2 -5 to -6%2 Adjusted Effective Tax Rate¹ ~27% ~26% Adjusted Diluted EPS¹ Growth +3 to 4%2 Flat to +1%2 Free Cash Flow¹ Gro
Slide 18: Jeff Harmening
Jeff Harmening Chairman and Chief Executive Officer
Slide 19: North America Retail
Third Quarter Fiscal 2018 North America Retail SEGMENT GROWTH Q3 Q3 NET SALES GROWTH BY OPERATING UNIT Organic Net Sales* +1% Canada +6% (+1% CC¹*) Constant-currency U.S. Snacks +3 Flat Segment Operating Profit* U.S. Meals & Baking +2 U.S. Cereal -1 U.S. Yogurt -8 Total North America Retail +1% (1)
Slide 20: Competing Effectively in the U.S.
Competing Effectively in the U.S. GENERAL MILLS U.S. RETAIL SALES Q3 Highlights (% vs. LY) • Growing In Line with 1% Aggregate Categories -1% • Growing Market Share in -4% 7 of Top 9 Categories -7% F17 Q1 Q2 Q3 F18 Source: Nielsen XAOC 20
Slide 21: Broad-based Improvement Driven by Solid Fundamentals
Broad-based Improvement Driven by Solid Fundamentals FISCAL 2018 Q3 • Baselines Driving 75% GENERAL MILLS U.S. RETAIL SALES (% vs. LY) of F18 YTD Retail Sales Improvement 8% 9% 6% • New Products Turning 3% 2% +48% vs. LY 1% 0% 0% • High-quality Merchandising Driving Incremental Volume -6% Cereal Yog
Slide 22: Maintaining Price Discipline
Maintaining Price Discipline GENERAL MILLS U.S. RETAIL PRICES (F18 unit prices vs. LY, excludes Yogurt) 3.2% 2.3% 1.5% 1.4% 0.8% 0.8% Q1 Q2 Q3 Q1 Q2 Q3 Baseline Quality Merchandising Source: Nielsen XAOC 22
Slide 23: U.S. Cereal Highlights
U.S. Cereal Highlights CONTINUED TOPLINE IMPROVEMENT CONSUMER NEWS IN Q4 IN FISCAL 2018 General Mills U.S. Cereal Retail Sales (% vs. LY) 2% 1% -1% Q1 Q2 Q3 Source: Nielsen XAOC 23
Slide 24: U.S. Yogurt Highlights
U.S. Yogurt Highlights YOGURT PORTFOLIO TRANSFORMATION F19 INNOVATION TO EXPAND DRIVING IMPROVEMENT “SIMPLY BETTER” OFFERINGS General Mills U.S. Yogurt Retail Sales “Simply Better” Yogurt Consumer Jobs (% vs. LY) -3% Remarkable Taste Wellness +16 pts COMING -19% F19 F17 Q1 Q2 Dec Jan Feb F18 Source:
Slide 25: U.S. Snack Bars Highlights
U.S. Snack Bars Highlights INNOVATION & NEWS FUELING FIBER ONE INNOVATION NATURE VALLEY AND LÄRABAR (F18 YTD Retail Sales vs. LY) Nature Valley +10% Lärabar +30% Source: Nielsen XAOC, F18 YTD through Feb. 25
Slide 26: Other North America Retail Highlights
Other North America Retail Highlights SOUP AND BAKING EXTENDING TOTINO’S AND SEASON UPDATE OLD EL PASO PERFORMANCE NATURAL & ORGANIC (F18 Oct-Feb Performance vs. LY) F18 Q3 Retail Sales: +9% Retail Sales: +1.4% F18 Q3 Net Sales: +HSD F18 Q3 Retail Retail Share: +0.6 pts Sales: +3% Source: Nielsen XA
Slide 27: Convenience Stores & Foodservice
Third Quarter Fiscal 2018 Convenience Stores & Foodservice SEGMENT GROWTH Q3 Q3 NET SALES GROWTH BY PLATFORM Organic Net Sales* +3% Focus 6 Platforms +1% Segment Operating Profit -10% Other +5 Total CS&F +3% FROZEN MEALS AND CEREAL LEADING FOCUS 6 GROWTH *Non-GAAP measure. See appendix for reconcili
Slide 28: Europe & Australia
Third Quarter Fiscal 2018 Europe & Australia SEGMENT GROWTH Q3 Organic Net Sales* -1% Constant-currency -46% Segment Operating Profit* *Non-GAAP measure. See appendix for reconciliation 28
Slide 29: Europe & Australia Highlights
Europe & Australia Highlights F18 YTD HIGHLIGHTS Q4 INNOVATION AND BRAND INVESTMENT Ice Cream Snack Bars Organic Petits Filous Gluten Free Old El Paso +DD Retail Sales Growth and Market Share Growth Retail Sales Growth on Key Yogurt Platforms New Flavors of TV Advertising on Häagen-Dazs Snack Bars S
Slide 30: Asia & Latin America
Third Quarter Fiscal 2018 Asia & Latin America SEGMENT GROWTH Q3 Organic Net Sales* Flat Constant-currency -134% Segment Operating Profit* *Non-GAAP measure. See appendix for reconciliation 30
Slide 31: Asia & Latin America Highlights
Asia & Latin America Highlights SNACK BARS IN INDIA HÄAGEN-DAZS IN ASIA Net Sales More Than Latest 3 Months Retail Sales: +9% Doubled in F18 Q3 Source: Nielsen/IRI, Latest Three Months through Jan. 2018 31
Slide 32: 3 Keys to Restoring Consistent Topline Growth
3 Keys to Restoring Consistent Topline Growth 1. Compete Effectively Across All Brands and All Geographies 2. Accelerate Our Differential Growth Platforms 3. Reshape Our Portfolio for Growth
Slide 33: General Mills Acquisition of Blue Buffalo Transaction Summary
General Mills Acquisition of Blue Buffalo Transaction Summary • All-cash Acquisition at $40/share ($8B Enterprise Value) • Blue Buffalo is the Leader in U.S. Wholesome Natural Pet Food • Scale & Profitability: $1.3B in Net Sales | 25% Adjusted EBITDA Margin* • Track Record of Growth (3-yr CGRs): Net
Slide 34: Blue Buffalo is a Unique Asset in an Attractive Category
Blue Buffalo is a Unique Asset in an Attractive Category U.S. PET FOOD IS AN WHOLESOME NATURAL IN EARLY BLUE IS LEADING THE ATTRACTIVE SPACE INNINGS OF TRANSFORMING THE WHOLESOME NATURAL PET FOOD CATEGORY TRANSFORMATION (Retail Sales; $ in Billions) (Volume Share of Category) CGR = +3.5% Wholesome N
Slide 35: General Mills Will Add Significant Value to Blue Buffalo
General Mills Will Add Significant Value to Blue Buffalo Blue Buffalo Value Driver General Mills Capabilities • Leading Salesforce with Strategic FDM Customer Relationships Expand Distribution in FDM (21% today) • #1 Rated “Best Insights & Category Leadership” in Food • Advantaged Technical Know-how
Slide 36: Summary
Third Quarter Fiscal 2018 Summary • Competing More Effectively; Organic Net Sales* +1% vs. LY • Disappointing Q3 Profit Results; Lower Annual Profit Outlook Driven by Higher Supply Chain Costs • Moving Urgently to Address Rising Costs and Support Profitability • Remain Confident in Value Creation Op
Slide 37: A Reminder on Non-GAAP Guidance
A Reminder on Non-GAAP Guidance Our fiscal 2018 outlook for organic net sales growth, constant currency total segment operating profit, adjusted effective tax rate, constant currency adjusted diluted EPS, and free cash flow are non-GAAP financial measures that exclude, or have otherwise been adjuste
Slide 38: Reconciliation of Organic Net Sales Growth
Reconciliation of Third Quarter Fiscal 2018 Organic Net Sales Growth (FISCAL YEAR) Q3 2018 Reported Organic Organic Organic Foreign Acquisitions Net Sales Volume Price/Mix Net Sales Exchange & Divestitures Growth North America Retail 1 pt Flat 1% 1 pt (1) pt 1% Convenience Stores 1 pt 2 pts 3% - - 3
Slide 39: Reconciliation of Total Segment Operating Profit
Reconciliation of Third Quarter Fiscal 2018 Total Segment Operating Profit (FISCAL YEARS, $ IN MILLIONS) Q3 2018 2017 % Change North America Retail $518.3 $516.7 -% Convenience Stores & Foodservice 84.3 93.6 (10) Europe & Australia 27.3 42.0 (35) Asia & Latin America (2.1) 10.0 (121) Total Segment O
Slide 40: Reconciliation of Constant-currency Total Segment Operating Profit Growth
Reconciliation of Fiscal 2018 Constant-currency Total Segment Operating Profit Growth (FISCAL YEAR) 2018 Percentage Change in Percentage Change in Total Segment Impact of Total Segment Operating Profit as Foreign Currency Operating Profit on a Reported Exchange Constant-currency Basis Q3 (5) % 1 pt
Slide 41: Reconciliation of Adjusted Diluted EPS and Constant-currency Growth Rate
Reconciliation of Third Quarter Fiscal 2018 Adjusted Diluted EPS and Related Constant-currency Growth Rate (FISCAL YEARS) Q3 Per Share Data 2018 2017 Change Diluted earnings per share, as reported $ 1.62 $ 0.61 166 % Provisional net tax benefit (0.86) - Mark-to-market effects* - (0.01) Acquisition t
Slide 42: Reconciliation of Adjusted Gross Margin
Reconciliation of Third Quarter Fiscal 2018 Adjusted Gross Margin (FISCAL YEARS) Q3 2018 2017 % of % of Net Sales Net Sales Gross margin as reported 32.3 % 34.5 % Mark-to-market effects 0.1 (0.2) Restructuring charges - 0.4 Project-related costs 0.1 0.3 Adjusted gross margin 32.5 % 35.0 % 42
Slide 43: Reconciliation of Adjusted Operating Profit Margin
Reconciliation of Third Quarter Fiscal 2018 Adjusted Operating Profit Margin (FISCAL YEARS) Q3 2018 2017 % of % of Net Sales Net Sales Operating profit margin as reported 15.3 % 14.3 % Mark-to-market effects 0.1 (0.2) Restructuring charges 0.1 2.5 Project-related costs 0.1 0.3 Acquisition transactio
Slide 44: Reconciliation of Constant-currency After-tax JV Earnings
Reconciliation of Third Quarter Fiscal 2018 Constant-currency After-tax JV Earnings (FISCAL YEAR) 2018 Percentage Change in Percentage Change in After- After-tax Earnings from tax Earnings from Joint Joint Ventures Impact of Foreign Ventures on a Constant- as Reported Currency Exchange currency Basi
Slide 45: Reconciliation of Tax Rate Excluding Items
Reconciliation of Third Quarter Fiscal 2018 Tax Rate Excluding Items (FISCAL YEARS, IN MILLIONS, EXCEPT PER SHARE DATA) Q3 2018 2017 Pretax Income Pretax Income Earnings* Taxes Earnings* Taxes As reported $503.4 $(432.5) $466.1 $107.0 Provisional tax benefit - 503.8 - - Mark-to-market effects 2.8 1.
Slide 46: Reconciliation of Nine-month Organic Net Sales Growth
Reconciliation of Nine-month Fiscal 2018 Organic Net Sales Growth (FISCAL YEAR) 2018 Nine Months Reported Organic Organic Organic Foreign Acquisitions Net Sales Volume Price/Mix Net Sales Exchange & Divestitures Growth North America Retail Flat (1) pt (1) % - Flat (1) % Convenience Stores 1 pt 2 pts
Slide 47: Reconciliation of Nine-month Total Segment Operating Profit
Reconciliation of Nine-month Fiscal 2018 Total Segment Operating Profit (FISCAL YEARS, $ IN MILLIONS) Nine Months 2018 2017 % Change North America Retail $1,674.4 $1,795.9 (7) % Convenience Stores & Foodservice 275.6 295.4 (7) Europe & Australia 84.8 127.2 (33) Asia & Latin America 30.1 61.3 (51) To
Slide 48: Reconciliation of Nine-month Adjusted Diluted EPS
Reconciliation of Nine-month Fiscal 2018 Adjusted Diluted EPS and Related Constant-currency Growth Rate (FISCAL YEARS) Nine Months Per Share Data 2018 2017 Change Diluted earnings per share, as reported $ 3.05 $ 2.08 47 % Provisional net tax benefit (0.86) - Tax adjustment 0.07 - Mark-to-market effe
Slide 49: Reconciliation of Canada Constant-currency Net Sales Growth
Reconciliation of Fiscal 2018 Canada Operating Unit Constant-currency Net Sales Growth (FISCAL YEAR) 2018 Percentage Change in Percentage Change in Canada Canada Net Sales Impact of Foreign Net Sales on a Constant- as Reported Currency Exchange currency Basis Q3 6% 5 pts 1% Nine months 4% 4 pts Flat
Slide 50: Reconciliation of Constant-currency Operating Profit Growth by Segment
Reconciliation of Third Quarter Fiscal 2018 Constant-currency Operating Profit Growth by Segment (FISCAL YEAR) Q3 2018 Percentage Change in Impact of Percentage Change in Segment Operating Foreign Currency Segment Operating Profit on Profit as Reported Exchange a Constant-currency Basis North Americ
Slide 51: Reconciliation of Q3 FY2017 Europe & Australia Operating Profit Growth
Reconciliation of Third Quarter Fiscal 2017 Europe & Australia Constant-currency Operating Profit Growth (FISCAL YEAR) Q3 2017 Percentage Change in Impact of Percentage Change in Segment Operating Foreign Currency Segment Operating Profit on Profit as Reported Exchange a Constant-currency Basis Euro