General Mills, Inc. · NYSE:GIS
General Mills — Q1 FY2020 Earnings Presentation
38 slides from General Mills's earnings presentation, Sep 18, 2019
Slide 1: General Mills Earnings Fiscal 2020 First Quarter
General Mills Earnings Fiscal 2020Fiscal First Quarter Investor 2020 Day September 18, 2019July 9, 2019 1
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, Chairman and Chief Executive Officer
Jeff Harmening Chairman and Chief Executive Officer General Mills Earnings Fiscal 2020 Investor First Quarter Day Fiscal 2020 September 18,July 9, 2019 2019 3
Slide 4: Today's Key Messages
Today’s Key Messages • Topline Improvement in North America Retail and Strong Growth in Pet • Actions to Improve Sales in Remaining Three Segments Starting in Q2 • Adjusted Operating Profit and Adjusted Diluted EPS Ahead of Expectations • Remain on Track to Deliver Fiscal 2020 Goals 4
Slide 5: Financial Results
First Quarter Fiscal 2020 Financial Results Dollars in millions except per share data Q1 TOTAL GENERAL MILLS $MM VS LY Net Sales $4,002 -2% Organic Sales* -1% Adjusted Operating Profit* $682 +7%1 Adjusted Diluted EPS* $0.79 +13%1 *Non-GAAP measure. See appendix for reconciliation. (1) Constant curre
Slide 6: Our Fiscal 2020 Priorities
Our Fiscal 2020 Priorities 1 Accelerate Organic Sales Improve NAR while continuing to drive Pet growth Maintain 2 Strong Margins Fuel growth investments through HMM and SRM 3 Reduce Leverage Continue cash discipline and pay down debt 6
Slide 7: Components of Net Sales Growth
First Quarter Fiscal 2020 Components of Net Sales Growth Organic Net Sales* = -1% +3 pts Flat -1 pt -2 pts -4 pts Organic Organic Foreign Acquisitions / Total Net Sales Volume Price / Mix Exchange Divestitures As Reported *Non-GAAP measure. 7
Slide 8: North America Retail
First Quarter Fiscal 2020 North America Retail SEGMENT RESULTS $MM VS. LY SEGMENT HIGHLIGHTS (Net Sales % vs. LY) Net Sales $2,376 Flat¹ • Continued Momentum in U.S. Cereal (+1%) Segment Operating Profit $560 +2%² • Improvement in U.S. Yogurt (Flat) and U.S. Snacks (-1%) • SRM Drove Positive Price/M
Slide 9: General Mills U.S. Retail Sales Trend
General Mills U.S. Retail Sales Trend RETAIL SALES % VS. LY % +/- LY 2-Year Average 0.0% -0.7% -0.3% -0.1% -4.9% -7.0% F17 F18 F19 F20 Q1 F20 Q1: Holding or Growing Share in 5 of Top 10 Categories Source: Nielsen xAOC 9
Slide 10: Maintain Momentum on U.S. Cereal
Maintain Momentum on U.S. Cereal GENERAL MILLS U.S. CEREAL MODERN BRAND BUILDING AND (Retail Sales, % vs. LY) STRONG INNOVATION 1% Flat Flat Cheerios Cinnamon Toast Crunch -3% F17 F18 F19 F20 Q1 Share pts vs. -0.3 +0.8 +0.3 +0.9 LY Strong Innovation Source: Nielsen xAOC 10
Slide 11: Improve U.S. Yogurt
Improve U.S. Yogurt GENERAL MILLS U.S. YOGURT RETAIL SALES GROWTH IN (Retail Sales % vs. LY) CORE AND “SIMPLY BETTER” -2% -2% -11% -19% F17 F18 F19 F20 Q1 Share pts vs. -3.8 -1.5 +0.1 -0.2 LY Source: Nielsen xAOC 11
Slide 12: Improve U.S. Snacks
Improve U.S. Snacks U.S. SNACKS OPERATING UNIT SHOWING EARLY SIGNS OF IMPROVEMENT (General Mills U.S. Snacks Retail Sales % vs. LY) • Positive Early Traction on Nature Valley Wafer Bar and Improved Retail Sales Trends on Fiber One Total Snacks Snack Bars • Focus on Back to School Merchandising, Incr
Slide 13: Competing Effectively in U.S. Meals & Baking
Competing Effectively in U.S. Meals & Baking OLD EL PASO SOUP REFRIGERATED DOUGH F20 Q1 Retail Sales +5% F20 Q1 Retail Sales +2% F20 Q1 Retail Sales +2% Source: Nielsen xAOC 13
Slide 14: Pet Segment
First Quarter Fiscal 2020 Pet Segment SEGMENT RESULTS $MM VS. LY SEGMENT HIGHLIGHTS Net Sales $368 +7%¹ • Q1 Net Sales Increase Led by Strong Growth in FDM and Significant Segment Operating Profit $81 +458% Positive Price/Mix • Mid-teens Net Sales Growth Excluding the Extra Week in F19 Q1 • All-chan
Slide 15: Pet All-channel Retail Sales +DD in F20 Q1
Pet All-channel Retail Sales +DD in F20 Q1 FDM PET SPECIALTY E-COMMERCE RETAIL SALES AT CUSTOMERS WITH BLUE MORE THAN 12 MONTHS +50% F19 Q1 F20 Q1 • Retail Sales +++ • Retail Sales -DD • Retail Sales +20% • Market Share Gains • Market Share Declines • Market Share Gains Source: Nielsen and IRI exclu
Slide 16: Convenience Stores & Foodservice
First Quarter Fiscal 2020 Convenience Stores & Foodservice SEGMENT RESULTS $MM VS. LY SEGMENT HIGHLIGHTS Net Sales $445 -4%¹ • Net Sales Down Due to Lower Bakery Flour Volume and Unfavorable Index Pricing Segment Operating Profit $91 -6% • Focus 6 Net Sales +2%, Led by Cereal, Frozen Baked Goods, an
Slide 17: Europe & Australia
First Quarter Fiscal 2020 Europe & Australia SEGMENT RESULTS $MM VS. LY SEGMENT HIGHLIGHTS Net Sales $454 -5%¹ • Q1 Net Sales Declines Reflect Challenging French Retail Environment Segment Operating Profit $28 -15%² and Changes in Merchandising Timing • Retail Sales +HSD on Snack Bars and +MSD on Me
Slide 18: Asia & Latin America
First Quarter Fiscal 2020 Asia & Latin America SEGMENT RESULTS $MM VS. LY SEGMENT HIGHLIGHTS Net Sales $360 -3%¹ • Q1 Net Sales Declines Driven by Retailer Inventory Reductions in Brazil, Distribution Network Changes Segment Operating Profit $10 -11%² in India, and Lower Volumes in China • Lapping +
Slide 19: Year-To-Go Expectations
Year-To-Go Expectations • Continue to Drive Results on NAR and Pet • Improve Topline Trends in Remaining Segments Beginning in Q2 • CS&F: Stronger Focus 6 Growth, Improved Flour Volume • EUAU: Increased Merchandising and Lapping Lost Distribution in 2H • ASLA: New SRM Actions and Increased Innovatio
Slide 20: Don Mulligan, Chief Financial Officer
Don Mulligan Chief Financial Officer General Mills Earnings Investor Day Fiscal First Quarter 2020 Fiscal 2020 September 18,July 9, 2019 2019 20
Slide 21: Joint Ventures
First Quarter Fiscal 2020 Joint Ventures Q1 AFTER-TAX EARNINGS: $22MM VS. $18MM LY JV GROWTH CPW HDJ Net Sales* +2% +6% Highlights: • Fourth consecutive quarter of net sales growth for CPW • CPW net sales increase driven by UK, Latin America, and Asia, Middle East, and Africa regions • HDJ net sales
Slide 22: Margin Results
First Quarter Fiscal 2020 Margin Results ADJUSTED GROSS MARGIN* ADJUSTED OP PROFIT MARGIN* (% OF NET SALES) (% OF NET SALES) 35.2% 33.6% 17.0% 15.7% F19-Q1 F20-Q1 F19-Q1 F20-Q1 Q1 margin expansion driven by favorable price/mix in all segments and last year’s purchase accounting inventory adjustment
Slide 23: Other Income Statement Items
First Quarter Fiscal 2020 Other Income Statement Items • Unallocated Corporate Expense Increased $22MM ex. Certain Items • Net Interest Expense Decreased $15MM • Adjusted Effective Tax Rate 20.9% vs. 22.7% LY* • Average Diluted Shares Outstanding Up 1% *Non-GAAP measure. See appendix for reconciliat
Slide 24: Balance Sheet and Cash Flow
First Quarter Fiscal 2020 Balance Sheet and Cash Flow OPERATING CASH FLOW ($ IN MILLIONS) • Core Working Capital -7% vs. LY $607 $572 • Capital Investments = $70MM • Dividends Paid = $298MM F19 F20 24
Slide 25: Reaffirming Fiscal 2020 Targets
Reaffirming Fiscal 2020 Targets KEY FINANCIAL METRICS* FISCAL 2020 OUTLOOK Organic Net Sales Growth +1 to +2% Adjusted Operating Profit Growth +2 to +4%¹ Adjusted Diluted EPS Growth +3 to +5%¹ Free Cash Flow Conversion >95% *Non-GAAP measures (1) Constant currency growth rate 25
Slide 26: Today's Key Messages
Today’s Key Messages • Topline Improvement in North America Retail and Strong Growth in Pet • Actions to Improve Sales in Remaining Three Segments Starting in Q2 • Adjusted Operating Profit and Adjusted Diluted EPS Ahead of Expectations • Remain on Track to Deliver Fiscal 2020 Goals 26
Slide 27: A Reminder on Non-GAAP Guidance
A Reminder on Non-GAAP Guidance Our fiscal 2020 outlook for organic net sales growth, adjusted operating profit, and adjusted diluted EPS are non-GAAP financial measures that exclude, or have otherwise been adjusted for, items impacting comparability, including the effect of foreign currency exchang
Slide 28: Appendix: North America Retail
Appendix: North America Retail F20 Q1 OPERATING UNIT RESULTS Operating Unit Net Sales % vs. LY U.S. Cereal +1% U.S. Yogurt Flat U.S. Meals & Baking -1% U.S. Snacks -1% Canada -2% Canada Constant-currency1 -1% (1) Constant currency growth rate. Non-GAAP measure. See appendix for reconciliation 28
Slide 29: Reconciliation of Canada Operating Unit Constant-currency Net Sales Growth
Reconciliation of First Quarter Fiscal 2020 Canada Operating Unit Constant-currency Net Sales Growth (FISCAL YEAR) Q1 2020 Percentage Change in Impact of Percentage Change in Canada Net Sales Foreign Currency Canada Net Sales on a as Reported Exchange Constant-currency Basis (2) % (1) pt (1) % *Tabl
Slide 30: Reconciliation of Organic Net Sales Growth
Reconciliation of First Quarter Fiscal 2020 Organic Net Sales Growth (FISCAL YEAR) Q1 2020 Organic Organic Organic Net Foreign Acquisitions & Reported Net Volume Price/Mix Sales Exchange Divestitures Sales Growth North America Retail (1) pt 1 pt Flat - - Flat Convenience Stores (6) pts 2 pts (4) % -
Slide 31: Reconciliation of Adjusted Operating Profit Constant-currency Growth Rate
Reconciliation of First Quarter Fiscal 2020 Adjusted Operating Profit Constant-currency Growth Rate (FISCAL YEARS, $ IN MILLIONS) Q1 2020 2019 Change Operating profit as reported $ 662.4 $ 601.5 10 % Mark-to-market effects 15.0 31.1 Restructuring charges 14.3 (1.2) Project-related costs - 1.2 Invest
Slide 32: Reconciliation of Adjusted Diluted EPS and Related Constant-currency Growth Rate
Reconciliation of First Quarter Fiscal 2020 Adjusted Diluted EPS and Related Constant-currency Growth Rate (FISCAL YEARS) Q1 Per Share Data 2020 2019 Change Diluted earnings per share, as reported $ 0.85 $ 0.65 31 % Tax item (0.09) - Mark-to-market effects* 0.02 0.04 Restructuring charges* 0.02 - In
Slide 33: Reconciliation of Constant-currency Segment Operating Profit Growth
Reconciliation of First Quarter Fiscal 2020 Constant-currency Segment Operating Profit Growth (FISCAL YEAR) Q1 2020 Percentage Change in Impact of Foreign Percentage Change in Segment Operating Currency Segment Operating Profit on Profit as Reported Exchange a Constant-currency Basis North America R
Slide 34: Reconciliation of Adjusted Gross Margin
Reconciliation of First Quarter Fiscal 2020 Adjusted Gross Margin (FISCAL YEARS) Q1 2020 2019 % of % of Net Sales Net Sales Gross margin as reported 34.7 % 32.8 % Mark-to-market effects 0.4 0.8 Restructuring charges 0.2 - Adjusted gross margin 35.2 % 33.6 % *Table may not foot due to rounding. 34
Slide 35: Reconciliation of Adjusted Operating Profit Margin
Reconciliation of First Quarter Fiscal 2020 Adjusted Operating Profit Margin (FISCAL YEARS) Q1 2020 2019 % of % of Net Sales Net Sales Operating profit margin as reported 16.5 % 14.7 % Mark-to-market effects 0.4 0.8 Restructuring charges 0.4 - Investment activity, net (0.2) - Acquisition integration
Slide 36: Reconciliation of Tax Rate Excluding Items
Reconciliation of First Quarter Fiscal 2020 Tax Rate Excluding Items (FISCAL YEARS, $ IN MILLIONS) Q1 2020 2019 Pretax Income Pretax Income Earnings* Taxes Earnings* Taxes As reported $573.9 $67.2 $488.9 $110.7 Tax item - 53.1 - - Mark-to-market effects 15.0 3.5 31.1 7.2 Restructuring charges 14.3 2
Slide 37: Reconciliation of Fiscal 2019 Adjusted Diluted EPS
Reconciliation of Fiscal 2019 Adjusted Diluted EPS (FISCAL YEAR) Full Year Per Share Data 2019 Diluted earnings per share, as reported $ 2.90 Net tax benefit (0.01) Tax items (0.12) Mark-to-market effects* 0.05 Divestiture loss, net 0.03 Acquisition transaction and integration costs* 0.03 Restructur
Slide 38: Reconciliation of Fiscal 2019 Income Taxes on Adjusting Items
Reconciliation of Fiscal 2019 Income Taxes on Adjusting Items (FISCAL YEAR, $ IN MILLIONS) 2019 Full Year Pretax Income Earnings* Taxes As reported $2,082.0 $367.8 Net tax benefit - 7.2 Tax items - 72.9 Mark-to-market effects 36.0 8.3 Divestitures loss 30.0 13.6 Acquisition transaction and integrati