Mccormick & Company, Incorporated · NYSE:MKC
Mccormick & — Q2 2022 Earnings Presentation
36 slides from Mccormick &'s earnings presentation, Jun 29, 2022
Slide 1: 2nd Quarter 2022 Financial Results and Outlook
2 QUARTER ND 2022 Financial Results and Outlook McCORMICK & COMPANY, INC. JUNE 29, 2022 The following slides accompany a June 29th, 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 release, 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 support, vo
Slide 3: Lawrence Kurzius, Chairman and Chief Executive Officer
Lawrence Kurzius Chairman and Chief Executive Officer 3
Slide 4: McCormick Long-Term Performance
1 McCORMICK LONG-TERM PERFORMANCE HISTORY OF MEETING OR EXCEEDING OUR LONG-TERM OBJECTIVES 10-YEAR 5-YEAR LONG-TERM CAGR CAGR OBJECTIVES Sales growth 7% 8% 4% - 6% Adjusted operating income growth 8% 11% 7% - 9% Adjusted EPS growth 9% 10% 9% - 11% 1) 10-Year CAGR, 2011 to 2021, and 5-Year CAGR, 2016
Slide 5: Challenging Global Environment
CHALLENGING GLOBAL ENVIRONMENT COST INFLATION AND MITIGATING ACTIONS SUPPLY CHAIN Higher cost inflation has persisted Multiple pricing actions Broad-based supply chain challenges Revenue management initiatives Escalation in 2Q drove adjustments to Comprehensive Continuous Improvement upcoming pricin
Slide 6: Challenging Global Environment
CHALLENGING GLOBAL ENVIRONMENT CHINA COVID-RELATED CONFLICT IN UKRAINE LOCKDOWNS Low utilization at Shanghai Plant Ukrainian operations paused mid-March Incremental cost to supply customers Russian operations suspended mid-March Significant demand softness Decision to exit Russian Consumer business
Slide 7: Second Quarter 2022 Sales Results
SECOND QUARTER 2022 SALES RESULTS SALES IMPACTS REPORTED RESULTS TOTAL CHINA CONFLICT IN EXIT OF LAPPING U.S. ALL OTHER 2Q 2022 3-YEAR CONSUMPTION UKRAINE BUSINESS TRADE SALES SALES 2Q 2022 SALES DISRUPTION IN INDIA INVENTORY PERFORMANCE GROWTH1 SALES CAGR1 REFILL GROWTH Consumer -2% -% -1% -3% -1%
Slide 8: Second Quarter 2022 Profit Results
SECOND QUARTER 2022 PROFIT RESULTS SECOND QUARTER PROFIT PRESSURE EXPECTED TO BE MITIGATED LATER IN 2022 1 ADJUSTED OPERATING INCOME DECLINED 33% Comparison includes 7% impact from China consumption disruption and the conflict in Ukraine Higher inflation and broad-based supply chain challenges w
Slide 9: Second Quarter Consumer Segment Update
SECOND QUARTER CONSUMER SEGMENT UPDATE PRICING ACTIONS IN ALL REGIONS REGIONAL HIGHLIGHTS AMERICAS AMERICAS First wave in 4Q 2021 7% 3-year compounded annual growth rate since 2019 Second wave in April 2022 4% impact from lapping 2Q 2021 trade inventory refill Third wave effective end of 3
Slide 10: Second Quarter Flavor Solutions Segment Update
SECOND QUARTER FLAVOR SOLUTIONS SEGMENT UPDATE PRICING ACTIONS IN ALL REGIONS AMERICAS AND EMEA VOLUME Branded foodservice follows Consumer business cadence Outstanding 2Q growth Rest of Flavor Solutions business Branded foodservice demand continues to strengthen ‒ Timing typically based on
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 IN FAST LONG-TERM CONSUMER TRENDS GROWING CATEGORIES1 U.S. Spices & Flavors Seasonings HEALTHY AND FLAVORFUL COOKING International Branded Spices & Foodservice DIGITAL ENGA
Slide 12: Investments to Sustainably Meet Growing Demand
INVESTMENTS TO SUSTAINABLY MEET GROWING DEMAND GLOBAL SUPPLY CHAIN BRAND MARKETING Increasing Capacity and Strengthening Resiliency Pivoting Messaging to Highlight Value of MKC Products NEW PRODUCTS Launching Products for New Consumer Needs Entry Price Point Better Value Lunch at 12 Home
Slide 13: Focused on Long-Term Goals, Strategies and Values
FOCUSED ON LONG-TERM GOALS, STRATEGIES AND VALUES THAT HAVE DRIVEN OUR SUCCESS Grown and compounded that growth over the years regardless of environment Long-term fundamentals that drove industry-leading performance remain strong Confidence in growth momentum and ability to navigate environment with
Slide 14: Mike Smith, Executive Vice President and Chief Financial Officer
Mike Smith Executive Vice President and Chief Financial Officer
Slide 15: 2Q 2022 Sales Results
2Q 2022 SALES RESULTS TOTAL COMPANY 0.2% constant currency 6.8% 0.0% -1.5% -1.3% -6.6% Volume/Mix Price Acquisitions Currency Net Sales CONSUMER FLAVOR SOLUTIONS -6.9% constant currency 11.4% constant currency 7.3% 9.7% 6.4% 4.1% 0.0% 0.0% -1.5% -1.7% -8.4% -13.3% Volume/Mix Price Acquisitions Curre
Slide 16: 2Q 2022 Sales Results: Consumer Segment, Americas
2Q 2022 SALES RESULTS: CONSUMER SEGMENT AMERICAS 2Q compared to 2021 -4.1% constant currency − Decline due to 4% impact from lapping trade inventory replenishments in 2Q 2021 7.4% − Pricing actions to offset cost increases 0.0% 3-Year CAGR since 2019 -0.1% -4.2% − 7% constant currency growth -11
Slide 17: 2Q 2022 Sales Results: Consumer Segment, EMEA
2Q 2022 SALES RESULTS: CONSUMER SEGMENT EMEA 2Q compared to 2021 -10.8% constant currency − Lower volume and mix due to: • High year-ago demand related to COVID lockdowns lapped 4.7% • Most significant decline in Vahine homemade desserts 0.0% • 1% impact from lower sales in Russia and Ukraine − Pr
Slide 18: 2Q 2022 Sales Results: Consumer Segment, Asia/Pacific
2Q 2022 SALES RESULTS: CONSUMER SEGMENT ASIA / PACIFIC 2Q compared to 2021 -17.6% constant currency − Includes a 20% volume and mix decline due to: • Consumption disruption in China • Exit of low margin rice business in India 3.1% 0.0% 0.0% − Pricing actions to offset cost inflation 3-Year CAGR
Slide 19: 2Q 2022 Sales Results
2Q 2022 SALES RESULTS TOTAL COMPANY 0.2% constant currency 6.8% 0.0% -1.5% -1.3% -6.6% Volume/Mix Price Acquisitions Currency Net Sales CONSUMER FLAVOR SOLUTIONS -6.9% constant currency 11.4% constant currency 7.3% 9.7% 6.4% 4.1% 0.0% 0.0% -1.5% -1.7% -8.4% -13.3% Volume/Mix Price Acquisitions Curre
Slide 20: 2Q 2022 Sales Results: Flavor Solutions, Americas
2Q 2022 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT AMERICAS 2Q compared to 2021 11.6% constant currency − Pricing actions to offset cost inflation 11.6% − Volume and mix growth driven by: 8.6% 3.0% • Higher sales to packaged food and beverage companies 0.0% 0.0% with strength in snack seasonings • Hi
Slide 21: 2Q 2022 Sales Results: Flavor Solutions, EMEA
2Q 2022 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT EMEA 2Q compared to 2021 19.2% constant currency − Broad-based volume and mix growth driven by: 13.6% 12.2% • Strong growth with quick service restaurant customers 5.6% • Strong growth with branded foodservice customers 0.0% • Partial offset of 1% im
Slide 22: 2Q 2022 Sales Results: Flavor Solutions, Asia/Pacific
2Q 2022 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT ASIA / PACIFIC 2Q compared to 2021 -5.9% constant currency − Includes a 7% decline due to China COVID-related restrictions − Pricing actions to offset cost inflation 2.7% 3-Year CAGR since 2019 0.0% − 3% constant currency growth -2.3% -8.6% -8.2% V
Slide 23: Gross Margin
GROSS MARGIN 2Q YTD 2022 (in millions) 2Q 2022 2Q 2021 Fav/(Unfav) Fav/(Unfav) Change Change Gross Margin 34.0% 39.5% (550) bps (380) bps Adjusted Gross Margin 34.0% 39.5% (550) bps (400) bps ANTICIPATED DRIVERS UNANTICIPATED DRIVERS ~250 basis point dilutive impact of pricing to offset Escalati
Slide 24: Operating Income
OPERATING INCOME 2Q YTD 2022 (in millions) 2Q 2022 2Q 2021 Fav/(Unfav) Fav/(Unfav) Change Change Selling, general & administrative expenses as percent of net sales 22.7% 22.9% 20 bps - Operating income $157.2 $237.4 (34%) (23%) Adjusted operating income $173.8 $258.0 (33%) (23%) Consumer 124.8 176.8
Slide 25: Income Taxes
INCOME TAXES (in millions) 2Q 2022 2Q 2021 YTD 2022 YTD 2021 Income tax rate 16.7% 22.1% 18.1% 25.2% Adjusted income tax rate 18.6% 22.2% 19.2% 22.5% Higher level of discrete tax items in 2022 25 The non-GAAP measures included herein, which we refer to as “adjusted”, exclude the impact of items af
Slide 26: Earnings Per Share
EARNINGS PER SHARE Fav/(Unfav) 2Q 2022 2Q 2021 Change Earnings per share $0.44 $0.68 (35%) Adjusted earnings per share $0.48 $0.69 (30%) Change in adjusted earnings per share Decrease in adjusted operating income ($0.24) Increase in other income 0.01 Decrease in adjusted income tax rate 0.02 Total d
Slide 27: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW BALANCED USE OF CASH Cash flow provided from operations was $154 million compared to $229 million in 2021 driven by lower net income $198 million of cash returned to shareholders through dividends Drive growth Capital expenditures of $102 million through 2Q 2022
Slide 28: 2022 Outlook Growth Rates
2022 OUTLOOK GROWTH RATES Reported Currency Constant Currency Sales growth 3% to 5% 5% to 7% Adjusted operating income increase Comparable to 2% 2% to 4% CCI-led cost savings Approximately $85M Cost inflation High-teens increase Adjusted gross profit margin 200 bps to 150 bps decrease Brand marketin
Slide 29: Key Takeaways
KEY TAKEAWAYS Long-term performance has been industry-leading meeting or exceeding objectives, including through volatile environments Strong sales growth momentum Strength of broad global portfolio Effective execution of strategies Pricing actions Confidence in driving strong 2022 performance
Slide 30: 2nd Quarter 2022 Financial Results and Outlook
2 QUARTER ND 2022 Financial Results and Outlook McCORMICK & COMPANY, INC. JUNE 29, 2022 The following slides accompany a June 29th, 2022, 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 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 32: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES (in millions except per share data) Three Months Ended Six Months Ended 5/31/2022 5/31/2021 5/31/2022 5/31/2021 Gross profit $ 523.0 $ 614.6 $1,083.4 $1,192.1 1) Transaction and integration expenses include transaction and integration expenses Impact of transaction and in
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 Compound annual growth rates (CAGR) expressed on a constant currency basis are presented excluding the impact of foreign currency exchange. To present this information for historical periods, current period results for entities reporting in currencies other than the U.S.
Slide 35: 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 36: 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 $2.89 to $2.94 $ 2.80 Impact of transaction and integ