Mccormick & Company, Incorporated · NYSE:MKC
Mccormick & — Q2 2020 Earnings Presentation
34 slides from Mccormick &'s earnings presentation, Jun 25, 2020
Slide 1: 2nd Quarter 2020 Financial Results
McCormick & Company, Inc. 2nd Quarter 2020 Financial Results June 25, 2020 BUILDING THE McCORMICK OF THE FUTURE The following slides accompany a June 25th, 2020, 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 margins, earnings, cost savings, acquisitions, brand marketing support, special charges, income tax expense and the impact o
Slide 3: Lawrence Kurzius
ilk LAWRENCE KURZIUS
Slide 4: COVID-19 Update
COVID-19 UPDATE COMMITMENT TO MAINTAINING CRITICAL FOOD SUPPLY AND SUPPORTING COMMUNITIES THREE PRIORITIES SINCE FIRST DAYS STATUS OF BUSINESS ▪ Ensure health and safety of our employees and the ▪ Hubei province in early stages of recovery quality and integrity of our products ▪ Rest of China fairly
Slide 5: COVID-19 Segment Update
COVID-19 SEGMENT UPDATE CONSUMER FLAVOR SOLUTIONS SECOND QUARTER SECOND QUARTER ▪ Initial pantry stocking in Americas and EMEA ▪ Packaged food companies performance varied by customer; early surge tapered off ▪ Pantry replenishment in China ▪ COVID-19 measures reduced foodservice customer ▪ Strong r
Slide 6: Focused on Execution
FOCUSED ON EXECUTION CONFIDENT IN OUR CAPABILITIES TO PERFORM IN THIS DYNAMIC ENVIRONMENT GLOBAL SUPPLY CHAIN UNCERTAINTY DRIVEN BY COVID-19 ▪ Global sourcing has been a real differentiator ▪ Evolving operating environment ▪ Manufacturing operations pressure ▪ Consumer comfort in eating away from ho
Slide 7: Global Footprint & Portfolio
GLOBAL FOOTPRINT & PORTFOLIO 1 GLOBAL FOOTPRINT BROAD & ADVANTAGED GLOBAL FLAVOR PORTFOLIO U.S. Spices & Seasonings Flavors Americas Americas International Spices & Seasonings Branded Foodservice 2019 2019 NET SALES NET SALES Recipe Mixes Custom Condiments EMEA Ingredients & Coatings APZ Condiments
Slide 8: Key Factors Underlying 2Q Strength
KEY FACTORS UNDERLYING 2Q STRENGTH ▪ McCormick has brands consumers trust ▪ Consumer messaging inspiring flavorful cooking ▪ Capitalization of capabilities across the organization ▪ Collaboration and partnerships STANDING TOGETHER TO MANAGE THROUGH THIS CRISIS 8
Slide 9: Second Quarter 2020 Financial Results
SECOND QUARTER 2020 FINANCIAL RESULTS GREW NET SALES 10%* ▪ Substantial increase in consumer demand driven by rise in cooking at home ▪ Partial offset by sharp declines in away from home products GREW ADJUSTED OPERATING INCOME 23%* ▪ Higher sales, favorable mix and CCI ▪ Adjusted operating margin ex
Slide 10: Consumer Segment Update – Americas
CONSUMER SEGMENT UPDATE – AMERICAS AMERICAS ▪ U.S. Branded portfolio consumption growth 55% ▪ Share gains in 9 of 11 categories ▪ Growth 2X center of store rate ▪ New products launched with exceptional trial ▪ 16% increase in household penetration ▪ Repeat buyers rate increased 11% ▪ Targeted media
Slide 11: Consumer Segment Update – EMEA & APZ
CONSUMER SEGMENT UPDATE – EMEA & APZ EMEA APZ ▪ Broad based growth across the region ▪ China condiment growth – some items 2x or 3x ▪ Share gains in majority of categories ▪ China new product success and acceleration ▪ Growth in French Vahine baking products ▪ Broad based growth and share gains outs
Slide 12: Flavor Solutions Segment Update
FLAVOR SOLUTIONS SEGMENT UPDATE AMERICAS ▪ Declines in branded foodservice and restaurant customers demand ▪ Branded foodservice decline impact more significant due to portfolio mix ▪ Culinary and marketing support provided to help customers adapt EMEA ▪ Significant rate of decline from COVID-19 res
Slide 13: Solid Foundation in Dynamic Environment
SOLID FOUNDATION IN DYNAMIC ENVIRONMENT ▪ Aligned with the consumer demands and preferences, which have accelerated ▪ Solid foundation in a dynamic and uncertain environment ▪ Agile, relevant and focused on long-term sustainable growth ▪ Strategies are building long-term shareholder value ▪ Exceptio
Slide 14: Mike Smith
MIKE SMITH Executive Vice President and Chief Financial Officer 14 14
Slide 15: 2Q 2020 Sales Results
2Q 2020 SALES RESULTS CONSUMER 27.8% constant currency TOTAL COMPANY 25.2% 26.0% 9.6% constant currency 2.6% 0.0% -1.8% 7.4% 7.6% 2.2% Volume/Mix Price Acquisitions Currency Net sales 0.0% -2.0% FLAVOR SOLUTIONS -16.1% constant currency Volume/Mix Price Acquisitions Currency Net sales 1.6% 0.0% -2.4
Slide 16: 2Q 2020 Sales Results: Consumer Segment – Americas
2Q 2020 SALES RESULTS: CONSUMER SEGMENT AMERICAS 36.3% constant currency ▪ Broad based volume and mix growth − Significant growth across branded portfolio 35.8% 32.3% ‒ Private label products ▪ Pricing actions to offset increased costs 4.0% 0.0% -0.5% Volume/Mix Price Acquisitions Currency Net sales
Slide 17: 2Q 2020 Sales Results: Consumer Segment – EMEA
2Q 2020 SALES RESULTS: CONSUMER SEGMENT EMEA 26.0% constant currency ▪ Higher volume and mix across the region ▪ Significant growth drivers: 26.4% ‒ Vahine homemade dessert products 22.0% ‒ Schwartz and Ducros branded spices and seasonings 0.0% ‒ Schwartz dry recipe mixes -0.4% -4.0% Volume/Mix Pric
Slide 18: 2Q 2020 Sales Results: Consumer Segment – Asia/Pacific
2Q 2020 SALES RESULTS: CONSUMER SEGMENT ASIA / PACIFIC -12.8% constant currency ▪ Wuhan disruption drove a 26% decline in volume/mix ▪ Partially offset by increased consumer demand led by: ‒ Condiments in China 0.0% ‒ Broad-based Australia growth -0.3% -5.1% ‒ Strong e-commerce growth -12.5% -17.9%
Slide 19: 2Q 2020 Sales Results
2Q 2020 SALES RESULTS CONSUMER 27.8% constant currency TOTAL COMPANY 25.2% 26.0% 9.6% constant currency 2.6% 0.0% -1.8% 7.4% 7.6% 2.2% Volume/Mix Price Acquisitions Currency Net sales 0.0% -2.0% FLAVOR SOLUTIONS -16.1% constant currency Volume/Mix Price Acquisitions Currency Net sales 1.6% 0.0% -2.4
Slide 20: 2Q 2020 Sales Results: Flavor Solutions – Americas
2Q 2020 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT AMERICAS -13.4% constant currency ▪ Decline driven by branded foodservice and quick service restaurant customers ▪ Partially offset by: 1.6% 0.0% ‒ Growth with packaged food companies -1.6% ‒ Pricing to offset cost increases -15.0% -15.0% Volume/Mix Pr
Slide 21: 2Q 2020 Sales Results: Flavor Solutions – EMEA
2Q 2020 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT EMEA -30.6% constant currency ▪ Decline driven by quick service restaurant and branded foodservice customers ▪ Partially offset by: 2.2% 0.0% ‒ Sales growth with packaged food companies -3.7% ‒ Pricing to offset cost increases -32.8% -34.3% Volume/Mix
Slide 22: 2Q 2020 Sales Results: Flavor Solutions – Asia/Pacific
2Q 2020 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT ASIA / PACIFIC -6.2% constant currency ▪ Decline driven by COVID-19 related lockdowns and closures in countries outside of China 0.3% 0.0% -6.5% -5.1% -11.3% Volume/Mix Price Acquisitions Currency Net sales 22 The non-GAAP measure included herein, whic
Slide 23: Operating Income
OPERATING INCOME 2Q 2020 2Q 2019 Fav/(Unfav) (in millions) Change Operating income $257.4 $208.1 24% Adjusted operating income $260.3 $215.2 21% Consumer 231.6 137.8 68% Flavor solutions 28.7 77.4 (63%) ▪ 23% constant currency adjusted operating income increase for total company ‒ Consumer segment g
Slide 24: Operating Margin
OPERATING MARGIN 2Q 2020 2Q 2019 Fav/(Unfav) (in millions) Change Gross margin 41.4% 39.1% 230 bps Selling, general & administrative expenses as percent of net sales 22.8% 22.6% (20) bps Operating margin 18.4% 16.0% 240 bps Adjusted operating margin 18.6% 16.5% 210 bps ▪ Gross margin expansion of 23
Slide 25: Income Taxes
INCOME TAXES (in millions) 2Q 2020 2Q 2019 Income tax rate 17.9% 18.7% Adjusted income tax rate 18.0% 18.9% ▪ Adjusted income tax rate declined versus the year-ago period ▪ Both quarters’ favorably impacted by discrete tax items, primarily related to entity structure refinements in 2020 and stock op
Slide 26: Income from Unconsolidated Operations
INCOME FROM UNCONSOLIDATED OPERATIONS 2Q 2020 2Q 2019 Fav/(Unfav) (in millions) Change Income from unconsolidated operations $10.2 $9.5 7% ▪ Income from unconsolidated operations increased 7% from the second quarter of 2019 26
Slide 27: Earnings per Share
EARNINGS PER SHARE Fav(Unfav) 2Q 2020 2Q 2019 Change Earnings per share $1.46 $1.12 30% Adjusted earnings per share 1.47 1.16 27% Change in adjusted earnings per share Increase in adjusted operating income $0.27 Decrease in interest expense 0.05 Other impacts, net ( 0.01) Total increase $0.31 27 The
Slide 28: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW ▪ Cash flow provided from operations $356 million vs $314 million in 2019 Balanced Use of Cash ▪ Cash conversion cycle improved 6 days from 2019 year end ▪ Returned $165 million of cash to shareholders through dividends ✓ Drive growth ▪ Capital expenditures of $87 million
Slide 29: Expectations for Balance of Year
EXPECTATIONS FOR BALANCE OF YEAR HIGH LEVEL OF UNCERTAINTY AROUND THE PACE AND SHAPE OF COVID-19 RECOVERY DEMAND EXPECTATIONS OTHER KEY EXPECTATIONS ▪ Elevated consumer segment demand to continue at ▪ Incremental COVID-19 costs to continue, more some level heavily weighted to 3Q ▪ Packaged food cust
Slide 30: Second Quarter Key Takeaways
SECOND QUARTER KEY TAKEAWAYS ▪ Second quarter results speak to the value of our products and our capabilities as a company ▪ Executing during volatility highlights our agility and strong foundation ▪ Focus on long-term strategies, consumer behavior and accelerated trends will enable us to emerge str
Slide 31: 2nd Quarter 2020 Financial Results
McCormick & Company, Inc. 2nd Quarter 2020 Financial Results June 25, 2020 BUILDING THE McCORMICK OF THE FUTURE The following slides accompany a June 25th, 2020, earnings release conference call. This information should be read in conjunction with the press release issued on that date.
Slide 32: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES The tables below include financial measures of adjusted operating income, adjusted operating income margin, adjusted income tax expense, adjusted income tax rate, adjusted net income and adjusted diluted earnings per share, each excluding the impact of special charges for
Slide 33: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES 1) Adjusted operating income margin is calculated as adjusted operating income as a percentage of net sales for each period presented 2) Adjusted income tax rate is calculated as adjusted income tax expense as a percentage of income from consolidated operations before inc
Slide 34: 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