Mccormick & Company, Incorporated · NYSE:MKC
Mccormick & — Q4 2020 Earnings Presentation
42 slides from Mccormick &'s earnings presentation, Jan 28, 2021
Slide 1: Building the McCormick of the Future
McCormick & Company, Inc. 4th Quarter 2020 Financial Results and 2021 Outlook January 28, 2021 BUILDING THE McCORMICK OF THE FUTURE The following slides accompany a January 28th, 2021, earnings release conference call. This information should be read in conjunction with the press release issued on t
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, volume and product mix, gross margins, earnings, cost savings, brand marketing support, transaction and integration expenses, spe
Slide 3: Lawrence Kurzius
ilk LAWRENCE KURZIUS
Slide 4: Strong 2020 Financial Performance
STRONG 2020 FINANCIAL PERFORMANCE ▪ Delivered strong 2020 results during period of great disruption ▪ Proved the strength of business model, the value of our products and our capabilities as a company ▪ Executed strategies successfully in unprecedented environment ▪ Drove outstanding underlying perf
Slide 5: Breadth & Reach Balances Portfolio for Consistency
BREADTH & REACH BALANCES PORTFOLIO FOR CONSISTENCY OUR BROAD AND ADVANTAGED GLOBAL PORTFOLIO U.S. Spices & Flavors Seasonings STRENGTH AND DIVERSITY OF OUR OFFERING Compelling products for every International FY 2020 Branded retail and customer strategy across all channels Spices & GLOBAL Foodservic
Slide 6: Fourth Quarter 2020 Financial Results
FOURTH QUARTER 2020 FINANCIAL RESULTS GREW NET SALES 5% ▪ Constant currency increase of 4% ▪ Both segments contributed to increase ADJUSTED OPERATING INCOME LOWER 4% ▪ Constant currency decline of 4% ▪ Higher sales and CCI-led cost savings ▪ More than offset by brand marketing investments, COVID-19
Slide 7: Fourth Quarter Consumer Segment Update
FOURTH QUARTER CONSUMER SEGMENT UPDATE AMERICAS ▪ U.S. branded portfolio consumption growth of 14% ▪ Continued household penetration and repeat buy rate increases ▪ Strong holiday execution EMEA ▪ Broad based volume growth across the region ▪ Double-digit branded consumption growth in largest market
Slide 8: Fourth Quarter Flavor Solutions Segment Update
FOURTH QUARTER FLAVOR SOLUTIONS SEGMENT UPDATE AMERICAS & EMEA ▪ Base business strength and new product momentum with packaged food customers ▪ Demand declines across branded foodservice and restaurant customers APZ ▪ Growth with quick service restaurant customers in China and Australia ▪ Momentum c
Slide 9: Fiscal Year 2020 Financial Results
FISCAL YEAR 2020 FINANCIAL RESULTS SALES GROWTH1 + 5% Consumer up 10% Flavor solutions down 3% ADJUSTED OPERATING INCOME2 + 4% ADJUSTED EARNINGS PER SHARE + 6% ▪ Achieved $113M cost savings, driven by our CCI program ▪ Delivered record $1B operating cash flow, a 10% increase ▪ Announced 10% quarterl
Slide 10: Fiscal Year 2020 Achievements
FISCAL YEAR 2020 ACHIEVEMENTS ACCELERATING E-COMMERCE GROWTH RECOGNIZED FOR SUSTAINABILITY EFFORTS E-commerce Sales +136% With triple-digit growth in pure-play, omni-channel and direct-to-consumer Most sustainable food 4th Consecutive year #1 products company for 5th consecutive year BUILDING BRAND
Slide 11: Global Flavor Leadership Reinforced and Condiment and Flavors Growth Accelerated
GLOBAL FLAVOR LEADERSHIP REINFORCED AND CONDIMENT AND FLAVORS GROWTH PLATFORMS ACCELERATED ▪ Iconic brand in high growth category ▪ Leading North American manufacturer of flavors ▪ Leading Mexican hot sauce ▪ Scale of global flavor platform increased ▪ Highly complementary to existing hot sauce ▪ Hi
Slide 12: Accelerating Condiment Growth with Cholula Acquisition
ACCELERATING CONDIMENT GROWTH WITH CHOLULA ACQUISITION PROVEN PLAYBOOK TO UNLOCK SIGNIFICANT GROWTH POTENTIAL ▪ Leverage operational expertise and infrastructure ▪ Elevate brand awareness, increase availability and extend product offerings ▪ Drive trial and household penetration ▪ Carried outstandin
Slide 13: Accelerating Americas' Flavor Platform with FONA
FONA IS THE CORNERSTONE FOR ACCELERATING AMERICAS’ FLAVOR PLATFORM ACCELERATING FLAVOR GROWTH ▪ Expands breadth and depth in flavor development ▪ Increases scale, manufacturing capacity and technical bench strength ▪ Creates growth opportunities with more comprehensive product offering ADVANCES HEAL
Slide 14: Global Demand for Flavor Is the Foundation of Sales Growth
GLOBAL DEMAND FOR FLAVOR IS THE FOUNDATION OF SALES GROWTH CAPITALIZING ON ACCELERATED SUSTAINABLY POSITIONED FOR LONG-TERM CONSUMER TRENDS CONTINUED GROWTH ▪ Healthy and flavorful cooking ▪ Alignment with consumer trends ▪ Trusted brands ▪ Breadth and reach of portfolio ▪ Digital engagement ▪ Curre
Slide 15: Consumer Segment Growth Drivers
CONSUMER SEGMENT GROWTH DRIVERS CURRENT CONDITIONS PLANS TO FUEL GROWTH ▪ Sustained elevated consumer demand in all regions ▪ Execute on strong category management initiatives − Supply chain resiliency strengthened ▪ Proprietary survey data indicates consumers − Enjoy the cooking experience − In-sto
Slide 16: Flavor Solutions Segment Growth Drivers
FLAVOR SOLUTIONS SEGMENT GROWTH DRIVERS CURRENT CONDITIONS PLANS TO FUEL GROWTH ▪ Packaged food customers returned to pre-COVID ▪ Momentum with packaged food customers growth rates − Strength in core iconic and new products ▪ Restaurant and other foodservice customers − Bigger-bet innovation in 2021
Slide 17: Strong Fundamentals and Momentum into 2021
STRONG FUNDAMENTALS AND MOMENTUM INTO 2021 ▪ Consumer momentum, Flavor Solutions recovery and Cholula and FONA acquisitions bolster confidence in 2021 growth ▪ 2020 achievements and effective strategies reinforce confidence in strong 2021 performance ▪ Organic sales growth expected in both segments
Slide 18: Mike Smith
MIKE SMITH Executive Vice President and Chief Financial Officer 18 18
Slide 19: 4Q 2020 Sales Results
4Q 2020 SALES RESULTS CONSUMER 4.7% constant currency TOTAL COMPANY 3.7% 5.9% 1.0% 0.0% 1.2% 4.1% constant currency Volume/Mix Price Acquisitions Currency Net Sales 4.9% 2.7% 1.4% 0.0% 0.8% Volume/Mix FLAVOR Price SOLUTIONS Acquisitions Currency Net sales Volume/Mix Price Acquisitions Currency Net S
Slide 20: 4Q 2020 Sales Results: Consumer Segment Americas
4Q 2020 SALES RESULTS: CONSUMER SEGMENT AMERICAS 5.5% constant currency ▪ Higher volume and product mix across many brands: − Simply Asia and Thai Kitchen 4.5% 5.5% − Frank’s RedHot and French’s 1.0% 0.0% 0.0% − Zatarain’s and Lawry’s Volume/Mix Price Acquisitions Currency Net Sales ▪ Partially offs
Slide 21: 4Q 2020 Sales Results: Consumer Segment EMEA
4Q 2020 SALES RESULTS: CONSUMER SEGMENT EMEA 9.8% constant currency ▪ Strong growth in all countries across the region 15.2% ▪ Significant volume and mix growth drivers: 8.4% 5.4% ‒ Schwartz and Ducros branded spices and 1.4% 0.0% seasonings Volume/Mix Price Acquisitions Currency Net Sales ‒ Vahine
Slide 22: 4Q 2020 Sales Results: Consumer Segment Asia/Pacific
4Q 2020 SALES RESULTS: CONSUMER SEGMENT ASIA / PACIFIC -9.9% constant currency ▪ Decline driven by: – Lower branded foodservice sales 3.4% – Shift to a later Chinese New Year in 2021 0.0% -0.2% -6.5% -9.7% Volume/Mix Price Acquisitions Currency Net Sales 22 The non-GAAP measure included herein, whic
Slide 23: 4Q 2020 Sales Results
4Q 2020 SALES RESULTS CONSUMER 4.7% constant currency TOTAL COMPANY 3.7% 5.9% 1.0% 0.0% 1.2% 4.1% constant currency Volume/Mix Price Acquisitions Currency Net Sales 4.9% 2.7% 1.4% 0.0% 0.8% Volume/Mix FLAVOR Price SOLUTIONS Acquisitions Currency Net sales Volume/Mix Price Acquisitions Currency Net S
Slide 24: 4Q 2020 Sales Results: Flavor Solutions EMEA
4Q 2020 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT EMEA 5.2% constant currency ▪ Pricing to offset cost increases ▪ Higher volume and mix driven by: 6.6% 3.7% ‒ Growth with packaged food companies with 1.5% 0.0% 1.4% strength in snack seasonings Volume/Mix Price Acquisitions Currency Net Sales ‒ Partia
Slide 25: 4Q 2020 Sales Results: Flavor Solutions Americas
4Q 2020 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT AMERICAS 1.9% constant currency ▪ Pricing to offset cost increases ▪ Volume and mix decline driven by: – Reduced demand from branded foodservice and 2.4% 0.9% 0.0% other restaurant customers -0.5% -1.0% – Partially offset by higher demand from packaged
Slide 26: 4Q 2020 Sales Results: Flavor Solutions Asia/Pacific
4Q 2020 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT ASIA / PACIFIC 7.1% constant currency ▪ Growth with quick service restaurant customers in China and Australia 10.8% 8.5% 3.7% 0.0% -1.4% Volume/Mix Price Acquisitions Currency Net Sales 26 The non-GAAP measure included herein, which we refer to as “con
Slide 27: Operating Income
OPERATING INCOME 4Q FY2020 (in millions) 4Q 2020 4Q 2019 Fav/(Unfav) Fav/(Unfav) Change Change Operating income $274.9 $299.2 (8%) 4% Adjusted operating income $290.2 $303.1 (4%) 4% Consumer 220.7 226.7 (2%) 16% Flavor Solutions 69.5 76.4 (9%) (21%) ▪ 4% constant currency adjusted operating income d
Slide 28: Operating Margin
OPERATING MARGIN 4Q FY2020 (in millions) 4Q 2020 4Q 2019 Fav/(Unfav) Fav/(Unfav) Change Change Gross margin 42.4% 42.4% 0 bps 100 bps Selling, general & administrative expenses as percent of net sales 23.8% 22.0% (180) bps (110) bps Operating margin 17.6% 20.2% (260) bps (10) bps Adjusted operating
Slide 29: Income Taxes
INCOME TAXES (in millions) 4Q 2020 4Q 2019 FY2020 FY2019 Income tax rate 23.2% 24.8% 19.8% 19.2% Adjusted income tax rate 22.9% 24.7% 19.9% 19.5% ▪ Adjusted income tax rate lower than 4Q 2019 due to favorable discrete items ▪ 2020 adjusted income tax rate increased 40 bps versus 2019 29 The non-GAAP
Slide 30: Income from Unconsolidated Operations
INCOME FROM UNCONSOLIDATED OPERATIONS 4Q FY2020 (in millions) 4Q 2020 4Q 2019 Fav/(Unfav) Fav/(Unfav) Change Change Income from unconsolidated operations $10.6 $11.7 (9%) 0% ▪ Income from unconsolidated operations declined 9% in 4Q 2020 and was comparable 2020 and 2019 30
Slide 31: Earnings per Share
EARNINGS PER SHARE Fav(Unfav) 4Q 2020 4Q 2019 Change Earnings per share $0.74 $0.79 (6%) Adjusted earnings per share 0.79 0.81 (2%) Change in adjusted earnings per share Decrease in adjusted operating income ($0.04) Decrease in interest expense 0.02 Decrease in adjusted tax rate 0.02 Other impacts,
Slide 32: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW RECORD HIGH $1B ▪ Increased cash flow from operations 10% from 2019 IN CASH FLOW FROM OPERATIONS ▪ Returned $330 million of cash to shareholders through dividends $1,100 ▪ Fully paid off term loans related to Frank’s and French’s acquisition $1,000 ▪ Expect to delever to
Slide 33: 2021 Financial Outlook
2021 FINANCIAL OUTLOOK Reported Currency Constant Currency Sales growth 7% to 9% 5% to 7% Contribution from Cholula and FONA acquisitions 3.5% to 4% Adjusted operating income increase 8% to 10% 6% to 8% CCI-led cost savings Approximately $110M Cost inflation Low single-digit increase Adjusted gross
Slide 34: 2021 Outlook Growth Rates
2021 OUTLOOK GROWTH RATES STRONG RobustBASE Base 2021 BUSINESS & Underlying COVID-19 ERP TAX Tax CONSTANT ACQUISITION Business COST INVESTMENT HEADWIND Headwind CURRENCY GROWTH INCREASE GUIDANCE Sales growth* 5% to 7% 5% to 7% Adjusted operating income 10% to 12% -1% -3% 6% to 8% growth* Adjusted EP
Slide 35: Key Takeaways
KEY TAKEAWAYS ▪ Strong 2020 results prove strength of business model, the value of our products, our capabilities as a company and successful strategy execution ▪ Strong foundation and well-positioned to capitalize on accelerating consumer trends ▪ Cholula and FONA acquisitions accelerate condiment
Slide 36: Building the McCormick of the Future
McCormick & Company, Inc. 4th Quarter 2020 Financial Results and 2021 Outlook January 28, 2021 BUILDING THE McCORMICK OF THE FUTURE 36following slides accompany a January 28th, 2021, earnings release conference call. This information should be read in conjunction with the The press release issued on
Slide 37: 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 38: 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 in
Slide 39: 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 40: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES In addition to the above non-GAAP financial measures, our “Leverage Ratio” is also determined using non-GAAP measures. A leverage ratio is a widely-used measure of ability to repay outstanding debt obligations. We believe that our Leverage Ratio is a meaningful metric to
Slide 41: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES To present “constant currency” information for the fiscal year 2021 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 2021
Slide 42: 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 2021 and actual results for 2020: 42