Mccormick & Company, Incorporated · NYSE:MKC
Mccormick & — Q3 2023 Earnings Presentation
35 slides from Mccormick &'s earnings presentation, Oct 3, 2023
Slide 1: 3rd Quarter 2023 Financial Results and Outlook
3 QUARTER rd 2023 Financial Results and Outlook McCORMICK & COMPANY, INC. October 3, 2023 The following slides accompany an October 3, 2023, earnings release conference call. This information should be read in conjunction with the press release issued on that date. 1
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 margin, earnings, cost savings, special charges, acquisitions, brand marketing support, volume and product mix, income tax
Slide 3: Brendan Foley, President and Chief Executive Officer
Brendan Foley President and Chief Executive Officer 3
Slide 4: Strong Third Quarter 2023 Results
STRONG THIRD QUARTER 2023 RESULTS SUSTAINED DEMAND AND EFFECTIVE STRATEGY EXECUTION Delivered solid constant currency sales growth Executed in line with expectations, notwithstanding slower China economic recovery Improved volume performance, excluding China Drove meaningful year-over-year margin ex
Slide 5: Third Quarter 2023 Financial Results
THIRD QUARTER 2023 FINANCIAL RESULTS STRONG BUSINESS PERFORMANCE 1 Net sales grew 6% including – 1% unfavorable impact from slower China economic recovery – 1% decline related to divesture and business exits – Sequential improvement in underlying volume growth Gross margin expanded 150 bps 1 Adjuste
Slide 6: 2023 Outlook
2023 OUTLOOK CONFIDENCE IN OUR GROWTH TRAJECTORY Continued top-line demand momentum 2023 sales and operating income reaffirmed, including lower benefit from China – Expecting sales outlook to be closer to middle of the range – Reaffirming operating income highlights stronger profit realization Stron
Slide 7: Third Quarter Consumer Segment Update – Americas
THIRD QUARTER CONSUMER SEGMENT UPDATE – AMERICAS CONTINUING CONSUMPTION MOMENTUM DRIVING STRONG GRILLING PERFORMANCE Double-digit growth across the grilling portfolio Spices & Seasonings total distribution point growth Share gains in mustard, BBQ sauce, and marinades Assortment on shelf more product
Slide 8: Third Quarter Consumer Segment Update – EMEA
THIRD QUARTER CONSUMER SEGMENT UPDATE – EMEA ACCELERATING CONSUMPTION TRENDS GROWING IN THE DISCOUNT CHANNEL Strongest quarterly sales performance in two years +30% channel growth across region Herbs, Spices, and Seasonings share growth for total region Expanded distribution in Volume growth in the
Slide 9: Fueling Growth with Partnerships and Brand Marketing
FUELING GROWTH WITH PARTNERSHIPS AND BRAND MARKETING REACHING LOYAL BUILT-IN AUDIENCES DRIVING BRAND AWARENESS Leveraging strengths across both 💛🌈 Launching Schwartz segments to launch limited-edition seasonings, recipe Mustard-flavored SKITTLES® for mixes, and meal kits National Mustard Day…
Slide 10: Third Quarter Flavor Solutions Segment Update – Americas
THIRD QUARTER FLAVOR SOLUTIONS SEGMENT UPDATE – AMERICAS DRIVING DOUBLE-DIGIT GROWTH IN FLAVORS AND BRANDED FOODSERVICE FLAVORS Strong seasonings growth Growth in performance nutrition beverages and health end-markets New product wins with category leader and high-growth innovator customers Robust p
Slide 11: Third Quarter Flavor Solutions Segment Update – EMEA and APAC
THIRD QUARTER FLAVOR SOLUTIONS SEGMENT UPDATE – EMEA AND APAC EMEA Broad-based growth driven by pricing Strong growth with both QSR and packaged food & beverage customers Customers continue to experience softness in volume Continued pruning of low margin business APAC Growth driven by QSR customers’
Slide 12: Mike Smith, Executive Vice President and Chief Financial Officer
Mike Smith Executive Vice President and Chief Financial Officer 12
Slide 13: 3Q 2023 Sales Results
3Q 2023 SALES RESULTS TOTAL COMPANY 5.5% constant currency 7.8% 5.6% 0.1% -0.2% -2.1% Acquisitions/ Volume/Mix Price Divestitures Currency Net Sales Divestitures CONSUMER FLAVOR SOLUTIONS 1.3% constant currency 11.4% constant currency 10.9% 12.0% 5.6% 1.0% 0.5% 0.0% 0.6% -0.3% -0.3% -4.0% Acquisitio
Slide 14: 3Q 2023 Sales Results: Consumer Segment – Americas
3Q 2023 SALES RESULTS: CONSUMER SEGMENT AMERICAS CONSUMER 1.7% constant currency ▪ Pricing actions to offset cost inflation ▪ 2% unfavorable impact from Kitchen Basics divestiture and exiting Hispanic product direct store delivery 4.4% 1.4% -2.3% -0.4% -0.3% Acquisitions/ Volume/Mix Price Divestitur
Slide 15: 3Q 2023 Sales Results: Consumer Segment – EMEA
3Q 2023 SALES RESULTS: CONSUMER SEGMENT EMEA CONSUMER 10.4% constant currency ▪ Broad-based growth across all categories and markets, 14.9% excluding Russia 13.0% ▪ Pricing actions to offset cost inflation 4.5% ▪ Volume and mix decline included: 0.0% – 2% impact from exiting Russia -2.6% Acquisition
Slide 16: 3Q 2023 Sales Results: Consumer Segment – APAC
3Q 2023 SALES RESULTS: CONSUMER SEGMENT APAC CONSUMER ▪ Volume and mix decline driven primarily by: -10.5% constant currency – Slower than expected recovery in China 4.5% 0.0% – Lapping strong China consumer consumption in 3Q 2022 ▪ Pricing actions to offset cost inflation -5.3% -15.0% -15.8% Acquis
Slide 17: 3Q 2023 Sales Results
3Q 2023 SALES RESULTS TOTAL COMPANY 5.5% constant currency 7.8% 5.6% 0.1% -0.2% -2.1% Acquisitions/ Volume/Mix Price Divestitures Currency Net Sales Divestitures CONSUMER FLAVOR SOLUTIONS 1.3% constant currency 11.4% constant currency 10.9% 12.0% 5.6% 1.0% 0.5% 0.0% 0.6% -0.3% -0.3% -4.0% Acquisitio
Slide 18: 3Q 2023 Sales Results: Flavor Solutions – Americas
3Q 2023 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT AMERICAS FLAVOR SOLUTIONS 10.1% constant currency ▪ Pricing actions to offset cost inflation ▪ Broad based growth across the portfolio 11.3% 8.7% ▪ Strength in flavors and branded foodservice 1.4% 1.2% 0.0% Acquisitions/ Volume/Mix Price Acquisitions/
Slide 19: 3Q 2023 Sales Results: Flavor Solutions – EMEA
3Q 2023 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT EMEA FLAVOR SOLUTIONS 15.1% constant currency ▪ Pricing actions to offset cost inflation 20.2% ▪ Volume and mix decline included: 16.7% – Lower volume in the businesses of some customers – 1% impact from exiting a foodservice product line 1.6% 0.0% -5.
Slide 20: 3Q 2023 Sales Results: Flavor Solutions – APAC
3Q 2023 SALES RESULTS: FLAVOR SOLUTIONS SEGMENT APAC FLAVOR SOLUTIONS 13.0% constant currency ▪ Pricing actions to offset cost inflation ▪ Volume growth driven by customers’ promotional activities 7.5% 7.4% 5.5% 0.0% -5.6% Acquisitions/ Volume/Mix Price Acquisitions Currency Net Sales Divestitures 2
Slide 21: Gross Margin
GROSS MARGIN 3Q (in millions) 3Q 2023 3Q 2022 Fav/(Unfav) Change Gross Margin 37.0% 35.5% 150 bps ▪ Favorable gross margin impacts: − Global Operating Effectiveness (GOE) and Comprehensive Continuous Improvement (CCI) led savings programs − Recovery of cost inflation pricing lagged over the last two
Slide 22: Operating Income
OPERATING INCOME 3Q (in millions) 3Q 2023 3Q 2022 Fav/(Unfav) Change Selling, general & administrative expenses as percent of net sales 22.1% 20.5% (160) bps Operating income $245.0 $235.2 4% Adjusted operating income $251.1 $238.6 5% Consumer 173.3 183.7 (6%) Flavor Solutions 77.8 54.9 42% ▪ SG&A e
Slide 23: Interest Expense and Income Taxes
INTEREST EXPENSE AND INCOME TAXES 3Q (in millions) 3Q 2023 3Q 2022 Fav/(Unfav) Change Interest Expense $52.7 $37.9 (39%) Income tax rate 21.4% 21.6% 17 bps Adjusted income tax rate 21.4% 21.2% (23 bps) ▪ Increased interest expense driven by the higher rate environment non-GAAP measures included here
Slide 24: Income from Unconsolidated Operations
INCOME FROM UNCONSOLIDATED OPERATIONS 3Q (in millions) 3Q 2023 3Q 2022 Fav/(Unfav) Change Income from Unconsolidated Operations $13.4 $7.5 79% ▪ Increase driven by strong performance in largest joint venture, McCormick de Mexico ▪ 2023 projection of Income from Unconsolidated Operations increased to
Slide 25: Earnings Per Share
EARNINGS PER SHARE 3Q 3Q 2023 3Q 2022 Fav/(Unfav) Change Earnings per share $0.63 $0.82 (23%) Adjusted earnings per share $0.65 $0.69 (6%) Change in adjusted earnings per share Increase in adjusted operating income 0.04 Increase in unconsolidated income 0.02 Decrease in other income (0.06) Increase
Slide 26: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW ▪ Strong year-to-date cash flow provided from operations of $660 million CASH FLOW FROM – 164% increase from $250 million year-to-date 2022 OPERATIONS – Increase driven by higher operating income and working capital $660M improvements, including lower inventory $652M ▪ $3
Slide 27: 2023 Outlook
2023 OUTLOOK REFLECTS IMPROVED UNDERLYING PERFORMANCE DISCRETE YEAR-OVER-YEAR DRIVERS CONSTANT GLOBAL NET CHINA KITCHEN INCENTIVE INTEREST TAX UNDERLYING TOTAL CURRENCY OPERATING RECOVERY BASICS COMP HEADWIND1 HEADWIND 3-YEAR BUSINESS 2Q 2022 SALES GUIDANCE EFFECTIVE- DIVESTITURE REBUILD GROWTH NESS
Slide 28: 2023 Outlook
2023 OUTLOOK CURRENT PRIOR Reported & Reported & Constant Currency Constant Currency Sales growth 5% to 7% 5% to 7% Adjusted operating income increase 10% to 12% 10% to 12% CCI-led cost savings Approximately $85M Approximately $85M Cost inflation Low to mid-teens increase Low to mid-teens increase A
Slide 29: 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 LONG-TERM DRIVING SUSTAINABLE GROWTH CONSUMER TRENDS IN BOTH SEGMENTS Healthy and Flavorful Cooking Focus on Fast-Growing Categories Trusted Brands Breadth and Reach of Portfolio Digital Engagement
Slide 30: Key Takeaways
KEY TAKEAWAYS Strong third quarter results reflect: ─ Sustained demand and successful execution of growth strategies ─ Improved volume performance, excluding China ─ Meaningful year-over-year margin expansion ─ Strong year-to-date cash flow Sales and operating profit outlook reaffirmed: ─ Including
Slide 31: 3rd Quarter 2023 Financial Results and Outlook
3 QUARTER rd 2023 Financial Results and Outlook McCORMICK & COMPANY, INC. October 3, 2023 The following slides accompany an October 3, 2023, earnings release conference call. This information should be read in conjunction with the press release issued on that date. 31
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. These represent non-GAAP financial measures whic
Slide 33: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES (in millions except per share data) Three Months Ended 8/31/2023 8/31/2022 1) Adjusted operating income margin is calculated as adjusted operating income as a percentage of net sales for each period presented. Operating income $ 245.0 $ 235.2 Impact of special charges 6.1
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
Slide 35: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES To present "constant currency" information for the fiscal year 2023 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 2023