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Kellogg Company August 2, 2012
Page 1 of 18
SECOND QUARTER 2012FINANCIAL RESULTS
August 2, 2012
Forward‐Looking Statements
This presentation contains by reference, “forward‐looking statements” with projections concerning, among other things, the integration of the Pringles® business, the Company’s strategy, and the Company’s sales, earnings, margin, operating profit, costs and expenditures, interest expense, tax rate, capital expenditure, dividends, cash flow, debt reduction, share repurchases, costs, brand building, ROIC, working capital, growth, new products, innovation, cost reduction projects, and competitive pressures. Forward‐looking statements include predictions of future results or activities and may contain the words “expects,” “believes,” “should,” “will,” “anticipates,” “projects,” “estimates,” “implies,” “can,” or words or phrases of similar meaning.
The Company’s actual results or activities may differ materially from these predictions. The Company’s future results could also be affected by a variety of factors, including the ability to integrate the Pringles® business and the realization of the anticipated benefits from the acquisition in the amounts and at the times expected, the impact of competitive conditions; the effectiveness of pricing, advertising, and promotional programs; the success of innovation, renovation and new product introductions; the recoverability of the carrying value of goodwill and other intangibles; the success of productivity improvements and business transitions; commodity and energy prices; labor costs; disruptions or inefficiencies in supply chain; the availability of and interest rates on short‐term and long‐term financing; actual market performance of benefit plan trust investments; the levels of spending on systems initiatives, properties, business opportunities, integration of acquired businesses, and other general and administrative costs; changes in consumer behavior and preferences; the effect of U.S. and foreign economic conditions on items such as interest rates, statutory tax rates, currency conversion and availability; legal and regulatory factors including changes in food safety, advertising and labeling laws and regulations; the ultimate impact of product recalls; business disruption or other losses from war, terrorist acts or political unrest; and other items.
Forward‐looking statements speak only as of the date they were made, and the Company undertakes no obligation to update them publicly.
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Kellogg Company August 2, 2012
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Second Quarter 2012 Overview
Quarterly results on‐track
Maintaining outlook for the full‐year, including investment
Improvement in North America, and Europe in‐line with expectations
Executing our growth strategy –Pringles growth opportunity
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Pringles
Day One transition executed very smoothly
On track to exit from transition services on or ahead of schedule
Synergy projections remain as expected
Top-to-Top meetings held with multiple customers – they have confidence in this brand
Demand growth remains ahead of last year
Excited about combining Kellogg and Pringles talent
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Kellogg Company August 2, 2012
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Summary of Financial Results
($ millions, except EPS)
(a) Internal net sales and operating profit growth exclude the impact of foreign currency translation and if applicable, acquisitions and dispositions. In addition to these items, internal operating profit growth also excludes the impact of transaction and integration costs associated with the Pringles acquisition.
Second Quarter 2012
Kellogg Company
Growth Growth
Internal Net Sales(a) $ 3,474 2.3% 6,914 1.1%
Internal Operating Profit(a) $ 485 -5.0% 1,020 -5.6%
Reported Earnings Per Share $ 0.84 -10.6% 1.84 -4.7%
Second Quarter 2012
$
Year-to-Date 2012
$
5
Net Sales Components
(year‐over‐year, % change)Second Quarter 2012
6
2Q 2011Net Sales
Volume Price / Mix Acq/Div. Currency 2Q 2012Net Sales
(0.6)%
$3.39 B
+ 2.9% 3.3%
Internal Growth 2.3%
+2.6%
(3.0)% $3.47 B
Kellogg Company August 2, 2012
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Gross ProfitSecond Quarter 2012
40.7%Margin(a)
42.6%Margin(a)
7
Gross Profit of $1.4 billion; margin impacted by:
• Continued commodity inflation
• The timing of investment in Supply Chain
• Lower production to reduce levels of inventory
• Pringles
Brand‐Building(a) Investment
(brand building $)
Second Quarter 2012
(a) Brand building includes advertising, consumer promotions, COGS promotions, and excludes trade spending.(b) Internal brand building growth excludes the impact of foreign currency translation and if applicable,
acquisitions, dispositions, and differences in the number of shipping days.
10%Y-O-Y Change Int. Growth (b)
Incr./(Decr.)
4% (9)% (3)%
2011
8
Q1 Q2 Q3 Q4
2012
(4)%
Q1 Q2
(5)%
Higher in 2H
2H
Kellogg Company August 2, 2012
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Internal Operating Profit Performance by Area
(a) Internal operating profit performance excludes the impact of foreign currency translation and if applicable, acquisitions and dispositions. In addition to these items, internal operating profit growth also excludes the impact of transaction and integration costs associated with the Pringles acquisition.
(year‐over‐year % change, internal performance(a))
Second Quarter 2012
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North America $ 425 +3.3% Good growth
Europe $ 72 -19.9% In-line with expectations
Latin America $ 48 -15.2% Lapping disposal of assets.+DD brand building
Asia Pacific $ 16 -31.6% Difficult environment in ANZ and timing
Cash Flow(a)
(a) Kellogg defines cash flow as cash from operating activities, less capital expenditures; see reconciliation to GAAP cash flow at the end of this presentation.
Cash flow(a) approximately $525 million
Capital expenditure was $155 million or 2.2% of net sales
Remain focused on working capital
Did not repurchase shares during the quarter
Year‐to‐date 2012
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Kellogg Company August 2, 2012
Page 6 of 18
Full Year
Lower by 2 – 4%
2 – 3%
$3.18 – 3.30
Internal Net Sales (a)
Internal Operating Profit (a)
EPS
2012 Outlook:Reaffirming the Outlook
11
(a) Internal sales and operating profit growth exclude the impact of foreign currency translation and if applicable, acquisitions and dispositions. In addition to these items, internal operating profit growth also excludes the impact of transaction and integration costs associated with the Pringles acquisition.
(As Reported, including Pringles)
Including Investment in Innovation, Brand Building, and SAP, but excluding Pringles
2012 Outlook:Reaffirming the Outlook
12
Changes From Previous Guidance
Previous, As‐Reported Guidance $ 3.18 ‐ $ 3.30
Change, Impact from FX (a) $ (0.02) ‐ $ (0.02)
One‐Time Change, Transaction‐Related Items (0.02) (0.02)
One‐Time Tax Benefit 0.04 0.04
Guidance Range $ 3.18 ‐ $ 3.30
(a) At current spot rates.
Kellogg Company August 2, 2012
Page 7 of 18
Net SalesSecond Quarter 2012
(a) Internal sales growth excludes the impact of foreign currency translation and if applicable, acquisitions, dispositions and differences in the number of shipping days.
(internal net sales growth(a), year‐over‐year % change)
Kellogg North America Kellogg International
-1%
4%
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1%
4%
6%
9%
Building on Difficult Comps.
North America Net SalesSecond Quarter 2012
(a) Internal sales growth excludes the impact of foreign currency translation and if applicable, acquisitions, dispositions and differences in the number of shipping days.
(b) Includes U.S. cereal, Pop-Tarts, health and wellness, and Kashi businesses.
(c) Includes U.S. cookies, crackers, cereal bars, and fruit-flavored snack businesses.
(d) Includes food service, convenience and Girl Scouts businesses.
(e) Includes the U.S. frozen and Canadian businesses.
(internal net sales growth(a), year‐over‐year% change)
U.S. Snacks (c)U.S. Morning Foods & Kashi (b)
U.S. Specialty (d)
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North America Other(e)
Kellogg Company August 2, 2012
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North American Innovation
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Kellogg Company August 2, 2012
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U.S. Snacks(a)
Second Quarter 2012 – excl. Pringles
$725 $729 $727
$702
$742$759
2012
Q4Q3Q2Q1
2011
Q1
Net Sales
Q2
(b)
(a) Includes U.S. cookies, crackers, cereal bars, and fruit-flavored snacks businesses.
(b) Internal sales growth excludes the impact of foreign currency translation and if applicable, acquisitions and dispositions.
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Kellogg Company August 2, 2012
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Category$ in Billions
Growth Kellogg Share
$3.1(a) 4.8%(a) 30.8%(b)
$5.6(a) 4.0%(a) 30.1%(b)
$5.3(a) 5.1%(a) 15.5%(b)
$5.2(a) 4.8%(a) 10.6%(b)
Cookies
Wholesome Snacks
Crackers
Salty Snacks (Potato Chips)
(a) Nielsen XAOC data, 52-week, 2011.(b) Nielsen XAOC data, 12-week through 30 June, 2012.
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Kellogg Company August 2, 2012
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Consecutive Years of Growth15
1996 2011
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Special K • Strong innovation
• Passionate consumers
• Household penetration growth
and gap
• SK franchise point of entry
• Immediate effect of TV activity
2008 2009 2010 2011 2012E
Cracker ChipsAll Other
Special K brandgrowth in snacks
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Kellogg Company August 2, 2012
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3%
Previous 52 Weeks
2%
Current 52 Weeks
Unit Sales
Category Keebler FudgeShoppe
ChipsDeluxe
Sandies
* Source: Nielsen all-channel consumption,52-week period ending 30 June, 2012)
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Kellogg Company August 2, 2012
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Successful Innovation – Snacks
* Source: Nielsen all channel consumption 2009, 2010, 2011
2006 2007 2008 2009 2010 2011 2012Cookies Crackers Wholesome Snacks
% Sales from Innovation3-Year Rolling*
2 Breakthrough Innovation Awards New Product Pacesetter Award
Kellogg Competitor 1
Competitor 2 Competitor 3
Kellogg Innovation SalesAnnual
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Kellogg Company August 2, 2012
Page 14 of 18
A majority of Kellogg’s U.S. Snacks’ net sales ($2.4 billion in 2011) distributed via DSD
Total number of stores serviced 22,000
Average number of stores per territory 16
Average store visits per week 4.5
Total deliveries a week 28,000
Average deliveries per store per week 1.3
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Kellogg Company August 2, 2012
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(4)%
(2)%
7%
International Growth
(internal net sales growth(a), year‐over‐year % change)
(a) Internal sales growth excludes the impact of foreign currency translation and if applicable, acquisitions, dispositions, and differences in the number of shipping days.
Second Quarter 2012
29
Latin AmericaEurope Asia Pacific
SUMMARYSETTING THE FOUNDATION
30
Summary
Quarterly results on‐track
Maintaining outlook for the full‐year, including investment
Improvement in North America, and Europe in‐line with expectations
Executing our growth strategy –Pringles growth opportunity
Kellogg Company August 2, 2012
Page 16 of 18
Appendix 1Reconciliation of Kellogg‐Defined Cash Flow to GAAP Cash Flow (a)
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(a) We use this non‐GAAP financial measure of cash flow to focus management and investors on the amount of cash available for debt repayment, dividend distributions, acquisition opportunities, and share repurchases.
June 30, July 2,(unaudited) 2012 2011
Operating activitiesNet income $659 $707Adjustments to reconcile net income to operating cash flows: Depreciation and amortization 194 175 Deferred income taxes (38) (1) Other 34 25Postretirement benefit plan contributions (32) (183)Changes in operating assets and liabilities (137) (77)
Net cash provided by operating activities 680 646
Less:Additions to properties (155) (243)
Cash flow $525 $403
Year-to-date period ended
Appendix 2
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Analysis of net sales and operating profit performance
Second quarter of 2012 versus 2011
U.S.
Morning Foods U.S. U.S. North America North Latin Asia Corp- Consoli-
(dollars in millions) & Kashi Snacks Specialty Other America Europe America Pacific orate dated
2012 net sales 939$ 803$ 252$ 369$ 2,363$ 613$ 274$ 224$ -$ 3,474$ 2011 net sales 927$ 729$ 232$ 343$ 2,231$ 634$ 281$ 240$ -$ 3,386$
% change ‐ 2012 vs. 2011:Volume (tonnage) (a) .3% ‐3.2% ‐1.6% ‐1.4% ‐ ‐.6%Pricing/mix 3.6% ‐.4% 8.4% ‐.6% ‐ 2.9%
Subtotal - internal business (b) 1.2% 4.1% 6.3% 8.9% 3.9% -3.6% 6.8% -2.0% - 2.3%Acquisitions (c) ‐% 6.2% 2.3% .8% 2.4% 7.9% .6% 5.7% ‐ 3.5%Divestitures (d) ‐% ‐% ‐% ‐% ‐% ‐% ‐% ‐2.7% ‐ ‐.2%Foreign currency impact ‐% ‐% ‐% ‐2.3% ‐.4% ‐7.6% ‐10.2% ‐7.5% ‐ ‐3.0%
Total change 1.2% 10.3% 8.6% 7.4% 5.9% -3.3% -2.8% -6.5% - 2.6%
U.S.
Morning Foods U.S. U.S. North America North Latin Asia Corp‐ Consoli‐
(dollars in millions) & Kashi Snacks Specialty Other America Europe America Pacific orate dated183$ 117$ 55$ 70$ 425$ 72$ 48$ 16$ (76)$ 485$ 176$ 111$ 56$ 63$ 406$ 102$ 61$ 25$ (51)$ 543$
% change ‐ 2012 vs. 2011:
Internal business (b) 3.3% .1% -3.2% 14.5% 3.3% -19.9% -15.2% -31.6% -4.8% -5.0%
Acquisitions (c) ‐% 6.8% 2.8% .1% 2.3% 1.2% ‐% .1% ‐.3% 1.9%Divestitures (d) ‐% ‐% ‐% ‐% ‐% ‐% ‐% 4.9% ‐% .3%Integration impact (e) ‐% ‐1.2% ‐% ‐% ‐.3% ‐7.1% ‐.3% ‐3.3% ‐43.1% ‐5.8%Foreign currency impact .1% ‐% ‐% ‐3.1% ‐.5% ‐4.4% ‐6.9% ‐3.8% ‐% ‐2.1%
Total change 3.4% 5.7% -.4% 11.5% 4.8% -30.2% -22.4% -33.7% -48.2% -10.7%
(a) We measure the volume impact (tonnage) on revenues based on the stated w eight of our product shipments.
(b) Internal net sales and operating profit grow th for 2012, exclude the impact of acquisitions, divestitures, transaction and integration costs
and impact of currency. Internal net sales and operating prof it grow th are non-GAAP f inancial measures w hich are reconciled to the
directly comparable measures in accordance w ith U.S. GAAP w ithin these tables.
(c) Impact of results for the quarter ended June 30, 2012 from the acquisition of Pringles.
(d) Impact of results for the quarter ended June 30, 2012 from the divestiture of Navigable Foods.
(e) Includes impact of transaction and integration costs associated w ith the Pringles acquisition.
2012 operating profit 2011 operating profit
Kellogg Company August 2, 2012
Page 17 of 18
Appendix 3
33
Analysis of net sales and operating profit performance
Year-to-date 2012 versus 2011
U.S.
Morning Foods U.S. U.S. North North Latin Asia Corp‐ Consoli‐
(dollars in millions) & Kashi Snacks Specialty America Other America Europe America Pacific orate dated
2012 net sales 1,880$ 1,545$ 600$ 737$ 4,762$ 1,151$ 544$ 457$ -$ 6,914$
2011 net sales 1,885$ 1,454$ 555$ 701$ 4,595$ 1,255$ 542$ 479$ -$ 6,871$
% change ‐ 2012 vs. 2011:Volume (tonnage) (a) ‐1.7% ‐7.9% ‐2.2% 1.3% ‐ ‐2.7%Pricing/mix 4.4% 1.0% 9.3% ‐1.5% ‐ 3.8%
Subtotal - internal business (b) -.3% 3.2% 7.2% 6.1% 2.7% -6.9% 7.1% -.2% - 1.1%Acquisitions (c) -% 3.1% 1.0% .4% 1.1% 4.0% .3% 2.8% ‐ 1.7%Divestitures (d) -% -% -% -% -% -% -% ‐3.3% ‐ ‐.3%Foreign currency impact -% -% -% ‐1.5% ‐.2% ‐5.4% ‐7.1% ‐3.8% ‐ ‐1.9%
Total change -.3% 6.3% 8.2% 5.0% 3.6% -8.3% .3% -4.5% - .6%
U.S.Morning Foods U.S. U.S. North North Latin Asia Corp‐ Consoli‐
(dollars in millions) & Kashi Snacks Specialty America Other America Europe America Pacific orate dated342$ 235$ 126$ 140$ 843$ 150$ 99$ 50$ (122)$ 1,020$
357$ 235$ 121$ 133$ 846$ 203$ 109$ 56$ (99)$ 1,115$
% change ‐ 2012 vs. 2011:Internal business (b) -4.5% -2.4% 2.8% 7.4% -1.0% -19.8% -3.8% -14.7% -.4% -5.6%
Acquisitions (c) -% 3.2% 1.3% .1% 1.1% .6% -% -% ‐.1% .9%Divestitures (d) -% -% -% -% -% -% -% 5.6% -% .3%Integration impact (e) -% ‐.5% -% -% ‐.2% ‐3.6% ‐.1% ‐1.5% ‐22.2% ‐2.8%Foreign currency impact -% -% -% ‐2.0% ‐.3% ‐3.4% ‐5.8% .1% -% ‐1.3%
Total change -4.5% .3% 4.1% 5.5% -.4% -26.2% -9.7% -10.5% -22.7% -8.5%
(a) We measure the volume impact (tonnage) on revenues based on the stated w eight of our product shipments.
(b) Internal net sales and operating profit grow th for 2012, exclude the impact of acquisitions, divestitures, transaction and integration costs
and impact of currency. Internal net sales and operating profit grow th are non-GAAP financial measures w hich are reconciled to the
directly comparable measures in accordance w ith U.S. GAAP w ithin these tables.
(c) Impact of results for the year-to-date period ended June 30, 2012 from the acquisition of Pringles.
(d) Impact of results for the year-to-date period ended June 30, 2012 from the divestiture of Navigable Foods.
(e) Includes impact of transaction and integration costs associated w ith the Pringles acquisition.
2012 operating profit
2011 operating profit
SECOND QUARTER 2012FINANCIAL RESULTS
August 2, 2012
34