Post on 15-Jul-2015
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Denise MorrisonPresident & Chief Executive OfficerCampbell Soup Company
2015CAGNY Presentation
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CHANGES UNDERWAY
Far reaching implications
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Shift our center of gravity
Create value for shareholders by driving sustainable, profitable net sales growth
DUAL MANDATE
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TRENDS AND DYNAMICS IN FOOD
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Redefining the framework of our relationships with our customers and consumers
SEISMIC SOCIAL SHIFTS
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REVOLUTIONARY CHANGES IN THE DEFINITION AND COMPOSITION OF THE FAMILY
Increasing diversity, new economic realities and powerful social transformations
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CONSUMER PREFERENCES AND PRIORITIES WITH RESPECT TO FOOD
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IMPACT OF DIGITAL TECHNOLOGIES AND E-COMMERCE
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Middle class expanding in developing markets
GLOBAL ECONOMIC REALIGNMENT
ASIA
USA+ EU
2BPEOPLETODAY
ALLOTHER
ASIAUSA+ EU
4.9BPEOPLEIN 2030
ALLOTHER
Source: Mario Pezzini, “An emerging middle class” OECD Observer, 2012.
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IMPORTANT STEPS TAKEN TO DIVERSIFY OUR PORTFOLIOAcquisitions contributing more than $1 billion in sales
August 6, 2012 June 13, 2013 August 8, 2013
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Clear portfolio rolesImproved product qualityBreakthrough innovation
IMPROVED COMPETITIVENESSACROSS MUCH OF OUR CORE PORTFOLIO
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Closed 5 manufacturingfacilitiesReduced costs by
IMPROVEMENT IN COST STRUCTURE
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Valuable Steps Taken
Announced closure of Marshall, MI plant
Announced exit of operations in Russia
Sold Campbell seed business and Davis, CA facility
Announced closure of South Plainfield, NJ plant
Partnership agreement with La Costena and Jumex; announced closing of Mexico plant
Acquired Plum Organics
Acquired Bolthouse Farms
Announced closure of Aiken, SC plant
Acquired Kelsen Group
Articulated new company Purpose and Growth Agenda
Sold European simple meals business
Announced closure of Sacramento plant
June 28, 2011
August 6, 2012
September 27, 2012
June 13, 2013April, 2014
October 28, 2013
August 8, 2013
June 27, 2013February 14, 2013
September 19, 2012
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Fundamental Changes Needed• How our business is organized
and managed• How we deploy resources
and assets• How we communicate and
connect with consumers
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A game-changing development in Campbell’s evolution
HOW OUR BUSINESS IS ORGANIZED AND MANAGED
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Organized and managed for moderate growth and higher profit
AMERICAS SIMPLE MEALS AND BEVERAGES ~ $4.5 Billion in Sales FY14
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AMERICAS SIMPLE MEALS AND BEVERAGES
Define more moderate goals for growth
Expand margins
Manage costs
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Focus on scale innovationplatformsExpand points of distribution and presence in growth channels
AMERICAS SIMPLE MEALS AND BEVERAGES
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AMERICAS SIMPLE MEALS AND BEVERAGES
Smarter approach to engagement and execution with customers
Reduce cost and complexity
in our supply chain
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Pivotal change in our structure
GLOBAL BISCUITS AND SNACKS~ $2.8 Billion in Sales FY14
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Unlock potentialLeverage portfolio scale
GLOBAL BISCUITS AND SNACKS
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Global Biscuits and Snacks
Core Markets with sizable presence
Export Markets
Core Markets with manufacturing presence
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PACKAGED FRESH
~ $1 Billion in Sales FY14
CONTINUE TO DELIVER ROBUST SALES PERFORMANCE IN BOLTHOUSE FARMS
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Super-premium cold pressed beverages
PACKAGED FRESH
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Building scale in the perimeter beyond produce
PACKAGED FRESHA FASTER-GROWING $18.6 BILLION CATEGORY
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New Business Divisions Organized by Category Americas
Simple Mealsand Beverages
Global Biscuitsand Snacks
PackagedFresh
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New Business Divisions Organized by Category
Mark AlexanderPresident
Americas Simple Meals and Beverages
Luca MigniniPresident
Global Biscuits and Snacks
Jeff DunnPresident
Packaged Fresh
AmericasSimple Meals
and BeveragesGlobal Biscuits
and SnacksPackaged
Fresh
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Unlock the potential of our assets Align spending with critical growth opportunities
HOW WE DEPLOYOUR RESOURCES AND ASSETS
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Clean sheet of paper
Unlock funds for growth
REEXAMINING OUR COSTS
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UNLOCK THE POWER OF OUR HUMAN RESOURCES & ASSETS
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CONNECT WITHCONSUMERS
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GAME CHANGINGDEVELOPMENTS FOR CAMPBELL
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CAMPBELL IS ON THE CUSP OF SOME MAJOR TRANSITIONS
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Anthony DiSilvestroSenior Vice President – Chief Financial OfficerCampbell Soup Company
2015CAGNY Presentation
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• Fiscal 2015 guidance
• Enabling our strategies– Three new divisions– Cost-reduction program
• Priorities for uses of cash
Agenda
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Fiscal 2015 Guidance
* See non-GAAP reconciliation
2014 Base*(52 weeks)
Previous 2015 Growth Rates
Revised 2015 Growth Rates
Currency Headwinds
Net Sales $8,139 0% to +2% -1% to +1% -2 pts
Adjusted EBIT* $1,244 -1% to +2% -7% to -5% -2 pts
Adjusted EPS* $2.45 -1% to +2%$2.42-$2.50
-5% to -3%$2.32-$2.38
-2 pts -$0.05
Continuing Operations(U.S. $ millions, except per share)
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Three New Divisions
55%34%
11%
F’14 Net Sales
70%
25%
5%
F’14 Operating Earnings*
*Excludes unallocated corporate expenses, items impactingcomparability and based on historical expense allocations; see non-GAAP reconciliation
Americas Simple Meals and Beverages
Global Biscuits and Snacks
Packaged Fresh
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Americas Simple Meals & Beverages
Global Biscuits & Snacks
Packaged Fresh
Leading Brands Across All Divisions
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Americas Simple Meals & Beverages
Global Biscuits & Snacks
Packaged Fresh
Three New Divisions – Portfolio Roles
• Moderate growth, consistent with categories• Margin expansion
• Accelerate sales growth • Expand into new categories
• Invest to grow in existing markets• Expand internationally
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Re-examining Our Cost Structure
6.9 4.6
2.3
TotalCost*
DirectProduct & Other**
AddressableSpend
• Analyzed $2.3 billion spend across P&L
• Completed benchmarking versus “Best-in-Class”
• Identified $200 million+ annual cost opportunity
• Adopting “Zero-Based Budgeting” methodology
*52-week sales base less adjusted EBIT base; see non-GAAP reconciliation**Primarily direct labor, ingredients, packaging and depreciation
U.S. $ billions
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Headcount Costs – Organization Redesign
Strategy• Simplify organization
structure
• Implement integrated global services
• Simplify and standardize end-to-end processes
• Too many layers
• Sub-optimal spans of control
• Not leveraging common processes across business units
Situation Assessment
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Non-Headcount Cost Reduction
Strategy• Target savings for each
category
• Adopt ZBB approach for fiscal 2016 budgeting process
• Develop plans to address complex cost categories over time
• Reviewed cost categories – Simple categories – Complex categories
• Completed benchmarking and identified areas of opportunity
Situation Assessment
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Headcount Non-Headcount Total
Adopting Zero-Based Budgeting Methodology
• Organization redesign to deliver new strategy
• Expense reduction across multiple categories
• $200MM+ annual savings target over next 3 years– 2 - 3% of annual sales
• Funding for growth and margin expansion
Cost Savings OpportunityU.S. $ million
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Strong Operating Cash Flows
0
250
500
750
1,000
1,250
FY10 FY11 FY12 FY13 FY14 FY15 est
Cash from Operations
Interest Coverage13 times*
Net Debt/EBITDA2.4 times*
Credit RatingsA3/BBB+
U.S. $ Millions
*See non-GAAP reconciliation
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Priorities for Uses of Cash
1 Capital Expenditures
2 Dividends
3 External Development
4 Share Repurchases
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-400
0
400
800
1,200
1,600
2,000
2,400
2,800
FY10 FY11 FY12 FY13 FY14 FY15 est
Cash Allocation History(U
.S. $
mill
ions
)
Capital Expenditures DividendsFY10-FY14 Total:
Ext Dev* Share Repurchases
*FY14 external development activity includes proceeds from European divestiture
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• Increased Capacity– Bolthouse beverage &
salad dressing– Goldfish crackers– Indonesia biscuits– Aseptic broth
• Cost Savings– Soup common platform– Australia automation project
Investing Capital for Capacity and Productivity
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Maintaining a Competitive Dividend
$-
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
Dividends Paid Payout Ratio ~ 50%
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> $1 Billion in Annual Sales+1 point of Organic Sales Growth
External Development Accelerating Growth
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• Guided by our “Dual Mandate”• Understand the trends and dynamics in the food industry• New enterprise structure to align our businesses with our
growth strategies• Adopting zero-based budgeting methodology to capture
$200+ million annual savings opportunity• Our goal is to improve our growth profile and create value
for our shareholders
Wrap-up
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Forward-looking StatementsThis presentation contains “forward-looking statements.” Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “believes,” “estimates,” “expects” and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements we make on guidance for 2015, on our cost-saving initiatives, on our new enterprise and management structure, on our ability to execute our new business strategies successfully, and on our expectations that we can accelerate innovation across our portfolio, integrate acquisitions and expand our international footprint. Forward-looking statements are based on our current expectations and assumptions regarding our business, our industry and other future conditions. Forward-looking statements are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements due to factors such as our ability to manage organizational change effectively; our ability to realize projected benefits and cost savings from the new structure and our cost-saving initiatives; the impact of strong competitive responses to our marketing strategies; risks associated with trade and consumer acceptance of our new and improved products; the effectiveness of our promotional programs; the impact of portfolio changes, and the other factors described in “Risk Factors” in the company’s most recent Form 10-K and in subsequent SEC filings. We undertake no obligation to update these statements to reflect new information or future events.
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Non-GAAP Measures
This presentation includes certain “non-GAAP” measures as defined by SEC rules. We have provided a reconciliation of those measures to the most directly comparable GAAP measures, which is posted on our investor Web site, which can be found at investor.campbellsoupcompany.com.
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Appendix
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Reconciliation of GAAP and Non-GAAP Financial Measures
($ millions, except per share)
Fiscal YearDiluted
Net Sales EBIT EPS*
2014 - As Reported 8,268$ 1,192$ 2.33$
Add: Restructuring charges and related costs - 58 0.11
Add: Pension settlement charges - 22 0.04
Add: Loss on foreign exchange forward contracts - 9 0.02
Add: Tax expense associated with sale of business - - 0.02
2014 - Adjusted 8,268$ 1,281$ 2.53$
Deduct: Impact of 53rd week (129) (37) (0.08)
Adjusted 2014 base 8,139$ 1,244$ 2.45$
*May not add due to rounding
Continuing Operations
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Reconciliation of GAAP and Non-GAAP Financial Measures
Fiscal Year Operating Earnings2014
EBIT - As Reported 1,192$
Add: Unallocated corporate expenses 149
Add: Restructuring Charges 55
Operating Earnings 1,396$
($ millions)Continuing Operations
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Reconciliation of GAAP and Non-GAAP Financial Measures
($ millions)Continuing Operations
Total CostAdjusted 201452-week base
Adjusted Net Sales base 8,139$
Deduct: Adjusted EBIT base (1,244)
Total Cost 6,895$
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Reconciliation of GAAP and Non-GAAP Financial Measures
($ millions)Fiscal Year Ended
Adjusted Interest Coverage August 3, 2014
Adjusted EBIT 1,281$
As Reported Depreciation and Amoritization 305
Adjusted EBITDA 1,586$
Interest, Net 119$ Adjusted Interest Coverage 13
Continuing Operations
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($ millions)
Reconciliation of GAAP and Non-GAAP Financial Measures
Net Debt to Adjusted EBITDAAugust 3, 2014
Short-Term Borrowings 1,771$
Long-Term Debt 2,244
Total Debt 4,015$
Less: Cash and Cash Equivalents (232)
Net Debt 3,783$
Adjusted EBITDA 1,586$
Net Debt to Adjusted EBITDA 2.4