KELLOGG COMPANY · 2020. 10. 29. · Kellogg Company 10/29/2020 2 KELLOGG COMPANY | Q3 2020...

Kellogg Company 10/29/2020

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KELLOGG COMPANY2020 Q3 EARNINGS

October 29, 2020

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KELLOGG COMPANY | Q3 2020 EARNINGS

Welcome, Agenda & DisclaimersJohn Renwick

VP Investor Relations & Corporate Planning

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KELLOGG COMPANY | Q3 2020 EARNINGS 3

Forward-Looking StatementsThis presentation contains, or incorporates by reference, “forward-looking statements”, with projections concerning, among other things, the Company’s restructuring programs, the integration of acquired businesses, 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, charges, rates of return, brand building, ROIC, working capital, growth, new products, innovation, cost reduction projects, workforce reductions, savings, 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 actual results or activities may differ materially from these predictions. The Company’s future results could be affected by a variety of other factors, including uncertainty of the magnitude, duration, geographic reach, impact on the global economy and current and potential travel restrictions of the COVID-19 outbreak, the current, and uncertain future, impact of the COVID-19 outbreak on our business, growth, reputation, prospects, financial condition, operating results (including components of our financial results), and cash flows and liquidity, the expected benefits and costs of the divestiture of selected cookies, fruit and fruit flavored-snacks, pie crusts, and ice-cream cones businesses of the Company, the risk that disruptions from the divestiture will divert management's focus or harm the Company’s business, risks relating to any unforeseen changes to or effects on liabilities, future capital expenditures, revenues, expenses, earnings, synergies, indebtedness, financial condition, losses and future prospects, risks associated with the Company’s provision of transition services to the divested businesses post-closing, the ability to implement restructurings as planned, whether the expected amount of costs associated with restructurings will differ from forecasts, whether the Company will be able to realize the anticipated benefits from restructurings in the amounts and times expected, the ability to realize the anticipated benefits and synergies from business acquisitions 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, transportation costs, 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 risks and uncertainties.

Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to update them publicly.

This presentation includes non‐GAAP financial measures. Please refer to the earnings press release, which is available on the Investor Relations page on the Company’s website, www.Kelloggcompany.com, for a reconciliation of these non‐GAAP financial measures to the most directly comparable GAAP financial measures. Managementbelieves that the use of such non-GAAP measures assists investors in understanding the underlying operating performance of the company and its segments.

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OverviewSteve Cahillane

Chairman & Chief Executive Officer

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http://www.kelloggcompany.com/


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Executing Well Through the Crisis

Keeping Employees Safe

Supplying Food to the World

Aiding Our Communities


Another Strong Quarter

Better-than-expected financial results▪ Strong organic net sales growth

▪ Gross profit margin expansion

▪ Double-digit increase brand building investment

▪ Stronger-than-expected cash flow

Exceptional emerging markets growth▪ Double-digit organic net sales growth in Latin America and AMEA

▪ Organic net sales growth in cereal, snacks, frozen, and noodles

▪ Amidst challenging macro conditions

Performing well in-market▪ Holding or gaining share in more than half of our country/categories

▪ Share gains in most U.S. retail categories and away-from-home channels


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Looking Ahead

Raising full-year guidance again

▪ Raising all guidance metrics

▪ Based on strength of Q3 results

Reinvesting for future

▪ Continued double-digit A&P growth

▪ Investing in capacity and capabilities

Confident in long-term trajectory

▪ Incremental households

▪ e-Commerce strength

▪ Emerging markets

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Financial Results & OutlookAmit Banati

Chief Financial Officer

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Q3 2020 – Summary of Financial Results

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FX-Neutral

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Net Sales – Sustained Organic Growth

* Please refer to Q3 2020 earnings press release tables for reconciliation of non-GAAP measures to the most directly comparable GAAP measure.

• Organic growth in all four Regions

• Organic growth in cereal, snacks, frozen, and noodles

• Final quarter of divestiture impact


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Improved Gross Margin, Increased Brand Investment



Enhancing Financial Flexibility

• Strong cash flow

• Reduced net debt

• Access to liquidity


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Pandemic – Q4 Financial Assumptions & Variables

• Developed Markets: At-home consumption continues to decelerate

• Away From Home Channels:Declines moderate, taking longer to stabilize

• Emerging Markets: COVID and related economic softness restrain growth

Net Sales: Gross Profit:

• Assuming no significant or prolonged disruption: Plants continue to run at available capacity

• Incremental Costs: Continued investment in safety, cleaning, temporary labor

• Less operating leverage:Moderated net sales, and planned downtime for maintenance, productivity enhancements, and capacity additions

Investment:

• Double-digit increase in A&P: Continuation of shift from 1H, revitalizing more brands, build on reappraisal

• Incremental investment in capabilities: E-commerce, packaging


2020 Outlook – Raising Guidance Again


Growth vs. Prior Year, except Cash Flow*


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Business UpdatesSteve Cahillane


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North America – Share Gains & Investment

* Please refer to the Q3 2020 earnings press release for reconciliation of non-GAAP measures to the most directly comparable GAAP measure.

• At-home demand remained elevated, if decelerating

• Gained or held share in 5 of 6 primary categories

• Away-from-home sales remained in decline, but we gained share in most categories/channels

• Significant increase in brand investment


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North America Snacks – Sustained Growth


Currency-Neutral, unless otherwise noted

• Elevated consumption growth decelerating

• Growth led by at-home occasions and pack-formats

• Holding or gaining share in all three primary categories in U.S.

• Divestiture lapped at end of July


North America Cereal – Increasing Penetration & ShareCurrency-Neutral, unless otherwise noted

• At-home demand elevated, if decelerating

• Gaining share

• Increased household penetration

• Away-from-home declines

Q3 Highlights:



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North America Frozen Foods – Elevated Consumption



• Elevated at-home demand

• Share gains by Eggo in waffles, pancakes, and french toast

• Continued double-digit consumption growth for MorningStar Farms

Q3 Highlights:


Europe – Sustained Growth and Increased Investment


• Cereal share gains in key markets, amidst decelerating category growth

• Pringles consumption and sales growth, led by U.K.

• Significant increase in brand investment

Q3 Highlights:



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Latin America – Better Than Expected


• Elevated consumption for cereal in modern-trade channels

• Snacks growth resumed in spite of challenging conditions

• Strong increase in brand building investment

Q3 Highlights:



AMEA – Better Than Expected


• High-single-digit growth in cereal

• Double-digit growth in snacks and noodles

• Significant increase in brand building investment

Q3 Highlights:


Source: Nielsen, IRI, Intage


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SummarySteve Cahillane


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• Protecting our People

• Strong execution amidst crisis

• Solid in-market performance

• Emerging markets holding up well

• Over-delivering our financial plan

• Investing for the Future

In Summary

A Stronger Kellogg Company


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Q&A

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KELLOGG COMPANY · 2020. 10. 29. · Kellogg Company 10/29/2020 2 KELLOGG COMPANY | Q3 2020...

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Transcript of KELLOGG COMPANY · 2020. 10. 29. · Kellogg Company 10/29/2020 2 KELLOGG COMPANY | Q3 2020...