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Kellogg Company

of 14

August 4, 2016

Kellogg Company2016 SECOND QUARTER

FINANCIAL RESULTSAugust 4, 2016

Forward‐Looking Statements

2

This presentation contains, or incorporates by reference, “forward‐looking statements” with projections concerning, among other things, the Company’s global growth and efficiency program (Project K), the integration of acquired businesses, the Company’s strategy, zero‐based budgeting, 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 future results could also be affected by a variety of factors, including the ability to implement Project K as planned, whether the expected amount of costs associated with Project K will differ from forecasts, whether the Company will be able to realize the anticipated benefits from Project K in the amounts and times expected, the ability to realize the anticipated benefits and synergies from the 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; 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.

Non‐GAAP Financial Measures. This presentation includes non‐GAAP financial measures. Please refer to the Appendices for a reconciliation of these non‐GAAP financial measures to the most directly comparable GAAP financial measures. Management believes that the use of such non‐GAAP measures assists investors in understanding the underlying operating performance of the company and its segments.

August 4, 2016 KELLOGG COMPANY | Q2 2016 EARNINGS

Kellogg Company

of 14

August 4, 2016

Second Quarter 2016

3

*On a currency‐neutral comparable basis


• Investing in our food and packaging – renovation and innovation across portfolio

• Expanding Pringles – good sales growth*worldwide

• Enhancing sales capabilities – Revenue Growth Management

• Increasing earnings visibility – raising margin* expectations

Clear Progress on Priorities:

Profit Margin Outlook

4August 4, 2016 KELLOGG COMPANY | Q2 2016 EARNINGS

• Ongoing• Project K• ZBB

Invest forImpact

PriceRealization

Productivity

10.0%

12.5%

15.0%

17.5%

20.0%

2015 2018E

Currency‐Neutral, Comparable Basis, Operating Profit as % of Net Sales

14.4%

• ROI• New Marketing

model

~18%

• Revenue Growth Management

On‐TrendFood

• Renovation• Innovation• Portfolio Management

Kellogg Company

of 14

August 4, 2016

Year to Date

Summary of Financial Results

5

* Please refer to appendices for reconciliation of non‐GAAP measures to the most directly comparable GAAP measure.

Change Versus Prior Year


Q2

Net Sales

Reported (6.6)% (5.5)%

FX‐Neutral Comparable * 8.6% 7.6%

FX‐Neutral Comparable

x‐Venezuela * (2.0)% (1.5)%

Op.Profit

Reported 9.1% 11.5%

Earn.PerShare

Reported 25.4% 2.4%

Comparable * (1.1)% (1.6)%



FX‐Neutral Comparable

x‐Venezuela * 5.3% 3.4%

Net Sales Components

6

Second Quarter 2016


$3,498 M +10.2%, (0.5)% ex. VZ

$3,268 M

(1.6)%,(1.5)% ex. VZ (15.1)%,

(1.8)% ex. VZ

Currency‐NeutralComparable Growth

+8.6%; (2)% ex. VZ+0.1%

YTD: (1.1)% 8.7% 0.3% (13.4)%excluding VZ (1.0) (0.5) 0.3 (2.0)

(year‐over‐year, % change)

Kellogg Company

of 14

August 4, 2016

Gross Profit Margin

7



36.0%

37.0%

38.0%

39.0%

40.0%

Q2 YTD

2015 2016

Currency‐Neutral, Comparable Basis, Excluding Venezuela, Gross Profit as % of Net Sales*

+ GPM flat ex‐Venezuela in Q2

+ Productivity, Project K, ZBB efficiencies, led by North America

‐ Adverse mix, investment in food, adverse transactional FX

+ Projecting improvement for year

Operating Profit Margin

8


+ OPM +110 bp ex‐Venezuela in Q2

+ Project K, ZBB efficiencies, and some timing of Brand Building

+ On‐track to post improvement for year


10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%

Q2 YTD

2015 2016

Currency‐Neutral, Comparable Basis, Excluding Venezuela, Operating Profit as % of Net Sales*

Kellogg Company

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August 4, 2016

Financial Performance by Region

9

North America

Europe

Latin America

Asia Pacific

(3)%

0%

112%

3%

5%

67%

17%

• Volume declines on price‐elasticity and non‐core brands • Adverse mix• Net input deflation and cost savings

• Pringles +DD growth, Wholesome Snacks +MSD growth, offset by softness in RTEC

• Efficiencies more than offset adverse transactional FX

• Pringles +HSD, Africa +DD, Asia +LSD, Australia cereal stabilizing• Brand Building and Overhead efficiencies/reductions


4%

• Pricing in hyperinflationary Venezuela; elsewhere, price‐elasticity and promo timing in Mexico

• Ex‐Venezuela price realization, cost savings, and Brand Building efficiencies


Net Sales

Growth*

Operating Profit

Growth*

x‐Venezuela

OP Margin

Growth*

1.4 pt.

0.5 pt.

(3.1) pt.

0.8 pt.

(1)% 4% 0.8 pt.

Q2 2016, Currency‐Neutral, Comparable Basis, Operating Profit as % of Net Sales

Cash Flow

10


• Year‐to‐date cash flow* $399 million

• Includes headwind of $(97) million from bond tender

• Ahead of year‐ago period, in line with expectations

• Continued reduction in core working capital* as % of sales

• On‐track to deliver approx. $1.1 billion cash flow* for the full year


* “Cash Flow” is Operating Cash Flow After Capital Expenditure; Year to Date through Q2 2016. “Core Working Capital” is an internal Kellogg metric defined as last 12 months’ average trade receivables and inventory, less 12 months’ average trade payables, divided by last 12 months’ net sales.

Kellogg Company

of 14

August 4, 2016

2016 Outlook

11

(a) 2016 guidance excludes the impact of acquisitions, dispositions, currency translation, differences in the number of shipping days, mark‐to‐market adjustments, integration costs, costs related to Project K, Venezuela remeasurement, VIE deconsolidation, and other items that could affect comparability.

(b) 2016 guidance excludes the impact of currency translation, differences in the number of shipping days, mark‐to‐market adjustments, integration costs, costs related to Project K, Venezuela remeasurement, and other items that could affect comparability. Does include the impact of prior acquisitions and investment in JVs.


EPS(b)Currency‐Neutral Comparable

Operating Profit(a)Currency‐Neutral Comparable

Net Sales(a)Currency‐Neutral Comparable

+4‐6%

+15‐17%

$4.11 ‐ $4.18

Note: Excluding Venezuela

Currency‐NeutralComparable

+0‐2%

+4‐6%

• Still expecting return to slight growthin 2H

• Now expected to be low end of range

• Expanded ZBB savings in North America, and early ZBB savings in International

• Now expected to be high end of the range

Previous: 0‐2%Previous: 4‐6%

Previous: 4‐6%

• Venezuela performance and ZBB savings• Comparable EPS comes down to $3.58‐

$3.65 (from previous $3.64‐$3.71 guidance) for European currency translation

Previous: $4.00‐$4.07

Previous: 11‐13%


2016 Outlook – Guidance Items

12

(a) 2016 guidance excludes the impact of currency translation, differences in the number of shipping days, mark‐to‐market adjustments, integration costs, costs related to Project K, Venezuela remeasurement, VIE deconsolidation, and other items that could affect comparability. Does include the impact of prior acquisitions and investment in JVs.



• Currency Translation – Venezuela $(0.41)/sh. Previously $(0.30)

• Currency Translation – Others $(0.12)/sh. Previously $(0.06)

• Interest Expense ~$400 Includes $150 from bond tender

• Comparable Tax Rate ~27% Previously 27‐28%

• Share Buybacks $700‐750 No change

$ in Millions, Except Per‐Share Data

• Up‐Front Costs (post‐tax) $(0.40)‐(0.50) No change; pre‐tax $(0.56)‐(0.71)

• Integration Costs (post‐tax) $(0.02)‐(0.03) No change; pre‐tax $(0.03)‐(0.04)

Kellogg Company

of 14

August 4, 2016

U.S. Snacks

13

Overview


Crackers

Cookies

Bars

Salty

Fruit Snacks• Big, profitable business

• Great brands

• Broad portfolio

• Impacted by Special K

Net Sales$3.2 billionNet Sales$3.2 billion

Retail Sales$1 bn

Retail Sales$0.2 bneach

Retail Sales$0.5 bn

Retail Sales$0.2 bneach

Retail Sales$0.7 bn

U.S. Snacks

14

• Project K

• Zero‐Based Budgeting

• Revenue Growth Management

Improving Profit Margins


YTDOperating Profit

Margin*

+120bp

RGM results:

• Consumption +5%• Avg. price increased on base,

promoted, and overall• Higher profit margin

* Currency‐neutral, comparable basis. Please refer to appendices for reconciliation of non‐GAAP measures to the most directly comparable GAAP measure.

Kellogg Company

of 14

August 4, 2016

U.S. Snacks

15

Investing in Growth Brands


Source: Nielsen, xAOC

Consumption, % Growth

7/2/2016 7/2/2016

YTD Q2

4.8 5.4

0.8 1.9

2.9 2.0

(1.5) 0.4

2.8 1.6

(0.5) 5.4

1.9 4.5

U.S. Snacks

16

Expanding On‐the‐Go


• New formats

• Additional offerings

• Expanded capacity

• Increased distribution

Kellogg Company

of 14

August 4, 2016

U.S. Snacks

17

Stabilize Special K


• Transition to new brand positioning

• Launching on‐trend nut‐based bars

• Renovating other foods – where possible

U.S. Snacks

18

• Improved Operating Profit Margin*

• Investment and on‐the‐go driving growth in core brands

• Weight management, off‐trend SKUs were a drag

Second Quarter 2016



Kellogg Company

of 14

August 4, 2016

U.S. Morning Foods

19

Second Quarter 2016


• Strong improvement in Operating Profit Margin*

• Core 6 cereal brands holding share, Pop‐Tarts strong growth

• Sales held back by timing of promotion, exit of non‐strategic businesses

• Kellogg’s NYC restaurant –one billion impressions!


U.S. Specialty Channels

20

• Continued net sales growth in core channels

• Margin expansion* through price realization and mix

• Strong innovation performance

• Expanding reach in emerging channels

Second Quarter 2016



Kellogg Company

of 14

August 4, 2016

North America Other

21

• Kashi completed non‐GMO verification across North America

• Innovation off to good starts in Canada, Frozen and Kashi

• Portfolio management, packaging transitions, and price elasticity

• Kashi investment in food and packaging; adverse cost impact of transactional FX in Canada

Second Quarter 2016


Europe

22

• +DD net sales growth in Pringles

• +MSD net sales growth in Wholesome Snacks

• Cereal held down by Special K, challenging retailer environment in U.K.

• New innovation and support planned in Cereal business

Second Quarter 2016


Kellogg Company

of 14

August 4, 2016

Latin America

23

• Managing well through volatility

• Sequential improvement in top‐line, despite price elasticity, challenging economic environment

• Good Operating Profit Margin*

improvement ex‐Venezuela in Q2

• Continuing to gain share in key markets

Second Quarter 2016



Asia Pacific

24

• Strong Pringles net sales growth, including initial waves of Tortilla

• Regained share in Australia cereal

• Strong net sales growth in Sub‐Saharan Africa, Southeast Asia

• Our JVs continue to perform well

• Improved Operating Profit Margin*

Second Quarter 2016



Kellogg Company

of 14

August 4, 2016

Summary

25

• Q2: Better earnings, progress on priorities

• 2016 Outlook: Higher margins

• Longer‐Term Outlook: Visibility into increased savings and efficiencies

May 5, 2016 KELLOGG COMPANY | Q1 2016 EARNINGS

August 4, 2016

Kellogg CompanySECOND QUARTER 2016 FINANCIAL RESULTS

Q&A

Kellogg Company

of 14

August 4, 2016

APPENDIX: 2016 EPS Guidance

27

(a) 2016 guidance excludes the impact of currency translation, differences in the number of shipping days, mark‐to‐market adjustments, integration costs, costs related to Project K, Venezuela remeasurement, VIE deconsolidation, and other items that could affect comparability. Does include the impact of prior acquisitions and investment in JVs.


Guidance from Q4 2015 Call Guidance from Q1 2016 Call Guidance from Q2 2016 Call

2015 Reported earnings per share $1.72 $1.72 $1.72

Items affecting comparability 1.81 1.81 1.81

2015 Comparable earnings per share (EPS) $3.53 $3.53 $3.53

+6‐8% +13‐15% +16‐18%

Currency‐neutral comparable 2016 EPS (a) $3.74 ‐ $3.81 $4.00 ‐ $4.07 $4.11 ‐ $4.18

Current estimate for impact of currency ex. VZ (≈0.06) (≈0.06) (≈0.12)

(≈0.04) (≈0.30) (≈0.41)

(≈0.10) (≈0.36) (≈0.53)

Comparable 2016 EPS $3.64 ‐ $3.71 $3.64 ‐ $3.71 $3.58 ‐ $3.65

Integration costs $(0.02) ‐ (0.03) $(0.02) ‐ (0.03) $(0.02) ‐ (0.03)

Upfront costs $(0.40) ‐ (0.50) $(0.40) ‐ (0.50) $(0.40) ‐ (0.50)

Current estimate for impact of VZ currency

Total Impact of currency


*

*

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