1. health and fitness
2. nutrition

May 5, 2015
Kellogg Company
Kellogg Company
2015 FIRST QUARTER FINANCIAL RESULTS
May 5, 2015
Forward‐Looking Statements
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 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 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 Pringles 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.
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. May 5, 2015
KELLOGG COMPANY | Q1 2015 EARNINGS
2
Page 1 of 18
May 5, 2015
Kellogg Company
Overview of First Quarter 2015
• Sales trends are improving
• Sales, operating profit, and earnings per share ahead of expectations*
• Continued good progress on Project K
* On a currency‐neutral comparable basis. Please refer to appendices for reconciliation of non‐GAAP measures to the most directly comparable GAAP measure.
May 5, 2015
KELLOGG COMPANY | Q1 2015 EARNINGS
3
Project K – 2015 Investment
1. In‐Store Execution
May 5, 2015
KELLOGG COMPANY | Q1 2015 EARNINGS
4
Page 2 of 18
May 5, 2015
Kellogg Company
Project K – 2015 Investment
2. Enhancing Our Foods
May 5, 2015
KELLOGG COMPANY | Q1 2015 EARNINGS
5
Project K – 2015 Investment
3. Emerging Markets
May 5, 2015
KELLOGG COMPANY | Q1 2015 EARNINGS
6
Page 3 of 18
May 5, 2015
Kellogg Company
Summary of Financial Results
($ in millions, except EPS)
First Quarter 2015
Reported $
Reported Growth
Currency‐Neutral Comparable Growth*
Net Sales
$
3,556
(5.0)%
(0.3)%
Operating Profit
$
384
(37.5)%
(1.9)%
Earnings Per Share $1.04 or 3% Growth
(Currency‐Neutral Comparable) * Please refer to appendices for reconciliation of non‐GAAP measures to the most directly comparable GAAP measure.
May 5, 2015
KELLOGG COMPANY | Q1 2015 EARNINGS
7
Net Sales Components
First Quarter 2015
(year‐over‐year, % change)
Currency‐Neutral
Comparable Growth (0.3)%
+ 0.4%
$3,742 M
0%
(0.7)%
(4.7)%
$3,556 M
Currency
Q1 2015
(5.0)%
Q1 2014
May 5, 2015
Volume
Price / Mix
Acq./Div./Integ.
Costs/Project K
KELLOGG COMPANY | Q1 2015 EARNINGS
8
Page 4 of 18
May 5, 2015
Kellogg Company
Currency‐Neutral Comparable Gross Profit *
First Quarter 2015
$1.4b
• Productivity improvements and Project K savings
$1.4b
37.9%
Margin*
37.9%
Margin*
2014
2015
• Factory/distribution inflation
• Investing in our food
* Please refer to appendices for reconciliation of non‐GAAP measures to the most directly comparable GAAP measure.
May 5, 2015
KELLOGG COMPANY | Q1 2015 EARNINGS
9
Operating Profit Performance by Region
First Quarter 2015
($ in millions, currency‐neutral comparable performance,* year‐over‐year % change )
Reported
Currency‐Neutral Dollars
Comparable Growth*
North America
$344
(8)%
Primarily driven by lower sales and investment in capabilities
Europe
$61
13%
Driven by sales growth and deflation in COGS
Latin America
$51
5%
Good sales growth including volume and pricing; investment in brand building and capabilities
Asia Pacific
$12
(3)%
Solid sales growth more than offset by investment in capability and brand building
* Please refer to appendices for reconciliation of non‐GAAP measures to the most directly comparable GAAP measure.
May 5, 2015
KELLOGG COMPANY | Q1 2015 EARNINGS
10
Page 5 of 18
May 5, 2015
Kellogg Company
Operating Cash Flow (after capital expenditure) *
Year‐to‐Date 2015
(millions)
•
Cash flow in‐line with plan
•
Continue to expect full‐year cash flow of approximately $1 billion
•
Cash for Project K and timing impacted results
•
Returned more than $450 million to shareholders in the quarter
* Please refer to appendices for reconciliation of non‐GAAP measures to the most directly comparable GAAP measure.
May 5, 2015
KELLOGG COMPANY | Q1 2015 EARNINGS
11
2015 Outlook – Reaffirming Guidance
Net Sales(a)
Approximately flat
Currency‐Neutral Comparable
Operating Profit(a)
‐2% to ‐4%
Currency‐Neutral Comparable
(includes a three‐to‐four‐point impact from incentive compensation)
EPS(a)
Flat to ‐2% Currency‐Neutral Comparable
Approximately $1 billion
Operating Cash Flow
(after capital expenditure and the significant after‐tax impact of Project K)
(a) 2015 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, and other items that could affect comparability.
May 5, 2015
KELLOGG COMPANY | Q1 2015 EARNINGS
12
Page 6 of 18
May 5, 2015
Kellogg Company
2015 Outlook – Guidance
2014 Reported earnings per share
Items affecting comparability (see page 6 of appendices)
$1.75 2.06 2014 Comparable earnings per share (EPS)
$3.81 EPS growth (‐2% to flat)
Currency‐neutral comparable 2015 EPS (a)
$3.74 ‐ $3.82
Current estimate for impact of currency
(≈0.24)
Comparable 2015 EPS
$3.50 ‐ $3.58
Integration costs $(0.04) ‐ (0.06)
Project K costs
$(0.80) ‐ (0.90)
(a) 2015 guidance excludes the impact of acquisitions, dispositions, currency translation, differences in shipping days, mark‐to‐market adjustments, integration costs, costs related to Project K, and other items impacting comparability.
May 5, 2015
KELLOGG COMPANY | Q1 2015 EARNINGS
13
U.S. Morning Foods (a)
First Quarter 2015
(currency‐neutral comparable net sales growth,* year‐over‐year change)
$799
$759
$782
$768
$776
(2.9)% Growth*
Q1
Q2
Q3
2014
Q4
Q1
2015
(a) Includes U.S. cereal, Pop‐Tarts, health and wellness bars, and beverage businesses.
* Please refer to appendices for reconciliation of non‐GAAP measures to the most directly comparable GAAP measure.
May 5, 2015
KELLOGG COMPANY | Q1 2015 EARNINGS
14
Page 7 of 18
May 5, 2015
Kellogg Company
U.S. Snacks (a)
First Quarter 2015
(currency‐neutral comparable net sales growth,* year‐over‐year change)
$864
$851
$807
$807
$854
(1.1)% Growth*
Q1
Q2
Q3
Q4
2014
Q1
2015
(a) Includes U.S. cookies, crackers, cereal bars, savory snacks, and fruit‐flavored snack businesses.
* Please refer to appendices for reconciliation of non‐GAAP measures to the most directly comparable GAAP measure.
May 5, 2015
KELLOGG COMPANY | Q1 2015 EARNINGS
15
U.S. Specialty (a)
First Quarter 2015
(currency‐neutral comparable net sales growth,* year‐over‐year change)
$372
$361
$276
$270
$280
(2.5)% Growth*
Q1
Q2
Q3
2014
Q4
Q1
2015
(a) Includes food service, convenience and Girl Scouts businesses.
* Please refer to appendices for reconciliation of non‐GAAP measures to the most directly comparable GAAP measure.
May 5, 2015
KELLOGG COMPANY | Q1 2015 EARNINGS
16
Page 8 of 18
May 5, 2015
Kellogg Company
North America Other (a)
First Quarter 2015
(currency‐neutral comparable net sales growth,* year‐over‐year change)
$482
$470
$464
$448
$433
(6.1)%
Growth*
Q1
Q2
Q3
Q4
Q1
2014
2015
(a) Includes U.S. Frozen, Canadian, and Kashi businesses.
* Please refer to appendices for reconciliation of non‐GAAP measures to the most directly comparable GAAP measure.
May 5, 2015
KELLOGG COMPANY | Q1 2015 EARNINGS
17
Europe
First Quarter 2015
(currency‐neutral comparable net sales growth,* year‐over‐year change)
$705
$767
$720
$677
$607
1.0% Growth*
Q1
Q2
Q3
2014
Q4
Q1
2015
* Please refer to appendices for reconciliation of non‐GAAP measures to the most directly comparable GAAP measure.
May 5, 2015
KELLOGG COMPANY | Q1 2015 EARNINGS
18
Page 9 of 18
May 5, 2015
Kellogg Company
Kellogg Latin America
Maria Fernanda Mejia
President, Kellogg Latin America
Agenda
• Latin America at a glance
• Operating model • KLA strategy • Activating the strategy
20
Page 10 of 18
May 5, 2015
Kellogg Company
Latin America: A Vibrant Developing Market
• Growing economies
• 600+ million consumers
• Large Breakfast & Snacks categories, $42B combined and growing • 40% under 20 years of age
• Global competitor focus • Rising middle class
• Changing lifestyle increasing need for convenience
21
Solid Footprint: Geographies & Categories 2014 Net Sales: $1.2 Billion Salty Snacks
Mexico
Venezuela
Wholesome
Snacks
CARICAM
Andean
Mercosur
Cereal
Cluster Detail: CariCam (Central America / Caribbean), Mercosur (Brazil, Argentina, Chile, Paraguay, Uruguay) Andean (Colombia, Peru, Ecuador) 22
Page 11 of 18
May 5, 2015
Kellogg Company
Strong, Powerful and Expandable Brands
23
Leader in Cereal, Determined to Become Snacks Leader
Cereal
55.4% category‐share value
Wholesome Snacks
24% category‐share
Salty Snacks
1.3% category‐share and growing
Source: Nielsen RIE LA – 2014 FY, $ share of category
24
Page 12 of 18
May 5, 2015
Kellogg Company
2012‐2014: New Operating Model, Enabled by Project K • Regional category model • Business simplification
• Consumer, shopper, channel and customer focus
• Talented leaders
• Efficiency and effectiveness
• In‐store excellence
• Supply chain utilization
25
Accelerating Growth
Net Sales Growth (a)
16% 7% 7% 7% Q2
Q3
Q4
(5%)
Q1
2014
* Currency‐neutral comparable growth
Q1
2015
26
Page 13 of 18
May 5, 2015
Kellogg Company
Kellogg Latin America Strategy
• Category growth and expansion
• Pan‐regional innovation
• Win where they shop
• Advantaged supply chain network
• Talent and leadership development
27
Relevant, More Competitive Pan‐Regional Innovations
Choco Krispis Relaunch Special K Restage Parent‐Brand Innovation
28
Page 14 of 18
May 5, 2015
Kellogg Company
Maximizing the Potential of Pringles Since the acquisition: good growth and brand expansion USD 10%+
FY12
FY14
Tortilla successful innovation
$6M sales +80% incremental 29
Activating High Frequency Stores: New Distribution Price Point (USD)
Medium Bag
13‐16 Portions Stand‐Up Pouch
3‐4 portions Small Bag
6‐8 Portions
Single‐Serve
Single‐Serve –
Coinage
< $0.30
$0.30 – 0.50
$1.00 – 1.20
$1.20 – 1.90
$2.00 – 2.30
30
Page 15 of 18
May 5, 2015
Kellogg Company
Activating High Frequency Stores: Visibility Program
Outside the store Inside the store Sales +DD% vs LY and market share gains
Source: Comparable Sales, YTD through Feb. 2015 vs LY 31
Latin America: Year‐to‐Go
Innovation
High‐Frequency Stores
Commercial Activation
32
Page 16 of 18
May 5, 2015
Kellogg Company
Latin America – Summary
• Exciting opportunity for years to come
• Kellogg is very well‐positioned – Growing categories
– Leading brands
– Increasing profitable sales growth
– Right strategy and initiatives
• Driving and investing for growth
33
Asia Pacific
First Quarter 2015
(currency‐neutral comparable net sales growth,* year‐over‐year change)
$242
$248
$270
$247
$230
4.0% Growth*
Q1
Q2
Q3
2014
Q4
Q1
2015
* Please refer to appendices for reconciliation of non‐GAAP measures to the most directly comparable GAAP measure.
May 5, 2015
KELLOGG COMPANY | Q1 2015 EARNINGS
34
Page 17 of 18
May 5, 2015
Kellogg Company
Summary
• Sales trends are improving
• Sales, operating profit, and earnings per share ahead of expectations*
• Continued good progress on Project K
* On a currency‐neutral comparable basis. Please refer to appendices for reconciliation of non‐GAAP measures to the most directly comparable GAAP measure.
May 5, 2015
KELLOGG COMPANY | Q1 2015 EARNINGS
35
Kellogg Company
2015 FIRST QUARTER FINANCIAL RESULTS
May 5, 2015
Page 18 of 18