ConAgra Brands, Inc. · NYSE:CAG
ConAgra Brands — Q4 FY2017 Earnings Presentation
40 slides from ConAgra Brands's earnings presentation, Jun 29, 2017
Slide 1: FY17 Q4 Earnings Presentation
FY17 Q4 Earnings Presentation June 29, 2017
Slide 2: Today's Presenters
Today’s Presenters Brian Kearney Director of Investor Relations Sean Connolly President and Chief Executive Officer Dave Marberger Chief Financial Officer 2
Slide 3: Forward-Looking Statements & Non-GAAP Measures
Forward-Looking Statements & Non-GAAP Measures Forward-Looking Statements This document contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are based on management's current expectations and are subject to uncertainty and changes in
Slide 4: Sean Connolly, President and CEO
Sean Connolly President and Chief Executive Officer 4
Slide 5: New Era, New Company
New Era, New Company 1919 1971 1993 2009 2016/17 Agriculture Diversified Conglomerate Branded Pure Play 5
Slide 6: Better Positioned for Value Creation
Better Positioned for Value Creation from to Conglomerate Pure Play Branded Food Company Focus on Volume Focus on Value Reliance on Trade/Push Reliance on Brand Strength/Pull SKU Proliferation SKU Optimization Erratic A&P/Innovation Disciplined A&P/Innovation Inefficient Cost Structure LEAN Cost Str
Slide 7: Two Years of Aggressive Action
Two Years of Aggressive Action Improving Culture, Growth Capabilities, Reshaping the Portfolio and Margins Sold Private Brands Built new management team Divested Spicetec Flavors & Relocated headquarters to Chicago Seasonings and J.M. Swank Built Growth Center of Excellence Successfully
Slide 8: Multi-Year Transformation Plan
Multi-Year Transformation Plan FY16/17 FY18 FY19/20 • Reset top-line • Improve top-line • Accelerate growth • Expand margins • Expand margins • Expand margins 8
Slide 9: Tremendous Opportunity Remains
Tremendous Opportunity Remains • Continue to improve margins • Continue to improve growth prospects • Continue to reshape the portfolio, organically and inorganically 9
Slide 10: Performance Summary
Performance Summary (dollars in millions, Q4 FY17 vs YA FY17 vs YA except per share data) Net Sales $1,862 (9.3)% $7,827 (9.7)% Net Sales excl. impacts of (3.6)% (5.0)% divestitures & foreign exchange Adj. Gross Profit 540 (5.1)% 2,365 (3.9)% Adj. Gross Margin 29.0% +130 bps 30.2% +180 bps Adj. Op.
Slide 11: Strong Margin Improvement
Strong Margin Improvement Adj. Gross Margin Adj. Operating Margin* +180 bps +310 bps 30.2% +130 bps 15.8% 29.0% 28.4% +100 bps 27.7% 13.6% 12.7% 12.7% Q4 FY16 Q4 FY17 FY16 FY17 Q4 FY16 Q4 FY17 FY16 FY17 * Adjusted Operating Margin excludes equity method investment earnings 11 Note: “Adjusted” financ
Slide 12: Key Margin Drivers
Key Margin Drivers $200 million SG&A savings program completed Trade efficiency program on track Realizing pricing benefits of premiumization SKU rationalization working Supply Chain productivity coming through Divesting low-margin businesses Continue to Chip Away from Here 12
Slide 13: Value Over Volume Strategy On Track
Value Over Volume Strategy On Track Incremental Sales Base Sales Velocity (% Change vs Year Ago) (% Change vs Year Ago) Q2 Q3 Q4 Q1 Q2 Q3 Q4 +2.6% FY16 FY16 FY16 FY17 FY17 FY17 FY17 (1.7)% (6.8)% +1.2% +1.4% +0.7% +0.6% (14.9)% (14.9)% (0.4)% (18.2)% (15.3)% (0.3)% (21.2)% Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY16
Slide 14: FY17 Revenue Rebase Abating Sequentially
FY17 Revenue Rebase Abating Sequentially Net Sales Growth excl. Divestitures and Foreign Exchange 1% 0% (1%) (2%) (3%) (4%) (3.6%) (5%) (4.8%) (6%) (5.8%) (7%) H1 Q3 Q4 Net sales excl. impacts of divestitures and foreign exchange is non-GAAP. See the end of this presentation for a reconciliation of
Slide 15: Modernizing Healthy Choice
Modernizing Healthy Choice Where We Were Where We Are Heart Health Focus Broader Health Benefits 15
Slide 16: Strong Results From Modernizing
Strong Results From Modernizing Healthy Choice Results % Volume from Millennials +17% $ Sales +2% Base $ Sales +9% Velocity +11% Healthy Choice Frozen Gross Margin Expansion >900 bps (FY17 vs FY14) Source (all metrics except gross margin expansion): IRI Market Advantage, TTL US MULO L26W Ending 5/28
Slide 17: Where We Are Headed
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Slide 18: Robust FY18 Innovation Pipeline
Robust FY18 Innovation Pipeline 18
Slide 19: Looking Ahead
Looking Ahead • Continue top line progress • New innovation slate starting to hit market • Continue to focus on executional excellence • Continue to expand margins • Continue to re-shape portfolio via disciplined M&A 19
Slide 20: FY18 Outlook
FY18 Outlook1,2 Key Financial Metrics FY18 Reported Net Sales Growth (2)% to Flat Organic Net Sales Growth3 (2)% to Flat Adj. Op. Margin4 15.9% to 16.3% Effective Tax Rate 32.5 to 33.5% Adj. Diluted EPS from cont. ops. $1.84 to $1.89 Share Repurchases5 $1.1 billion 1. The inability to predict the am
Slide 21: Dave Marberger, Chief Financial Officer
Dave Marberger Chief Financial Officer 21
Slide 22: Consolidated Financial Summary
Consolidated Financial Summary (dollars in millions, Q4 FY17 vs YA FY17 vs YA except per share data) Net Sales $1,862 (9.3)% $7,827 (9.7)% Net Sales excl. impacts of (3.6)% (5.0)% divestitures & foreign exchange Adj. Gross Profit 540 (5.1)% 2,365 (3.9)% Adj. Gross Margin 29.0% +130 bps 30.2% +180 bp
Slide 23: Net Sales Bridge
Net Sales Bridge Q4 Drivers of Net Sales Change FY17 Drivers of Net Sales Change 2% 1.5% 1.0% 0% (0.3%) (0.3%) (2%) (4%) (4.4%) (5.1%) (6%) (5.4%) (6.0%) (8%) (10%) (9.3%) (9.7%) (12%) Volume Price/Mix Foreign Divestitures Total Net Volume Price/Mix Foreign Divestitures Total Net Exchange Sales Exch
Slide 24: SG&A Reduction On Track
SG&A Reduction On Track Q4 Adj. SG&A FY17 Adj. SG&A (dollars in millions) (dollars in millions) $1,017 $242 $803 (21)% vs YA $211 (13)% vs YA FY16 FY17 FY16 FY17 % Net Sales 11.8% 11.3% 11.7% 10.3% “Adjusted” financial measures are non-GAAP. See the end of this presentation for a reconciliation of t
Slide 25: Strong A&P Investment in Q4
Strong A&P Investment in Q4 Q4 A&P FY17 A&P (dollars in millions) (dollars in millions) $347 $328 (5)% vs YA $76 +12% vs YA $68 FY16 FY17 FY16 FY17 % Net Sales 3.3% 4.1% +80 bps 4.0% 4.2% +20 bps 25
Slide 26: FY17 Financial Summary by Segment
FY17 Financial Summary by Segment Net Sales Adj. Op. Profit1 Adj. Op Margin (dollars in millions) FY17 vs YA FY17 vs YA Op Margin vs YA Grocery & Snacks $3,209 (5.0)% $779 +12.1% 24.3% +370 bps Refrigerated & Frozen 2,653 (7.5)% 452 +2.4% 17.0% +165 bps International 816 (3.6)% 68 - 8.3% +30 bps Foo
Slide 27: FY17 Adj. EPS Bridge
FY17 Adj. EPS Bridge FY17 Drivers of Adj.Adj. GrossEPS Diluted Margin From Cont. Ops. vs YA $0.23 $(0.06) $1.74 $0.29 $1.30 $(0.21) $0.19 FY16 Volume Gross Margin SG&A Interest Expense / JM Swank / FY17 Actuals Expansion Income Tax / Spicetec Actuals FX / Other “Adjusted” financial measures are non-
Slide 28: Key Balance Sheet & Cash Flow Metrics
Key Balance Sheet & Cash Flow Metrics YTD through Q4 FY16 FY17 (dollars in millions) Net Cash Flow from Operating Activities – cont. ops. $626 $1,141 Capital Expenditures $278 $242 Dividends Paid $433 $415 Share Repurchases $0 $1,000 Trade Working Capital $988 $725 (dollars in millions) May 29, 2016
Slide 29: FY18 Outlook and FY17-FY20 Algorithm
FY18 Outlook1,2 Key Financial Metrics FY18 FY17-FY20 Algorithm Reported Net Sales Growth (2)% to Flat n/a Organic Net Sales Growth3 (2)% to Flat +1% to +2% CAGR Adj. Op. Margin4 15.9% to 16.3% ~16.5% in FY20 Effective Tax Rate 32.5 to 33.5% n/a Adj. Diluted EPS from cont. ops. $1.84 to $1.89 +10% CA
Slide 30: Summary
Summary • Strong FY17 results • Continuing to make progress on upgrading volume base and expand margins • Strong balance sheet • FY18 Guidance shows continued progress • Organic net sales growth expected to improve each quarter • EPS growth weighted to second half of fiscal year 30
Slide 31: Q&A
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Slide 32: Reconciliation Tables
Vy CONAGRA “BRANDS -° Reconciliation Tables
Slide 33: Conagra Brands Net Sales Reconciliation
Conagra Brands Net Sales Reconciliation (dollars in millions) FY 17 FY 17 FY 16 FY 17 FY 16 FY 17 FY 16 FY 17 Q1 Q2 Q2 YTD Q2 YTD Q3 Q3 Q4 Q4 FY 16 FY 17 Net Sales $ 1,895.6 $ 2,088.4 $ 4,411.8 $ 3,984.0 $ 2,199.3 $ 1,981.2 $ 2,053.0 $ 1,861.7 $ 8,664.1 $ 7,826.9 Impact of foreign exchange 10.6 8.9
Slide 34: Conagra Brands Gross Profit Reconciliation
Conagra Brands Gross Profit Reconciliation (dollars in millions) FY 17 Q4 FY 16 Q4 FY 17 FY 16 Net Sales $ 1,861.7 $ 2,053.0 $ 7,826.9 $ 8,664.1 Gross Profit $ 529.0 $ 580.1 $ 2,342.1 $ 2,429.2 Net expense related to the planned divestiture of the Wesson oil brand, most of which is related to charge
Slide 35: Reconciliation of total operating profit to income from continuing operations
Reconciliation of total operating profit to income from continuing operations before income taxes and equity method earnings Company operating Profit: Total operating profit for segments consisting of earnings before interest expense and equity method investment earnings, and income taxes. Segment o
Slide 36: Grocery & Snacks Segment operating profit reconciliation
Grocery & Snacks Segment operating profit reconciliation (dollars in millions) Q4 FY 16 Q4 FY 17 FY 16 FY 17 Grocery & Snacks Segment operating profit $ 114.3 $ 50.9 $ 592.9 $ 653.7 Net expense related to restructuring plans 3.9 9.9 51.8 25.3 Net expense related to the planned divestiture of the Wes
Slide 37: Commercial Segment operating profit reconciliation
Commercial Segment operating profit reconciliation (dollars in millions) Q4 FY 16 Q4 FY 17 FY 16 FY 17 Commercial Segment operating profit $ 10.1 $ - $ 45.4 $ 202.6 Gain on sale of Spicetec and J.M. Swank businesses - - - (197.4) Adjusted Commercial operating Profit $ 10.1 $ - $ 45.4 $ 5.2 Adjusted
Slide 38: Reconciliation of SG&A adjusted for items impacting comparability
Reconciliation of total selling, general, and administrative expenses, adjusted for items impacting comparability (dollars in millions) Q4 FY 16 Q4 FY 17 FY 16 FY 17 Net Sales $ 2,053.0 $ 1,861.7 $ 8,664.1 $ 7,826.9 Selling, general, and administrative expenses $ 731.6 $ 417.8 $ 2,024.6 $ 1,417.1 Ga
Slide 39: Diluted EPS from continuing operations reconciliation
Q4 FY16 Q4 FY17 FY 16 FY 17 Diluted EPS from continuing operations $ (0.27) $ 0.36 $ 0.29 $ 1.25 Gain adjustment on sale of Spicetec and J.M. Swank businesses - - - (0.16) Net expense related to restructuring plans 0.04 0.02 0.41 0.09 Net expense related to the planned divestiture of the Wesson oil
Slide 40: FY17 Q4 Reported to Adjusted Income and Tax Rate
Income from continuing Income from continuing operations before income 1 FY17 Q4 operations Income Tax Expense taxes Effective Tax Rate Reported $ 153.0 $ (60.2) $ 92.8 (64.9)% Restructuring plans 10.5 5.5 16.0 Net expense related to the planned divestiture of the Wesson oil brand, most of which is