ConAgra Brands, Inc. · NYSE:CAG
ConAgra Brands — Q2 FY2017 Earnings Presentation
33 slides from ConAgra Brands's earnings presentation, Dec 22, 2016
Slide 1: FY17 Q2 Earnings Presentation
FY17 Q2 Earnings Presentation December 22, 2016
Slide 2: Today's Presenters
Today’s Presenters Johan Nystedt VP, Treasury & Investor Relations Sean Connolly President and Chief Executive Officer Dave Marberger Chief Financial Officer 2
Slide 3: Forward-Looking Statement
Forward-Looking Statement This presentation 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 circumstances. We undertake no responsibili
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 Agriculture Diversified Conglomerate Branded Pure Play 5
Slide 6: Six Key Thoughts
Six Key Thoughts 1 Different company with significant potential 2 Key to success is focus, discipline, and culture 3 Revenue management and cost/complexity reductions will fuel margins 4 Margin expansion will fuel growth and cash flow 5 In a unique position to reshape portfolio efficiently 6 Time an
Slide 7: Embedding New Portfolio Management Principles (PMPs)
Embedding New Portfolio Management Principles (PMPs) Upgrade volume base Effectively back the Refresh winners the core Ramp up Assign innovation clear roles and M&A Essential to consistent growth 7
Slide 8: Distinct Portfolio Roles for Our Brands
Distinct Portfolio Roles for Our Brands Reinvigorate Accelerate Growth Reliable Contributors Grow Core & Extend 8
Slide 9: Success Means Breaking Bad Habits
Success Means Breaking Bad Habits from to Focus on volume Focus on value creation Reliance on trade/push Reliance on brand strength/pull SKU Proliferation SKU Optimization Erratic A&P support Focused/consistent A&P support 9
Slide 10: Q2 Performance Highlights
Q2 Performance Highlights (dollars in millions, Q2 FY17 Change vs YA except per share data) Net Sales $2,088 (11.5)% Est. impact of divestitures and (5.5)% foreign exchange Adj. Op. Profit* 355 +11.6% Adj. Op. Margin* 17.0% +350 bps Adj. Diluted EPS $0.49 +25.6% * Adjusted Operating Profit and Adjus
Slide 11: Value Over Volume Strategy Working
Value Over Volume Strategy Working Incremental Sales Base Sales Velocity (% Change Vs. Year Ago) (% Change Vs. Year Ago) Q2 Q3 Q4 Q1 Q2 FY16 FY16 FY16 FY17 FY17 3.4% (1.8)% 1.7% (6.8)% 0.4% 0.5% Q2 Q3 Q4 Q1 Q2 (15.2)% FY16 FY16 FY16 FY17 FY17 (18.4)% (21.4)% (2.9)% 11 Source: IRI Market Advantage, C
Slide 12: Continued Margin Improvement
Continued Margin Improvement Adj. Gross Margin Adj. Operating Margin* H1 FY17 H1 FY17 30.1% 16.2% 31.1% 17.0% 15.4% 13.5% 29.0% 28.6% 10.5% 27.5% Q1 Q2 Q1 Q2 Q1 Q2 Q1 Q2 FY16 FY16 FY17 FY17 FY16 FY16 FY17 FY17 * Adjusted Operating Margin excludes Equity method investment earnings 12 “Adjusted” finan
Slide 13: Further Margin Upside Remains
Further Margin Upside Remains Adj. Gross Margin ~32.0% 30.1% 28.4% 25.9% FY15 FY16 FY17 H1 FY20E* “Adjusted” financial measures are non-GAAP. See the end of this presentation for a reconciliation of these measures to the most directly comparable GAAP measures. 13 * The inability to predict the amoun
Slide 14: Frontera Integration On Track
Frontera Integration On Track 14
Slide 15: Looking Ahead
Looking Ahead • Continue to execute against our PMPs • Lapping pricing actions in second half of year • Innovation expected to be in market Q1 FY18 • Continue to expand margins • Continue to re-shape portfolio via disciplined M&A 15
Slide 16: Dave Marberger, Chief Financial Officer
Dave Marberger Chief Financial Officer 16
Slide 17: Basis of Financial Presentation
Basis of Financial Presentation • Lamb Weston and its associated joint ventures have been reclassified to Discontinued Operations for all periods presented • When referred to as “Adjusted,” a metric excludes items impacting comparability of results • The recently divested businesses Spicetec Flavors
Slide 18: Consolidated Financial Summary
Consolidated Financial Summary (dollars in millions, Q2 FY16 Q2 FY17 Change vs YA except per share data) Net Sales $2,359 $2,088 (11.5)% Adj. Gross Profit 674 650 (3.6)% Adj. Gross Margin 28.6% 31.1% +250 bps Adj. Op. Profit* 318 355 +11.6% Adj. Op. Margin* 13.5% 17.0% +350 bps Adj. Diluted EPS $0.3
Slide 19: Net Sales Bridge
Net Sales Bridge Q2 Drivers of Net Sales Change 2% 1.0% 0% (2)% (0.4)% (4)% (6)% (5.1)% (8)% (7.0)% (10)% (12)% (11.5)% (14)% Volume Price/Mix Divestitures Foreign Total Net Sales Exchange 19
Slide 20: SG&A Reduction On Track
SG&A Reduction On Track Q2 Adj. SG&A First Half Adj. SG&A (dollars in millions) (dollars in millions) $249 $519 (21)% (25)% $198 $390 FY16 FY17 FY16 FY17 % Net Sales 10.6% 9.5% 11.8% 9.8% “Adjusted” financial measures are non-GAAP. See the end of this presentation for a reconciliation of these measu
Slide 21: Adj. EPS Bridge
Adj. EPS Bridge Q2Adj. Drivers Gross ofMargin Adj. EPS $0.05 $(0.02) $0.01 $0.49 $0.07 $0.39 $(0.09) $0.09 $(0.01) Q2 FY16 Volume Gross FX SG&A Interest / JM Swank Rounding Q2 FY17 Adj. EPS Margin Taxes / Spicetec Adj. EPS Expansion EPS contributions from J.M. Swank and Spicetec are the company’s be
Slide 22: Financial Summary by Segment
Financial Summary by Segment (dollars in millions) Net Sales Adj. Op. Profit1 Q2 FY17 vs YA Q2 FY17 vs YA Grocery & Snacks $854 (5.8)% $222 +17.9% Refrigerated & Frozen 740 (10.5)% 120 (7.5)% International 211 (4.5)% 18 (17.0)% Foodservice 283 (0.7)% 32 +56.4% Commercial2 - (100.0)% - (100.0)% Corpo
Slide 23: Balance Sheet & Cash Flow
Balance Sheet & Cash Flow Year to Date FY16 FY17 (dollars in millions) Capital Expenditures $110 $118 Dividends Paid $215 $219 Share Repurchases $0 $170 (dollars in millions) May 29, 2016 Nov. 27, 2016 Debt $5,455 $3,452 Cash 798 1,443 Ending Net Debt $4,657 $2,010 23
Slide 24: FY17 Outlook
FY17 Outlook Full year outlook is in line with Investor Day guidance FY17 Outlook1 Net Sales excl. divestitures2 (4) to (5)% Adj. Gross Margin 30.4% to 30.6% Adj. Op. Margin3 15.3% to 15.5% Adj. EPS $1.65 to $1.70 1. The inability to predict the amount and timing of future items makes a detailed rec
Slide 25: Summary
Summary • Continuing to make progress on upgrading volume base • Continuing to expand margins • Cost savings program remains on track • Strong balance sheet • Guidance unchanged 25
Slide 26: Q&A
<b VY wbx CONAGRA “BRANDS -° Q&A
Slide 27: Reconciliation Tables
<b VY wbx CONAGRA “BRANDS -° Reconciliation Tables
Slide 28: Conagra Brands Gross Profit Reconciliation
Conagra Brands Gross Profit Reconciliation (dollars in millions) FY 15 FY 16 FY 16 Q1 FY 17 Q1 FY 16 Q2 FY 17 Q2 FY 16 Q2 YTD FY 17 Q2 YTD Conagra Brands Net Sales* $ 9,034.0 $ 8,664.1 $ 2,053.0 $ 1,895.6 $ 2,358.8 $ 2,088.4 $ 4,411.8 $ 3,984.0 Conagra Brands Gross Profit $ 2,296.2 $ 2,429.2 $ 561.3
Slide 29: Reconciliation of Operating Profit to Income from Continuing Operations
Conagra Brands 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 t
Slide 30: Segment Operating Profit Reconciliation
Grocery & Snacks Segment operating Profit Reconciliation (dollars in millions) Q2 FY 16 Q2 FY 17 Grocery & Snacks Segment operating profit $ 185.7 $ 220.3 Net expense related to restructuring plans 2.3 1.4 Adjusted Grocery & Snacks operating Profit $ 188.0 $ 221.7 Refrigerated & Frozen Segment opera
Slide 31: Commercial Segment Operating Profit Reconciliation
Commercial Segment operating Profit Reconciliation (dollars in millions) Q2 FY 16 Q2 FY 17 Commercial Segment operating profit $ 13.0 $ (0.5) Gain adjustment on sale of Spicetec and J.M. Swank businesses - 0.5 Adjusted Commercial operating Profit $ 13.0 $ - Corporate Expense Reconciliation (dollars
Slide 32: Reconciliation of Selling, General, and Administrative Expenses
Conagra Brands Reconciliation of total selling, general, and administrative expenses, adjusted for items impacting comparability (dollars in millions) Q2 FY 16 Q2 FY 17 Q2 YTD FY 16 Q2 YTD FY 17 Net Sales $ 2,358.8 $ 2,088.4 $ 4,411.8 $ 3,984.0 Selling, general, and administrative expenses $ 483.2 $
Slide 33: Diluted EPS from Continuing Operations Reconciliation
FY15 FY16 Q2 FY16 Q2 FY17 Q2 YTD FY17 Diluted EPS from continuing operations $ 1.04 $ 0.29 $ 0.18 $ 0.26 $ 0.48 Gain on sale of Spicetec and J.M. Swank businesses - - - 0.02 (0.15) Net expense related to restructuring plans and integration costs 0.08 0.41 0.19 0.03 0.05 Net expense related to our ye