Cash Flow and Uses of Cash

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Wilfred Fowler
7 years ago
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1 Agenda Reaffirm 2015 Guidance Long-Term Targets 2016 Guidance Fuel for Growth Cash Flow and Uses of Cash Finance 2 1

2 Guidance for 2015 Comparable Net Sales (a) Comparable Operating Profit (a) (includes a three-to-four-point negative impact from incentive compensation) Currency-Neutral Comparable EPS (a) (includes a three-to-four-point negative impact from incentive compensation) Approximately Flat -2% to -4% Flat to -2% Cash Flow (b) Approximately $1.1 billion (a) 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 affecting comparability. (b) Cash from operations less capital expenditure. Finance 3 Increased Confidence to Achieve Goals Visibility to achieve long-term targets in 2016 and beyond Realistic goals by region and a clear path to achieve growth potential Accelerated savings programs Strong base productivity Significant structural cost-saving programs Strong underlying cash flow Finance 4 2

3 Long-Term Guidance Comparable Net Sales (a) +1% to 3% Comparable Operating Profit (a) +4% to 6% Currency-Neutral Comparable EPS (b) +7% to 9% Dividend Yield Long-Term Shareowner Return 3% (c) +DD (c) (a) 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 affecting comparability. (b) Excludes the impact of currency translation, differences in the number of shipping days, mark-to-market adjustments, integration costs, costs related to Project K, and other items impacting comparability. (c) Assumes continuation of current yield and price/earnings multiple Finance Growth Goals North America Sales Growth Low SD Operating Margin Change* basis points Europe Low SD basis points Latin America Mid-to-High SD Hold margin Asia Pacific Mid-to-High SD bps of margin Total Low SD 17-18% OP margin *Target compound currency-neutral annual growth rates and operating margin expansion by 2020; off a base in 2014 Finance 6 3

4 Guidance for 2016 Comparable Net Sales (a) Comparable Operating Profit (a) Currency-Neutral Comparable EPS (b) +1% to 3% +4% to 6% +6% to 8% (a) 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 affecting comparability. (b) Excludes the impact of currency translation, differences in the number of shipping days, mark-to-market adjustments, integration costs, costs related to Project K, and other items impacting comparability. Finance 7 Gross Margin Guidance Gross Margin Peer Group (a) Strong gross margin relative to peer group 38.9% Average ex-kellogg Remains a critical metric/ provides fuel to invest in brands Zero-based budgeting and reinvestments in food will impact outlook Expect to hold/improve margins (a) Fiscal year 2014 Will communicate performance in 2016 Finance 8 4

5 Kellogg Company Global Growth Strategy Finance 9 Base Productivity and Structural Cost Savings Approx. $ Million of Savings In 2016 To offset inflation Available for investment and margin improvement $100m $100m Base Productivity* Project K Zero-Based Budgeting Good Visibility into 2017 and 2018 Strong base productivity programs Project K savings on track / good visibility Zero-based budgeting to unlock additional savings Savings to exceed reinvestment * Assumes 3-4% productivity in COGS Finance 10 5

6 Project K Savings and Investment Incremental Annual and Total Savings, $US Creating the supply chain of the future Implementing global business services Built global category teams Total Pre-tax charges Non-cash costs, incl. above Capital Spending Total after-tax cash $1,200 1,400 million ($275 $325 million) $300 million Approx. $1,000 million 2016/2017 show highest incremental savings On track to meet operational and financial goals Finance 11 Zero-Based Budgeting Global Rollout North America Europe Latin America Sustained Sustained Sustained Implementing zero-based budgeting. Work underway in North America Targeting discretionary spending, including overhead, brand building, and COGS costs including distribution costs Asia Pacific Sustained Beyond Beginning the global roll-out in the second half of 2016 Reinforces Confidence in achieving financial goals beyond 2016 Finance 12 6

7 Productivity From Sustainability Programs >94% Manufacturing Waste Diverted from Landfill 71 46% Ingredients Engaged in Responsible Sourcing Improved Newsweek Green Rankings to 68 th 28MM Media Impressions during Climate Week /B CDP Carbon; CDP Water; Forest Leader $22MM Est. Savings in Manufacturing Sustainability* 100% Certified Sustainable Palm Oil -12% Greenhouse Gas Absolute Emissions since K Commitment to Support Farmers By 2030 * Finance 13 Strong Generation of Cash Flow (a) $ in Millions Project K Working Capital Improvement 4 1.0B 1.2B 1.2B 1.2B 1.1B E (a) Cash flow is defined as Cash Flow from Operations less Capital Expenditure. Refer to the Company s K filing where this non-gaap financial measure is reconciled to the most comparable GAAP measure. Finance 14 7

8 Industry-Leading Core Working Capital Core Working Capital (a) Rolling 12 months, Percent of Net Sales 11.5% 12.3% 14.0% 6.4% 7.1% 7.2% 7.6% 8.0% 8.4% Kellogg Company 1 Company 2 Kellogg 2014 Company 3 Company 4 Company 5 Company 6 Company 7 (a) Period ending 3Q 2015 for Kellogg. Period ending December 2014 for Kellogg FY 2014 all other. Last 12 months average trade receivables and inventory, less 12 months average trade payables, divided by last 12 months sales. Finance 15 Returning Cash to Share Owners $ in Millions $1,402 Dividends Shares $1,197 $1,370 Dividends/ Share Repos of $ b Long history of returning cash to shareowners 604 $ Returned approximately $6 billion during last five years Dividend: 40-50% payout ratio E Finance 16 8

9 Acquisitions / Investments Aligned With Our Strategy Natural and/or Organic Foods Emerging Markets Global Snacks Finance 17 Finance Summary Back on long-term growth targets Good visibility to 2016 and beyond Broad productivity gains allow for reinvestment in growth and operatingmargin expansion Cash flow growth in line with earnings growth/ return cash to share owners Acquisitions to support our growth strategy Finance 18 9

Kellogg Company November 3, 2011

Kellogg Company November 3, 2011 Third Quarter 2011 Financial Results November 3, 2011 1 Forward Looking Statements This presentation contains, or incorporates by reference, forward looking statements with projections concerning, among