Morgan Stanley Global Consumer & Retail Conference

Transcription

1 Morgan Stanley Global Consumer & Retail Conference November 16, 2006

2 Rick Wolford Chairman and CEO 1

3 Forward-looking Statement Disclaimer During the course of our discussion today, we will make statements that may constitute projections, expectations, beliefs or similar forward-looking statements. We would like to caution you that the Company s actual results could differ materially from the results anticipated or projected in these forward-looking statements. Additional detailed information concerning important factors that could cause Del Monte s actual future results to differ materially from the information we will give you today is included in our public filings, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q, which are available on the SEC s EDGAR database or on our website. The Company does not undertake to update any of these forward-looking statements in light of new information or future events. As our Q2 F07 quarter ended October 29, 2006, we will not be discussing performance or guidance for the quarter or for fiscal This presentation does not, and we can not, update or comment on this guidance. 2

4 Vision Nourishing Families. Enriching Lives. Every Day. Every product Every innovation Every program 3

5 A Branded, Top-Tier Consumer Packaged Foods Company Successfully Executing Project Brand We are now: More strategically focused Better positioned for brand-driven innovation More streamlined and efficient More aligned with consumer and customer trends Better competitively positioned To Drive: Higher Growth Margin Expansion Shareholder Value 4

6 Strong Foundation Business Building Blocks Know our Market ~90% of revenues in U.S. retail market Brand share to support pricing and innovation ~80% of Del Monte s branded retail sales #1 and #2 Competitive scale Top 10 marketer in the center store (1) providing customer and consumer leverage Categories are strong and large Topline growth reflects strengthening fundamentals (1) Excluding beverage companies 5

7 Strong Foundation Streamlined Portfolio of Leading Brands Net Sales (Pre-Acquisitions) Soup and Infant Feeding ~10% Net Sales (Post- Acquisitions) Pet Products ~25% Consumer Products ~65% Note: New net sales is forward-looking Consumer Products ~60% Pet Products ~40% 6

8 Strong Foundation Brand Strength #1 brand in Fruits, Vegetables and Tomatoes 1 #1 brand in Tuna #1 brand in Dog Biscuits #2 brand in Soft and Chewy Dog Treats #3 brand in Dry Cat Food #2 brand in Wet Cat Food 1. Solid Tomatoes tied for #1 As of April 30,

9 Strong Foundation Growing Categories Consumer Categories Pet Categories F06 Size ($B) '03-'06 CAGR F06 Size ($B) '03-'06 CAGR Fruit $ % Vegetable $ % Tomato $ % Broth $ % Tuna $ % Total $ % Dry Dog $ % Dry Cat $ % Pet Snacks $ % $ % Wet Cat $ % Wet Dog $ % $ % Total $ % Source: ACNielsen All-Outlet Household Panel and internal estimates as of Fiscal

10 Environment Strong, topline momentum; Pressured operating margins starting in F05 Revenue Growth Operating Margins $M ~3% CAGR (1) 3,050 3,000 $2,999 14% 12% 12.1% 10.2% 2,950 10% 8% 2,900 $2,856 6% 2,850 4% 2,800 2% 2,750 F04 F06 0% F04 F06 (1) Net Sales CAGR 2.5% 9

11 Strategic Plan Project Brand tenets driving performance Portfolio Optimization w/ Recent Acquisitions, Pricing and Mix Improvement Del Monte Long-Term Growth Targets Innovation and Brand- Driven Growth 7-9% M&A w/ Integration Cost and Asset Streamlining w/ Transformation Initiatives 3-5% Financial Flexibility w/ Debt Reduction Revenue Target EPS Target 10

12 Portfolio Optimization Mix Improvement Focus: branded, higher margin/growth businesses Fiscal 2006 Going Forward High Margin Pre-Acquisition ~30% of Net Sales High Margin Post Acquisition ~40% of Net Sales High Growth High Growth ~10% NSV Growth Rates ~2X Margins Continue NSV and Margin Momentum 11

13 Portfolio Optimization Recent Acquisitions Improve portfolio mix through the divestiture and acquisitions Divested Soup and Infant Feeding Non-branded businesses ~$295 FY06 sales Single-digit operating margins (1) Acquired Meow Mix and Milk-Bone Branded businesses ~$430 CY05 sales Double-digit operating margins Long Term Guidance 3-5% Topline Growth 7-9% EPS Growth (1) Reflects standalone businesses 12

14 Strategic Plan Project Brand tenets driving performance Portfolio Optimization w/ Recent Acquisitions, Pricing and Mix Improvement Del Monte Long-Term Growth Targets Innovation and Brand- Driven Growth 7-9% M&A w/ Integration Cost and Asset Streamlining w/ Transformation Initiatives 3-5% Financial Flexibility w/ Debt Reduction Revenue Target EPS Target 13

15 Innovation and Brand-Driven Growth Brand-driven innovation: 3 Initiatives Existing Line Extension Category Expansion Category Adjacency 14

16 Category Building Innovation Innovation: Products and packaging address key themes/platforms Healthy & convenient meals that bring the family together Healthy & convenient snacks for families with busy lifestyles 15

17 Category Building Innovation Innovation: Products and packaging address key themes/platforms Foods and treats for a highly rewarding taste experience Foods and treats to live a long, active and fulfilled life 16

18 Category Building Innovation F07 Pet Innovation Pet Products leading F07 category building innovation Pet Snacks Dry Pet 17

19 Execution - Partnerships Partnerships with Leading Authorities Strengthen Del Monte s Health and Wellness Initiatives Roberta Duyff Nationally Recognized Food & Nutrition Expert; Award-Winning Author Dr. Dean Ornish Renowned Physician; Nutrition / Exercise Art Smith Celebrity Chef; Back to the Table Proponent Leading Women s Heart Health Awareness Campaign Multi-Faceted Partnership including 55-minute Cable TV Program 18

20 Strategic Plan Project Brand tenets driving performance Portfolio Optimization w/ Recent Acquisitions, Pricing and Mix Improvement Del Monte Long-Term Growth Targets Innovation and Brand- Driven Growth 7-9% M&A w/ Integration Cost and Asset Streamlining w/ Transformation Initiatives 3-5% Financial Flexibility w/ Debt Reduction Revenue Target EPS Target 19

21 Transforming Acquisitions Pet acquisitions significantly strengthen financial performance and strategic profile Del Monte Foods Enhances portfolio of leading, high growth/margin brands Improves platform for innovation Increases annual sales growth and gross margin potential Del Monte Pet Products Increases representation from strategic priority pet snacks and dry food business Increases overall presence in Pet Aisle focused on dry pet and pet treats Expands distribution opportunities in under developed channels 20

22 Actions Taken M&A Acquisitions enhance financial profile Meow Mix Milk-Bone Large Categories $2.6B $1.6B Strong Category Growth Rates % 11% Center Store Scale 05 Net Sales ~$250M ~$180M Healthy Gross Margins 05 Gross Margins >35% >35% 21

23 Del Monte Pet Products Today s pet portfolio strategically positioned against high margin, high growth businesses % of DMPP Sales DMPP Market Share Position DMPP Market Share Category Pre-Acq Post-Acq Pre-Acq Post-Acq Pre-Acq Post-Acq Pet Snacks 31% 33% #2 #1 21% 38% Dry Dog 29% 21% #4 #4 9% 9% Dry Cat 6% 21% #4 #2 5% 21% Wet Dog 9% 6% #3 #3 7% 7% Wet Cat 25% 19% #2 #2 20% 21% Total DMPP #3 #2 Source: Nielsen 52 weeks ending April 2006; Food/Mass (xpl) 22

24 Acquisition Strengthens Competitive Position Dog Snacks Category before. 23

25 Acquisition Strengthens Competitive Position Dog Snacks Category after. 24

26 Acquisition Strengthens Competitive Position Dry Cat Category before. 25

27 Acquisition Strengthens Competitive Position Dry Cat Category after. 26

28 Key Success Drivers Del Monte focus: Build value with the acquisitions Meow Mix Continue the marketing and innovation momentum Capture the synergies Retain talent/transfer the entrepreneurial spirit Leverage Meow Mix brand equity Milk-Bone Revitalize the brand Apply Del Monte s innovation and R&D capabilities Utilize the Del Monte platform Leverage the wholesome brand heritage to capitalize on the growing health and wellness trend in Pet 27

29 Dave Meyers CFO 28

30 Strategic Plan Project Brand tenets driving performance Portfolio Optimization w/ Recent Acquisitions, Pricing and Mix Improvement Del Monte Long-Term Growth Targets Innovation and Brand- Driven Growth 7-9% M&A w/ Integration Cost and Asset Streamlining w/ Transformation Initiatives 3-5% Financial Flexibility w/ Debt Reduction Revenue Target EPS Target 29

31 Challenging Cost Environment Inflationary and Other Cost Increases 1 GROSS COST INCREASES vs. PRECEEDING YEAR, EXCLUDES SAVINGS INITIATIVES ($ in millions) $160 $140 $120 $100 $80 $60 $40 $20 $0 $150 $120 $120 F05 F06 F07E % Increase ~6% ~5% F07E vs. F06 COST INCREASES 1 LOGISTICS CATEGORY PACKAGING RAW MATERIALS LABOR, BENEFITS, OTHER 1 Reflects information that was provided on the July 20, 2006 Investor Day. The Company has not provided updates to these numbers since that time and does not do so in this presentation. 1 IMPACT $M

32 Actions Taken - Cost and Asset Streamlining Aggressive cost reduction programs, 3x increase since F05 ($ in millions) $60 $50 $40 $30 COST REDUCTION $50 $50 1 STRUCTURAL CHANGES F07E COST REDUCTIONS DRIVER LEAN MANUFACTURING E-SOURCING $20 $10 $0 $18 F05 F06 F07E INTENSIFYING ONGOING EFFORTS YIELD MANAGEMENT CAPITAL EXPENDITURES 1 Reflects information that was provided on the July 20, 2006 Investor Day. The Company has not provided updates to these numbers since that time and does not do so in this presentation. 31

33 Cost and Asset Streamlining Example: Procurement E-Sourcing Characteristics Item Location Incumbent $6,992,007 Spend Bid Information 4 suppliers 48 bids 32 overtimes Award Decision Remain with incumbent Annualized Savings $1,421, % 32

34 Actions Taken Announced Transformation Plan 2 Year Payback; >50% Rate of Return Implement Supply Chain Efficiencies Improves forecasting accuracy Improves supply chain efficiency Results in significant improvement in working capital Optimize Pet Manufacturing Matrix Reduces transportation miles Improves capacity management Streamline the Organization Reduces layers, including headcount reduction Realigns resources to increase overall effectiveness Implement Enhanced Trade Fund Management Capabilities Drives improved ROI promotional activity Reduces low-performing events Enables more efficient spend tracking 33

35 Transformation Initiatives: Sourcing Network Infrastructure Dry pet food manufacturing realignment Example: 9-Lives Current Topeka 34

36 Transformation Initiatives: Sourcing Network Infrastructure Dry pet food manufacturing realignment Example: 9-Lives Future Woodland Northeast Topeka Decatur MILES REDUCED = 1.4 MILLION 35

37 Transformation Plan Expected $110M in costs over the next two years; expect $50M in run rate savings in F09 Costs Savings Trade Fund Management ~15% Trade Fund Management ~10% Supply Chain ~25% Pet Manufacturing Matrix ~30% Supply Chain ~30% Pet Manufacturing Matrix ~45% Streamline Organization ~15% Streamline Organization ~30% 36

38 Strategic Plan Project Brand tenets driving performance Portfolio Optimization w/ Recent Acquisitions, Pricing and Mix Improvement Del Monte Long-Term Growth Targets Innovation and Brand- Driven Growth 7-9% M&A w/ Integration Cost and Asset Streamlining w/ Transformation Initiatives 3-5% Financial Flexibility w/ Debt Reduction Revenue Target EPS Target 37

39 Financial Flexibility Utilized cash flow to return value to shareholders F06 Execution Going Forward Executed Share Buyback Continue to Pay A Dividend 1 Initiated a Dividend Reduced Debt (Pre-Acquisitions) Reduce Debt Generate Strong Cash Flow Exceeded Cash Flow Target 1. The actual declaration and payment of future dividends and the establishment of record and payment dates, if any, is subject to final determination by our Board of Directors each quarter after its review of our then current strategy, applicable debt covenants and financial performance and position, among other things 38

40 Cash Management Strategy Post-Acquisitions, seek to reduce debt levels to target Debt/EBITDA Debt ($M) Adjusted Cash Flow ($M) 3 Meow Mix (5/19/06) and Milk Bone (7/3/06) Acquisitions 250 2,200 2,000 1,800 1,600 1,400 ~ $ ,200 1, $1,801 $1,647 $1,377 $1,304 ~ $1, $195 $202 $ /20/02 (Heinz Merger Date) 1 FY03 FY04 FY05 As of 5/19/ Pre-Acquisition - FY04 FY05 FY06 (1) A portion of debt reduction from 12/20/02 to FY03 is due to seasonal factors. (2) Debt levels for FY04 and FY06 include debt pay down of approximately $82 million and $266 million, respectively, from net proceeds from sale of discontinued operations. (3) Del Monte defines cash flow as cash provided by operating activities, less cash used in investing activities. Additionally, Del Monte uses adjusted cash flow. Refer to Cash Flow Reconciliation in appendix for the calculation of Del Monte s adjusted cash flow. 39

41 Long-Term Guidance Project Brand, acquisitions and transformation plan drive increased long-term growth rate targets Revenue and EPS Growth Rates Operating Margin Cash Flow 7-9% 12% $200M+ 3-5% Revenue Target EPS Target Operating Margin Cash Flow (Note: Reflects organic growth 40

42 Long-Term EPS Growth Targets Topline growth, operating margin expansion expected to drive EPS growth 3 to 5% NSV 12% OI margin ~ 4 to 7% EPS growth Investments in further innovation ~ 1 to 3% EPS investments Debt reduction of $150 to $200M/year ~ 4 to 5% EPS growth Continued investment in long-term health of business expected 41

43 Rick Wolford Chairman and CEO 42

44 Executional Excellence Key Focus Continue to Execute Against Project Brand Del Monte Long-Term Growth Targets Integrate Acquired Businesses 7-9% Implement Transformation Plan 3-5% Revenue Target EPS Target 43

45 44

46 Continuing Operations ($ s in Millions, except EPS) FY 06: Selected Financial Results Fiscal Year-End F 2005 F 2006 % Change Net Sales $ 2,899 $ 2, % Gross Profit % Gross Margin (% of Sales) 25.7% 26.2% SG&A % SG&A Margin (% of Sales) 15.5% 16.0% Operating Income % OI Margin (% of Sales) 10.2% 10.2% EPS ($ per share) (1) (1) Reflects EPS from Continuing Operations 45

47 Cash Flow Reconciliation Del Monte Foods Company Cash Flow Reconciliation ($Millions) Fiscal 2004 Fiscal 2005 (as revised) (as revised) Fiscal 2006 Net cash provided by operating activities, as reported (GAAP) Net cash provided by investing activities, as reported (GAAP) Cash flow Net proceeds from sale of certain assets (1) Mandatory debt prepayments, due to sale of the Soup and Infant Feeding Businesses $ $ (1.2) (71.8) (81.5) $ (265.7) 43.3 Adjusted Cash Flow Other Information: Net Sales $ 2,856.3 $ 2,899.3 $ 2,998.6 (1) Represents net proceeds from disposal of Veterinary Pet assets of $81.5M in fiscal 2004 and net proceeds from disposal of Soup and Infant Feeding Businesses of $265.7M in fiscal