McCormick & Company, Inc. September 6, 2006 Prudential s Back-to-school Conference

Transcription

1 McCormick & Company, Inc. September 6, 2006 Prudential s Back-to-school Conference 1

2 Executives at conference Bob Lawless Chairman, President & CEO Fran Contino Executive VP Strategic Planning & CFO Chuck Langmead President U.S. Industrial Group 2

3 Forward looking information Certain information contains in these materials, including expected trends in net sales and earnings performance and other financial measures, are forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of Forward-looking statements are based on management s current views and assumptions and involve risks and uncertainties that could be materially affected by external factors such as: actions of competitors, customer relationships, ability to realize expected cost savings and margin improvements, market acceptance of new products, actual amounts and timing of special charge items, removal and disposal costs, final negotiations of third party contracts, the impact of the stock market conditions on the share repurchase program, fluctuations in the cost and availability of supply chain resources and global economic conditions, including interest and currency rate fluctuations, and inflation rates, and other risks described in the Company s Form 10-K for the fiscal year ended November 30, The Company undertakes no obligation to update or revise publicly, any forward-looking statements, whether as a result of new information, future events, or otherwise. 3

4 Overview of McCormick Global leader in spices, seasonings and flavors Based in Maryland with operations around the world 8,000 employees S&P 500 company 4

5 Broad range of customers...and products Grocery stores Mass merchandisers Warehouse clubs Convenience stores Dollar stores Food processors Quick serve chains Casual dining Food distributors Consumer 57% Industrial 43% 2005 Net sales* Seasoning blends Spices & herbs Extracts Sauces & marinades Specialty foods Compound & processed flavors Seasonings Wet flavors Coating systems Ingredients * Restated for 2006 reclassification of sales to warehouse clubs 5

6 Across all eating trends, McCormick delivers flavor No matter where or what you eat, each day you are likely to enjoy something flavored by McCormick 6

7 Strategy for growth A simple and sustainable growth strategy 7% NET SALES 10% EPS has led to strong financial performance Average annual growth rates 5 years ended 11/30/05. 7

8 Stock price appreciation Total shareholder return MKC 13.9% S&P % Food stocks 6.8% For period 7/31/97 through 7/31/06 8

9 Stock price appreciation Acquisitions Ducros Zatarain s Uniqsauces DPI Silvo Simply Asia

10 Stock price appreciation Acquisitions Divest non-core businesses

11 Stock price appreciation Acquisitions Divert non-core businesses B2K program

12 The journey continues... Key initiatives Consumer business U.S. and Europe Acquisitions Restructuring program Industrial business transformation Financial outlook 12

13 Consumer business revitalization Convenient culinary in

14 Consumer business revitalization Convenient culinary in 2005 Spice and seasonings

15 Consumer business revitalization Gravity feed racks New graphics 15

16 Consumer business revitalization Flip-top cap New products 16

17 Consumer business revitalization New graphics Flip-top cap Gravity feed racks New products 17

18 Consumer business revitalization Europe 30% Americas 66% Asia/Pacific 4% 2005 Sales by region 18

19 Consumer business revitalization Sales growth in Europe Acquisitions Base business New products Ducros $421million Uniqsauces Silvo Net sales for 2000 and 2001 adjusted to include an estimated impact of EITF and disposition of Jenks that occurred in 2003.

20 Consumer business revitalization Europe revitalization Improve margins Increase marketing support Drive the core business Complementary acquisitions 20

21 Consumer business revitalization Drive the core business Marketing Merchandising New products 21

22 Consumer business revitalization Europe revitalization Improve margins Increase marketing support Drive the core business Complementary acquisitions 22

23 The journey continues... Key initiatives Consumer business U.S. and Europe Acquisitions Restructuring program Industrial business transformation Financial outlook 23

24 Consumer business growth initiatives: Acquisitions Leverage brands in new regions ZATARAIN S Niche brands that deliver flavor and have strong position 24

25 Recent acquisition Thai Kitchen and Simply Asia brands of authentic, easy-to-prepare Asian foods Sales have increased at 32% CAGR since 2002 Fastest growing brands in Asian category SIMPLY ASIA FOODS 25

26 The journey continues... Key initiatives Consumer business U.S. and Europe Acquisitions Restructuring program Industrial business transformation Financial outlook 26

27 Restructuring program Actions Consolidate global manufacturing Rationalize distribution facilities Improve go-to-market strategy Eliminate administrative redundancies Rationalize joint ventures 27

28 Restructuring program Projections Estimated charges $110-$130 million; 22 EPS impact in 2006 Cash portion $85-$100 million; $60 million in 2006 Reduce global positions 10-13% $50 million in annual savings by 2008; $10 million in 2006, and another $30 million in

29 Making good progress with plan Closing manufacturing facilities in California, Maryland, Belgium, Australia Offered voluntary separation program in U.S. Eliminating 10% SKU s in U.S. consumer business Exiting business in Finland Consolidating U.S. consumer business sales organizations Consolidating distributor network in Spain 29

30 Making good progress with plan Target savings: $50 million $50 $40 $30 $20 $10 $0 By end of 2006 will have completed actions to generate 2/3 of projected savings. 30

31 The journey continues... Key initiatives Consumer business U.S. and Europe Acquisitions Restructuring program Industrial business transformation Financial outlook 31

32 U.S. industrial business transformation Our mission is clear To create sustainable value for our strategic and highest potential customers Reduce operating cost and improve margins within the business Manage the unpredictable nature of new products for more reliable business forecasting and planning Build for the future 32

33 U.S. industrial business Europe 19% Americas 72% Asia/Pacific 9% 2005 Sales by region 33

34 The Brand Value Proposition Consumer Success! Commercialization Excellence Competencies Capabilities Core McCormick Brand Values 34

35 The Brand Value Proposition Long standing core values and commitments Ethics Integrity Quality Food safety Talented employees Financial stability 35

36 The Brand Value Proposition Portfolio of differentiated services valued by our customer Sensory Culinary Consumer insight Chemistry Supply chain management Create-It 36

37 The Brand Value Proposition Consumer Success! In the eyes of our customer and the ultimate consumer, the product delivered is a market success! 37

38 Defining our customers Strategic Critical Strategic- Business building partner with global reach Critical- Growth customer Our key strategic and critical partners Valued Valued- Stable business using core capabilities within our portfolio 38

39 Differentiating services Business activity aligned with customer strategies Strategic Strategic Projects leveraging depth of process and breadth of products Critical Critical Expand business through selected opportunities for profitable growth Valued Valued Mining for next critical customer 39

40 Plenty of room to grow CURRENT SHARE OPPORTUNITY Market share within our strategic and critical customers Internal estimates based on customer discussions 40

41 Sales growth will be 3-4% Strategic 2-3% Critical 5-6% Valued 1-2% 41

42 Past organizational structure Food Service Global Restaurants Strategic Partner Flavor Sales Sales Sales Flavor Sales Seasoning Sales Ingredient Sales 42

43 Simplified organizational structure 2 Commercial VP S 2 Sales Forces Food Service Food Manufacturers 43

44 Reducing complexity 30% 25% 20% 15% 10% 5% 0% Goal Reduce SKU's Achieved Reduce customers 44

45 Past product development cycle Consumer Preferred Product Development 45

46 New product development cycle (Create IT ) (Value Pyramid) New business cycle (New Product Development Cycle) (Supply Chain Excellence) 46

47 The voice of the customer McCormick is the go to company when we talk about flavor -Strategic Customer This is the kind of collaborative effort we need to be part of - Critical Customer The level of professionalism, dedication, accessibility, technical expertise, and assistance has been unmatched by any of our other suppliers. - Critical Customer 47

48 More signs of progress Voice of Customer Survey results confirm direction is right Strategic top-to top meetings leading to long range project commitments Improved forecasting Actual results this year showing positive financial impact 48

49 U.S. industrial business transformation Focusing on high potential customers Pursuing growth opportunities Increasing sales and margins 49

50 The journey continues... Key initiatives Consumer business U.S. and Europe Acquisitions Restructuring program Industrial business transformation Financial outlook 50

51 Financial Outlook Industrial 43% Consumer 57% Operating income contribution by segment varies Industrial 19% Consumer 81% 2005 Net sales 2005 Operating income 2005 restated to reflect reclassification of warehouse clubs and expense allocation to segments 51

52 Financial Outlook Sales mix shift toward consumer Consumer business 51% 57% 62% Industrial business 49% 43% 38% 2005 restated to reflect reclassification of warehouse clubs 52

53 Financial Outlook Operating income margins outlook Margin Stock 2005 gain comp Consumer business 19% +1% -1% 19% Industrial business 6% +4% -1% 9% Total company potential 13% +3% -1% 15% 2005 restated to reflect reclassification of warehouse clubs and expense allocation to segments 53

54 Financial goals For fiscal years 2006 to 2008 Grow sales 3-5% Base business increase 2-3% New products 1-2% Acquisitions 1-2% Distribution expansion 0-1% Pricing 0-1% Customer/SKU reductions (1-2%) Increase EPS 8-10% EPS growth goal excludes impact of special charges and stock compensation expense. 54

55 Generating strong cash flow $400 $350 $300 $250 $200 $150 $100 $50 $0 Cash from operations in $ millions

56 Using cash to increase shareholder return Increased dividends Appropriate acquisitions Share repurchase ($ in millions) $300 $250 $200 $150 $100 Share repurchase Dividends $50 $

57 2006 uses of cash from operations Acquisitions Dividends A balanced approach Capital expenditures Share repurchase 57

58 Strategy for growth A simple and sustainable growth strategy is driving strong financial performance 58

59 Experienced Management Team Yrs at Name Age MKC Position Bob Lawless Chairman, President & CEO Fran Contino 60 8 Exec VP, Strat Planning & CFO Chuck Langmead President U.S. Industrial Group Mark Timbie 51 9 President International Karen Weatherholtz Sr VP Human Relations Alan Wilson Pres N Amer Consumer Foods and U.S. Supply Chain 59

60 The journey continues Taking important improvement actions Building upon leading market position Developing new leadership, motivating employees Strong balance sheet; generating significant cash Goals to increase sales, profit and shareholder value 60