McCormick & Co Inc (NYSE:MKC) Q3 2016 Earnings Conference Call - Final Transcript

Sep 30, 2016 • 08:00 am ET

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McCormick & Co Inc (NYSE:MKC) Q3 2016 Earnings Conference Call - Final Transcript

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Presentation
Executive
Joyce Brooks

Good morning. This is Joyce Brooks, Vice President of Investor Relations. Thank you for joining today's call for a discussion of McCormick's third-quarter financial results and our latest outlook for 2016.To accompany this call, we've posted a set of slides at ir.McCormick.com. We'll begin with remarks from Lawrence Kurzius, President and CEO; and Mike Smith, Executive Vice President and CFO, and then open the line for questions.

(Forward-looking Statements) )During our remarks, we will refer to non-GAAP financial measures. These include adjusted operating income and adjusted earnings per share that exclude the impact of special charges, as well as information in constant currency. Reconciliations to the GAAP results are included in this morning's press release and slides. As a reminder, today's presentation contains projections and other forward-looking statements. Actual results could differ materially from those projected.

The Company undertakes no obligation to update or revise publicly any forward-looking statements whether as a result of new information, future events or other factors. As seen on slide 2, our forward-looking statement also provides information on risk factors that could affect our financial results. It's now my pleasure to turn the discussion over to Lawrence.

Executive
Lawrence Kurzius

Thank you, Joyce. Good morning, everyone. Thanks for joining us. McCormick's third quarter results continued the strong performance we delivered in the first half of 2016 with adjusted earnings per share of $1.03. In constant currency, we grew sales 6% with increases in both segments and each of our three regions, and grew adjusted operating income 15%.These results demonstrate the effective execution of our strategy, designed to drive both top line sales and significant productivity improvements.

This balanced approach is being managed by McCormick leaders and employees around the world, and I thank them for their effort and engagement. With our year-to-date financial results and momentum heading into the fourth quarter, we're well-positioned to deliver record results in 2016. Taking a look at the third quarter, we were pleased with the performance of both our consumer and industrial segments.

On a constant currency basis, we grew consumer segment sales 7% and increased adjusted operating income 12%. As those who follow McCormick know, we're driving sales with increases in our base business, new products and acquisitions. All three of these drivers contributed to consumer segment sales increase this quarter. Our base business growth was particularly strong in the Americas region, and led by sales of core McCormick and Lawry's brands spices and seasonings.

Also, our sales of recipe mixes including wet recipe mixes have picked up in the US, and we gained category share this quarter. China was another major driver of the consumer segment sales increase this quarter, with double-digit growth in constant currency and category share gains for both herbs and spices and recipe mixes. As for innovation, we shared with you at our June earnings call, the great line up of new products we are launching in the second half of our fiscal year.

These include the rollout of herb grinders in additional markets, organic recipe mixes,