General Mills, Inc. (NYSE:GIS) Q3 2019 Earnings Conference Call - Final Transcript

Mar 20, 2019 • 08:30 am ET

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General Mills, Inc. (NYSE:GIS) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Third Quarter Fiscal 2019 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded, Wednesday, March 20, 2019.

I'd now like to turn the conference over to Jeff Siemon. Please go ahead.

Executive
Jeff Siemon

Thanks, Edison, and good morning to everyone. I'm here with Jeff Harmening, our Chairman and CEO; Don Mulligan, our CFO; and Jon Nudi, who leads our North America Retail segment, who'll join us for the Q&A portion of the call.

And I'll turn it over them in a moment. But before I do, I'll cover a few housekeeping items. Our press release on our third quarter results was issued over the wire services earlier this morning, and you can find the release and a copy of the slides that supplement our remarks this morning on our Investor Relations website. Please note that our remarks this morning will include forward-looking statements that are based on management's current views and assumptions. The second slide in today's presentation list factors that could cause our future results to be different than our current estimates.

And with that, I'll turn you over to my colleagues, beginning with Jeff.

Executive
Jeff Harmening

Thanks, Jeff, and good morning, everyone. There were three things I hope you'll take away from today's call. First, we had a strong third quarter with solid execution leading to positive organic sales growth and significant operating margin expansion. Second, our year-to-date performance and fourth quarter plans give us confidence that we will meet or exceed all of our key fiscal 2019 financial targets. Specifically, we are raising guidance for full year adjusted diluted earnings per share and free cash flow conversion, and we expect net sales will finish toward the lower end of our guidance range and adjusted operating profit will finish toward the higher end of the range. And third, our improved execution and strengthened performance this year reinforce our view that a balanced approach to top and bottom line growth centered on our Consumer First strategy will drive long-term value for our shareholders.

Now I'll turn it over to Don to walk through our financial performance in the quarter. Then I'll come back to provide an update on our fiscal 2019 priorities and share a few highlights of our year-to-date performance.

Executive
Donal Mulligan

Thanks, Jeff, and good morning, everyone. Slide five summarizes our third quarter financial results. Net sales of $4.2 billion increased 10% in constant currency, including contributions from the Blue Buffalo acquisition. Organic net sales increased 1% in the quarter. Holistic Margin Management savings, positive net price realization and mix, continued strong cost control and the addition of the higher margin Blue Buffalo business helped drive significant margin expansion in the quarter, resulting in adjusted operating profit of $730 million, up 25% in constant currency. And adjusted diluted EPS of $0.83 increased 6% in constant currency, driven by adjusted operating profit