McCormick & Co Inc (NYSE:MKC) Q3 2020 Earnings Conference Call - Final Transcript
Sep 29, 2020 • 08:00 am ET
[Operator Instructions] And our first question is from the line of Andrew Lazar with Barclays. Please proceed with your questions.
Good morning, everybody.
Lawrence E. Kurzius
Hi, Andrew. Good morning. Thanks for hanging in there for a very long script.
No worries, no worries. Our pleasure. So two things would be, first off, thanks for your thoughts around your expectations for organic sales into next year. I'm curious as we think about EBIT for next year, obviously we're not in a position to give any kind of guidance, but maybe you can just cover off on a couple of the discrete items, puts and takes that we kind of know about, meaning, I think you covered, Mike, $40 million to $50 million of COVID related costs this year. Is all of that expected to not repeat next year or is a portion going to next year? And then, any way you can break out what the incremental maybe incentive comp cost is expected to be this year and just any other things that are discrete that we kind of know now that we should take into account as we think about sort of profit growth next year? And then I've just got a follow-up. Thank you.
Hey, Andrew, it's Mike. I'll answer this, and if Lawrence has any comments, he can chime in. You referred to the COVID costs. Obviously, we talked about this year, about $40 million to $50 million incremental costs in 2020. We expect some of those to continue. However, some of those, we don't expect to continue, some of the things like we're scaling up production, we're onboarding people, we have incremental co-packers in place now. We would expect that to not impact us into next year. However, some of the things we've done like the PPE and other coverage for our employees, we do expect to continue. So it's a mix of that. However, we would be really -- a lot depends on the environment and the continued research. And so, on January guidance, we'll give you a lot more detail on that, obviously.
Lawrence E. Kurzius
Right. But there's other -- in addition to what Mike said, there are costs that we incurred for temporary plant closure, extraordinary sanitation that we do not anticipate happening again next year. And just bringing on all of this capacity has been done very quickly and -- and as a result, it's been brought on somewhat inefficiently in the short term, and we would expect that efficiency rate to go up as we get into next year.
Now, on incentive comp, Mike mentioned a word about that. I certainly hope that it doesn't constitute as a tailwind next year. But kind of -- but it's not, it's because -- if it isn't a tailwind, it's because of continued extraordinary performance. We have a pay-for-performance philosophy. Our employees have really delivered this year, and so incentive comp across the -- all levels of the organization is pretty much at the top of our program range. And