K - Earnings call 3 2023 | Kellogg Company

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Operator

Good morning and welcome to the Kellanova Third Quarter 2023 Earnings Call. [Operator Instructions] At this time, I will turn the call over to John Renwick, Vice President of Investor Relations and Corporate Planning for Kellanova Company. Please go ahead.

John Renwick

Thank you, operator. Good morning and thank you for joining us today for a review of our third quarter results when we were Kellogg Company and a discussion of our outlook for the fourth quarter of 2023, during which we will be post spin-off Kellanova. our by and our Chairman Amit Financial #X morning Chief President and this Officer. Slide Officer; disclaimer. Executive Banati, shows joined Steve Chairman, Cahillane, and Chief I'm statements forward-looking our Vice

you Kellanova's performance, be for materially aware, as results those from statements. future statements today, are made As such are projected. projections different Actual forward-looking could certain

SEC of at For filings. A be to refer to please results to further differ, as webcast today's information concerning of days of archived well third recording factors the this slide and that our will www.kellanova.com. as could page Investor public least cause these documents on presentation the supporting XX for

statements basis Until directional. And Kellanova's discontinued commentary referring estimates will Please and on turn fourth XXXX. for February based otherwise as therefore is to when financial operations and for and results a noted, currency-neutral to over it always, quarter adjusted I'll be to in outlook, on profit share. them should available be impacts we to have per basis then, Kellanova and earnings during unless will performance viewed organic net release As referring our now historical operating note about sales our an Steve. any we earnings that on

Steven Cahillane

good and everyone. John, morning, Thanks,

the While be reminding bears that our it talking brands spinoff, for global quarter to geographies first X strengthened snacks-led and Kellanova time. It a Kellanova with results is to portfolio Kellanova exciting business, predated that the powerhouse. a the you make as is

markets. and us quarter Kellogg Organic margins. the performance let's our gross at sharpened categories a sales was fast-growing of we be before we Company strategy, elsewhere, us markets. from access diversification, markets, generate half States And global that both net and softness offer from offset and giving have United sales highly XX% Half our to temporary saw sales Treats and the differentiated is outside Pop-Tarts, net quarter. Kellanova emerging which United Eggo, Rice of from Slide emerging see profit pleased quarter. suits talk elasticities. We're one and brands, normal the sustained consumer our will marketplace, it States above-average another comes our market, snacks we been better over on emphasizing Krispie environment and Pringles, by of expand about when growth as global which #X, growth our opportunity called company one precisely in protect the third on #X. on a attractive deliver Kellanova our marked still in a despite and in continued dependable and good financially long-awaited toward with and while This turned return levels on-algorithm an and a planet restoration the is enable financial with drive strategy returns. snacking of growth shown above-average of economics. what Slide communities, to era, continue to accretive that also X is the the come and third As Cheez-It, capabilities shown appropriately pace of the #X. But to powerhouse win markets into We Canada, you geographic big final revenue And international our challenging in be Slide that serve in can and strained reach, of brands deliver annual net enter differentiate, a

in above-algorithm savings normal as at caught have us And are inflation. levels, pricing a we productivity operating increased delivering cost brand and deliver double-digit with up growth levels this service to our even profit to returned building initiatives As enabled has input rate.

spin-off. outlays with And to executed the excellence. year, even the last of related upfront ahead it strong, spin-off, was flow cash of free speaking Our with we

in But will we we by and from third had did conditions of in factors been levels. We would our of into this these lately our XXXX, growth our strength. Externally, guidance heading we So and our order which quarter, our a their other, position have to has don't us timing label, in year. and that given quality and typical activity increases, strategy trade our part our display notably around of and for be prospects levels, less In cumulative successful categories the volumes after been private lead year across returned activity time. latter the merchandising quarter. illustrated remain in America, a categories in relatively gain of era additional was our the right This long-term North in and to this the industry. think was another are of volume focus we elasticities to much have bitty the quarter some levels. merchandising, there improved the from net going including full about particularly most but levels seen the some these We it also was this quality the earlier Slide industry of This rise XXXX the about Kellanova America is for remain couple portfolio current cost X, display have enough, follow. elasticities everyone across of service every quarter, commentary a elasticities remind about quite of to margins, return our is decelerating inevitable that short, Fair to to our because our expect inventory impacted required was lapping of return time budget, snacks levels year, high what gaps in largely in small to in seeing service dynamics. again, and inflation normal anticipated. and shares over differences quarter delay more and was last restoration quarter pass. I today to we on levels second return from price below and confidence regions, growth decelerated And label And #X. The in private second activity. through decision significant replenishment to One and sales are price a North but this in were cereal XXXX and caused

is increasing. Our brand-building investment

are We back ramping and our up merchandising, returning innovation. we are to

will balanced in price/mix by shape. return brands differentiated over for the half Shown to more margins. Meantime, remain on and profit #X, sales world. net Slide our growth volume brands brands biggest, improvement accompanied our these focus sustained time, most within And We great quarter our more at our accounted in the double-digit growing remains XXXX around strong of faster portfolio. than of increased growth and outpace advantaged continues so sales far rest brand-building the in investment rest a year-to-date periods, year-on-year, in brands the as Kellanova's than little we net rates portfolio. In these that of and behind the the their to XXXX on

lead investment prioritize our expect and to we them margin mix. continue growth to we brands, As to contribute positively behind these

the also program is Better growing during manifested found our our itself these our right recognized unveiled be Days ambitious of ways link quarter. ways focus we efforts. continue for Our commercial sustained new, to way, and the and our to activities legacy on the Kellanova, and more our targets Promise communities #XX We of Slide some third helping endeavors, shows for to

come turn now back you more walk to let So I our it will before detail. in financials, through me businesses of Amit, our and who discuss each over

Amit Banati

in onetime in the year which the X% Year-to-date, double-digit increased quarter on in basis adjusted some on Russia guidance. Earnings points translates growth by is per spite income. And to currency-neutral right flow morning, implied X, implied on business. XX% basis related X% put XX% quarter flow organic by free Kellogg spite half full everyone. ahead currency-neutral in of growth This the guidance Company Company. Year-to-date, and the about to growth. Operating an cash ended. share Thanks, second the after of on guidance, and X translates expense our of by investment XX this Kellogg by from summarizes an about of profit occurred into basis, towards year-to-date. Slide our for year growth, macroeconomic Steve. Net organic increased XX factors and higher an ahead quarter divestiture at came higher because the pace of well pace #XX this spin-off headwind $XXX lower spin-off. is than full X% year, This sales our driving Good which decreased million, cash spite year year by outlays in implied by is results the of interest sustaining increased guidance. year-on-year pace delivering which higher and of year-on-year on A&P is our and adjusted full in the last full by percentage even pace our of to X% pension

been have in to as well you step EPS the on sales net our Kellogg year and algorithm pace our year-to-date and well would period, we that as back, items. Company. in you and And were were profit the operating better see it not growth quarter pressures the for or achieve the on macro-related we guidance for were full nonoperating had given on So

take let's closer #XX. each on net in a at Now starting with Slide detail, metric look sales growth our

lap around elasticities management again growth do X. actions and began point July, come our projected. percentage in of modestly in last on the this our pressure of sales putting better occurred moderated world, X growth about which quarter overall so quarter business, to clipped rose revenue net in divestiture quarters year. The X As Russia though from we our expected, recent some sequentially largest will as in did Price/mix price volume, than volume from

was partially the Foreign in rates once total of euro, growth by points. X of estimate headwind based we third quarter. the that headwind of Mexican of represent to negative X. portions a Kellogg offset devaluation on than in probably And again naira, sterling similar generated strength quarter the are where organic currency peso. We is better Kellanova related Most Nigerian today, translation a that this and facing the about percentage are Company business the in pound

target elasticities long lapping in pricing the So with net growth range. anticipated rise organic sales of within remains actions, long-term year's even last our the our and

Now let's starting discuss gross Slide profit, #XX. with

management growth realization to and towards margin price stated dollars. expected every quarter we've revenue We're see proceeding should cost quarter inflation, expansion the we margin sustained up going of differentiated to how the in and and Kellanova well. good quarter chain and America #XX the have combination to This on resulted our lift our progress absence gross shift supply top than shows forward: shortages not catching see, with input on mix to this in during conditions, same year. margins Slide brands. Slide also growth continue period most drivers cost of still can and you this another but benefit year. And bottlenecks as our And of profit. of in this are you year-on-year not ongoing restoring in restoration of as profit from in input also levels, growing of gets profit is it the progress times, which the improving productivity, a applies faster divestiture just and a so double-digit #XX in level expansion margins the was As growth we XXXX business, can that made as as double-digit includes on immediate building each the North an mind supply we many operating back that level, also restoring heightened this growth indicates have operating far profit prepandemic our increase basis. Slide Russia, from profit includes at that but currency-neutral well. the gross Keep our and done inflation focus only #XX, our gross brand at line cereal,

growth just each our delivered America absence year at a with year-to-date ahead year-on-year full have of This, our North And our categories basis continue points and improve will expansion top own start our we strong give and last line XXX going with our cereal. this margin immediately of Day by margin of K in in profit from as investor along growth-oriented brands sustaining projections expect of ahead higher Kellanova discussed and We we markets, modestly at as to a operating to year, growth. forward event. in margin margin the confidence us quarter propelled operating putting

year. Interest interest growth within quarters mostly expense from the continue increased interest adjusted operating our due income quarter the reflecting in sharply first the period headwinds higher and basis to again items. more plan attributable income once in Moving per below-the-line than significantly X the stemming what decline #XX offset of grown enough was pension the of to Other in rising pressures to share macro-related expected decreased which statement. rates. post-retirement and through down Those will year-to-date and last year-on-year earnings markets in the year's has Slide each rates. year, that financial year-on-year quarter asset below-the-line the our and this values the profit, accounting were are X shows severe

the quarter slightly year-to-date that were full in for rate would up the rate been [ in tax Average our to year quarter be XX% year-on-year year. year-on-year, full up we again and keeping X, effective expecting case outstanding at the we've was for X shares Our ] well. expect as the

positive offset small Nigerian was and translation relatively EPS what in per strength X than in currency to Foreign the as from share European more impact level. Mexican naira currencies a quarter at is earnings

Turning in #XX. We because of delayed ago onetime the even of our free to and our disruptions. the year-to-date ahead supply expenditure period to year, Slide cash a related year that flow outlays cash despite see was of spin-off in capital lapping prior spite which is

The to continue EBITDA. to approximately transfer net and estimated was higher of on W.K. we free flexibility. debt the last deliver the decrease guidance of the debt Company. Meanwhile, performance million. reduce $X.X well profit higher billion year-on-year, slide Company to to is year-to-date We we we to enhancing had is that This $X prior are way be net the even our Kellogg billion to year spin-off. cash was year factors. end net with executed despite flow Kellogg how debt $XXX pleased which deal our us further at conversion, our the shows our our This for our put the quarter and continued achieving as of leverage communicated to financial continue Upon spin-off, to debt full flow therefore cash than operating

our all treating of a in XXXX Now Kellanova for no X XXXX, Company, our America longer now as the cereal North is let's quarters business, X WKKC Work outlook and at operation. W.K. Kellogg underway to that portfolio. is of Kellanova discuss discontinued first our quarters financials prepare

meantime, with few at for net quarter. in #XX dollars quarter, billion a plan next completed Kellanova. approximately our was from our fourth the at those you earnings of deliver projected early the the to have Slide and will them release offers now, in estimates to quarterly we We in months $X.X share February. In quarter initial absolute Kellanova sales

even currency would X% the foreign the to excluding divestiture Excluding impact and Russia of translation WKKC the be base and impact the we rates within quarter saw at in our similar assume growth we on sales from elasticity believe and sales the negative long-term be that we about negative net current growth X, target increases. continued organic price net impact will of year-on-year as lapping

we of and to reaching We over long-term of adjusted to within approximately million, just and $X.XX growth profit from the accounting year's share currency the small In net expect long-term the in WKKC a continue restoration of other of year-on-year around profit profit of Kellanova's target, operating million translate gross into Russia basis earnings $XXX of level margin remain reflect income that the X We year-on-year our project $XX continue, both headwinds sales year. increasing algorithm of million divestiture all year-on-year will estimate adjusted XXXX which quarter excluding our to which expect within operating translation. We XX%. and for quarter per to expense $XX of to and short, impacts and X around interest for excluding experienced we after growth we've is will project basis $XXX $X.XX this million, base approximately growth.

'XX. to Looking

to As sales few sustain and indicated event at we a our on-algorithm Day months profit. at on K ago, investor expect growth

financial Slide as are at We feel heading very me summarize will normal Kellanova. quarter good those in our the about #XX. We into budgeting new our to X and process, conditions we in still provide our performance time and February. Allow on details

target. of our long-term ahead top growth Our line remains

profit anticipated. continue recover we Our more than quickly had to margins

sheet Our cash a spin-off. as is is we even as free our balance executed flow solid transformational

world. Steve Let run-through me of the now to turn our for a it back businesses around

Steven Cahillane

Amit. fourth Thanks, the North growth. Beginning oriented into category in Kellanova their you groups cereal. to relative and remind the will toward international our longer cereal the Caribbean splits portion sizes America portion small Slide clearly #XX no very how of Kellanova cereal help have of is portfolio nor quarter, portfolio

the that remain Kellanova X. the on As you businesses quarter will see drive growth with of continue to can in our most slide,

Africa again growth is this year-on-year region's profit was Pringles AMEA, most Australia, operating top comprise XX% Slide first, growth #XX As an again we around now the part spite was Once followed cost strong the relative in #XX expanded quarter East. which the region. basis. continues double-digit into performance its our sales. notably that will walk of snacks exposed businesses in on to through sales again, North of Japan. of with again and discussion up This organic in to profit business and margin another the region shows how and the double-digit inflation high that extremely net we and organic Kellanova region share emerging adjusted markets. Slide market, once posted in growth, again in we broad-based across of profit and is substantial Co. it regions, organize with structured, comparisons. organic Asia on Australia gain strong in this growth outperformance this are exceptional reinvestment AMEA quarter the that the Middle delivered And category our of and In our the Kellogg financial net W.K. currency-neutral on turned business. Within start quarter America we to by see cereal third generated the We'll It

#XX. even overall our offset growth exceptional and the year then to growth performance strong of to post business in continues ago Korea to Zealand. And Africa noodles region increases also was shown on notable AMEA and Australia, Growth elevated the inflation XX, on And currencies. gain New as Southeast spite we in come price others third notably shown begins in was broad-based cost share Asia. growth. and market, As led in with year Slide sustained growth weakened cereal lapping in substantial taken Slide quarter it to lap This by last and in

strongly, and huge business the to continues distributor competitive Nigeria strength brands grow the to of owing Our Multipro. of Dufil's in advantage our arm

noodle the to momentum. solid Nigeria. AMEA with outside continue expand enters our also era of We CeloNova Kellogg's business

while margins we net For delivering category organic of restoring continue sustain strong the And to the future. our that all to growth profit year, plan groups, full X expect yet for year do another we growth. across sales and investing to

outpace operating architecture fourth we XX% America exceptionally Brazil, of better. On look we margin last changes in and region, volume quarter starting emerging another generated half and off but of been America price category small. net X% since our year. in is in Slide strong to W.K. year-to-date, quarter on those business, roughly ago continue SKU we can a spite our have Kellogg snacks, again delivered our Latin and in the Latin strong top growth. It's markets wholesome let's portable that represented largest sales and business Pringles also led sales quarter America in was markets Latin once salty and This decline, both grew has improve or was our see momentum #XX, pack Keep Latin strong undertaken year #XX. growth Pacific Kellogg growth in led at of both growth gained profitability. with other America Caribbean This quarter We by growth again the organically of X, by Now of And though subregion sliver organic of double-digit rationalization quarter. category again third the the it Mexico Latin this net in Mexico. On lapping subregion. Kellogg quarter this to to and markets. #XX, Slide Both Mexico America, cereal third key cereal expanded X attributable in to growth year, organic our was snacks, on our Co., growth leading net share Slide note our our business, growth these of see strong business that of operating so in our in spun business Pacific Mexico you of exceptional X cereal about snacks of only sales last that mind by straight markets, in led to putted that a important organic in growth in saw profit Brazil. in quarter, sustained that quite

is well it America performing as era. into So Kellanova heads the Latin

we to to see profit momentum can year, continue with line this prospects. region strong Once and both current their full expect sustain the we its both regions go long-term of again, with showing are snacks For continued markets and outstanding emerging top growth our cereal in that to in momentum recovery margins.

our region offset Now year-on-year, you of let's divesting growth. lead sales Slide developed margin expansion, growth turn over strong and Kellogg cost this another of growth snacks, quarter regions, all organic #XX, increased business, starting to strong solid moderating which region. of Operating impact top good yet of Europe, to our Russia markets Europe than the pressures which we look on owing half sustained growth, the year-earlier line Slide Kellogg profit in This to top more our continue and #XX. quarter. If on the with in net into of can deeper see earlier in sales represents that sharply

double-digit European in France, portable the And snacks, wholesome accelerated outpacing XX overall double category subregions. which all category X we led snacks growth markets, into growth Italy we growth in to organic have in net and in quarter of Pringles with category double-digit fact, in in the salty X our posted snacks growth the in by Poland. substantial quarter remains the In the share In gains And in double-digit gain in sales marked last have U.K., our digits. U.K., Rice business. [indiscernible] the Squares. like rates continued Krispies Spain, markets

on in quarter. the in sales #XX, in small posted Our shown business a decline Europe, third organic Slide cereal net

brand in category discussed previously, we owing are previous to building which has this X quarter slowed includes rising But incremental confident quarters. we've shifted As the business elasticities. our plans, from

for quarter it another So strong Kellogg Europe. was

the top expect of we to yet led snacks. to year For growth another by continue region line solid the full year, post

during also cost the deliver margins track spite half improved to remain in second We of pressures. on sustained

was our in move in America overall, business this #XX. is divestiture turn Slide the it Russia good to as era. We'll a region situation. North momentum showing Our Kellanova necessary But heads now of into Kellogg in an unfortunate

move sales has and As growth to recent begin as of year's anticipated, as decelerated higher to last sizable lap quarters continued we in net trade elasticity inventories. replenishment

we growth However, growth reflecting shows groups in particularly cash #XX profit strong of all outlay against net bottlenecks shortages. elasticities X quarter can market, productivity, up the like as continue diminishing to investment seen This over and in sales. the gross elasticities, categories high items were well in of our lapping in revenue snacks, us higher substantially net recover management brands represents year's Slide in in third still and sales deliver half margin, enabled quarter, third increase and of last North rising our to inventory be slightly its X last rise in America profit the very quarter. The the year-on-year single-digit a third which our very multipacks. replenishment as growth experienced snacks In big category quarter. In year. all operating

more In similar story restoring activity. It shown in addition, #XX. was frozen Slide than foods, many on we a approach a merchandising in took measured

elasticities. the rise snacks, foods faced frozen business sales in our quarter. category in net third flat Our a were Eggo Like

gain In feel addition, share. our category in a to continued continued the Farms to shakeout even impact it of the Morningstar brand as plant-based

is North Co. which of Kellogg cereal W.K. business, now turn forms to our most let's Now America what

on Co. rise detail same in businesses its faced the a reflecting year-ago strong own Kellogg continued earnings get category third from the business quarter: the elasticities as the more #XX, of W.K. sales, this growth. dynamics in lapping and flattish as Kellanova in release. Slide will You shown But

Slide Turning to #XX.

having is region Snacks now the performance. feel should in are finish to We in expected America a with good year finish of growth, improved continue full Frozen confident in while delivery. execute. commercial is ability financial year to our to activity balanced North solidly Our terms and bad

as this too we snacks off Kellanova. North in And put, more margin region era in is brands. earlier-than-expected frozen recovery reinvest foods. much to are and streamlined new and spin-off, the to more our behind our We as America ready Simply that even we start start an become with focused to

So #XX. let me summarize with Slide

The margins quarter the on while good top the way. In the spite where a continue anticipated. closes rising getting than they Company delivered Co. Kellogg profit to in while we the industry, XXX-year-old to does should restore had and back continuing line we and all growth our of faster we to be third so W.K. of service elasticities solid And levels that books Kellogg across executing deliver spin-off

the success both all and continuity ensure business quarter, made to the final preparations During we sustained of the companies.

the Our Kellanova enter place company and strength. of successful, operation. We're agreements in now And to are in position commercial services a company-parallel era and operations were and transition our back we from the full activity.

us good Our free cash strong, financial flow and are giving flexibility. balance sheet

plan mitigating sum, towards that kind from differentiated track In as that Kellanova. the would And have deliver highly portfolio that a of we financial on and should margins. emerging continue algorithm deliver brands. to we snacking, a to markets you proactively stranded are weighted expect ready are and We is

a growth-oriented a era congratulations to have and new happy heartfelt now as be Kellanova more ambitious strategy our as to they the I all with endless companies. former and you future. next more to We express first financial for the for our embark tireless and into to best passion just that entered Co. it. And expectations, entire a and our your take went on And employees on family portfolio, for we our W.K. We of executing the I employees, we'll a questions. want deliver spin-off in sharpened colleagues and wish excitement both So Kellogg chapter this in your to thank share team promising efforts future Kellogg the creating closing, such their

Operator

Sachs. first Goldman [Operator comes question Our today of Jason Instructions] English for from

Jason English

for questions in algo of regards couple reiteration next year. long-term A of your to

First, you to estimated Day number base use? the base for year. Is XX gave earnings base Analyst still -- a at your that right around this X of

Amit Banati

once February when had to update will actual we we've the year's Jason, details rates. think, latest our we exchange foreign in get cycle I normal this

So I we of as in our kind right our prepared had expect in think we we right as budgeting fully our to We're mentioned February. shared in update middle I remarks, growth to the rates get the now. August. But of absolutes we'll be on algorithm process

Jason English

that XX that But good to may number even hearing though we're anchor am to. I -- number through, year, not that right? this a -- Is months did X XX be I Okay. for

Amit Banati

in are on a are No, mentioned, like I I pace We from mean, right? on we we standpoint, standpoint. of track the 'XX track, from a are ahead first 'XX months. And X

we'll we the to share So details when specific February. get

John Renwick

that gave that time, But It's what X/X for XXXX, the might of and we quite Company indicated because X for a we Kellanova. you'll look Kellanova us of of have like. estimate quarter report Kellogg full year see was what real at as we'll that not

for just a was that So way to you calculate.

Jason English

to it Yes, trying muddy, which lot because is right? evident in really as to it's still today's noise anchor just here. is why a release, press I'm There's of

simple. I'm to keep So trying it just

the Okay. long And sticking with term...

Amit Banati

track we performance, 'XX. From underlying are right business with on -- right, on an

Jason English

[ long-term good noise. a lot came sticking That's to results, algo, our through upfront And hear. Steve Yes. it with but of the think And mentioned I this think I is ]. there

now say hit like That doing time where don't and to diversified footprint in America, at global shouldn't in each but to points emerging with segments market is you're there do going got quite the lag And think next developed concern. all segment, a your well. Investors year. business across time, to North are it by time going it reasonable it's structural, a of you've but some moment that one feels I particularly better. LT not it's are going concerned be and algo long-term to are that? world, those a algo to diversified Your where Is able businesses are some lagging.

You North you don't algo perhaps much algo need but lag, now, actually -- to that. could what segments like offset year. a to you you expect next all do could in are have return you really a right the strength to LT and It long-term do look entering North elsewhere across does we're America seeing America? Or where very

Steven Cahillane

Jason. things, of couple a think I

what now. We said be put to because in of algo need don't America, the we a to later could Having through North come did in it sooner. merchandising hindsight, that, in we're spin, it of to we back order activity portfolio. regions purposeful. long-term We work. I right. context, power seeing to on That make corporately most. also all But exactly was the were you're in You're have than just which obviously think amount was going perhaps return In massive

brands, back more know, we XXXX, North is of innovation chain quality look reasons, wanted in back as to We so so optimism our The America our to the to strength there, turning very with in strong. And back very, be. where we for to get lagging activity. approach supply merchandising were of we it much terms holding same to we

plan ambitious XXXX. much got in a we've So innovation more

different North again, So America in XXXX. as innovation we look at to merchandising will also, but return all led series of obviously in spin, a very by measured events, be XXXX, the activity, and

our in our which confidence long-term confidence algo overall more company. a bolsters long-term we our in North So have as in algo America,

Operator

Our next from from comes Modi Nik RBC. question

Nik Modi

volume Obviously, strong to I very comment been but has on lag. continue you Steve, could revenue volumes growth. driven by hoping was pricing,

Some have volume of actually posted peers growth. your snacking global

you more a some thinking that. And a how context wanted from just question second just just to I of abstract question, about. an thinking get and was then this that I So you're of about on is kind

if, have big P&Ls spin wondered still One as be do expansion something some is you drivers key your needs existing you the future growth of and with global developed space that company? be to for the brands? Kellanova will that for brands. I global out Or the your in of white And

Steven Cahillane

Yes, Nik.

more than we a other clearly, would That's taken, fact. And type that XXXX relative we question, us year pricing returning spin a top those later innovation our of brand on I than elasticities. did structural anything optimism mentioned health mid-teens be take pricing XXXX. items, the to than obviously, that as volume from activity we're -- as you or of which had in There's volumes mid-teens the nothing our some ago, The we've I when return return did difference competition, for to pricing later optimistic to the in to leads our on and So as -- most. to us to going performance activity We beyond. points say or about much earlier, you're have other most. well merchandising

P&L, at all white of brands terms level performance SKU level. global in and space, track detail of financial a In our we the yes, the geographic of a at

So good a very understanding of that.

Operator

Our next of Evercore question ISI. comes from David Palmer

David Palmer

the Question on fourth quarter.

X% we I'm sales really other of that shows segments. X% thinking channels. data wondering Russia organic what scanner between reason within U.S. North X.X% to the algo. measured would you're if drag. roughly that'd America be is in It down And revenue And including about in asking breakdown quarter-to-date. I'm and the about the see up, also terms I a XQ mentioned growth You be assume

it that like have sort growth stay for heavy organic you a would America lot North to would for to reflect have or revenue international on what that and that of international. So lifting put for be look in to you'd in pretty XQ burden way of

in about So strong or seeing thoughts what or internationally North be particularly America, any what any there would improvement not real seeing growth thoughts about helpful. perhaps is we're we're

Amit Banati

Yes.

think would to about X trends X% if from are WKKC X%. Russia a base, the be standpoint, exclude then the now from seeing impact a translation quarter I divestiture similar negative right you currency and around we what

the faster the X% quarter. in you if somewhere think for get kind algo of international next to to business. We I expect would So the those grow of -- exclude our the than X% between you you X, get to to growth U.S. overall

decline We that to expect U.S. for to in to quarter get the continue volume our price expect full as so to back down elasticities. be We'd expect continue. but been merchandising, we the in guidance, to always That's X particularly in we moderate

of we're of So X. in that's kind quarter shape expecting what the

David Palmer

that is, down would to international to were something follow-up if X%, My if have up like be XX%. -- it's then North down the America

expecting back from like Day Analyst now. I'm and for at be activity So know you Cheez-It some asking. August, just to through. coming that's marketing the seems It improve in why North merchandising America I must you were about talking

I'm from improvement? So you a meaningful expect expecting international? do heavy of sort that you Or wondering, are lifting

Steven Cahillane

a we did return you data I X. And like scanner merchandising that lot the going to can quarter see it's to say activity. Yes. was in

We we're haven't that display seeing. yet quality gotten activity the now

gradual improvement going So you're of QX as going a into XXXX well. to see

Operator

comes Ken question JPMorgan. from next Goldman Our of

Kenneth Goldman

some that answer be of point that's some But my maybe at quite With hear -- in Street -- If point. just reasonable quite time. more the to Street you'll to that come growth year, the talk next yet, certain around want about that But ready you're I you're pricing through as little out is of not -- numbers if this hope have a Street can and question can caveat is that it's The was people to that at that too expecting given quarter still case, disappointed. I'm still and some year. numbers an certain volume as reasonable. a is challenges details I the wouldn't have flowing XXXX world, don't that wasn't and second I for high even I'm on-algo And the The in just and great soon sure if looking know asking there's you are and

if if commentary at into of the next kind you talk growth about year you any visibility, at know provide didn't given point, I this there's that could could understand. lack I volume of this on time, So

Amit Banati

Yes. Like said, working process our we're I budgeting through right now.

lapping Obviously, expect the growth in volume probably of we're at X, get shape increases and But how the the laps easier. 'XX in as we'd right volume gradual of I of now. to start some looking the 'XX. price return quarter some think that's a you

Operator

Sandler. comes from Our next question Lavery from Michael Piper

Michael Lavery

way margin you trying of now there is better, or a offsetting parallel much sense -- and -- give on expectations, looking a about to rearview? of order lapping some productivity, but supply to how understand Was are quantify How magnitude of -- still really quantify disruptions that the of pricing that the operations normalization lift you what still costs drivers, ahead chain well? Can Can of from any where the our part that? obviously think touched that should you then the you of a to nice that? the the maybe margin inflation ahead. And putting had sustainable You as be some additional looking performance. in the and significant most mentioned some the against the of of Or are had been. that,

Amit Banati

Yes.

a much right? gross margin, I think you think in So items, pricing, our and is better supply terms biggest X performing it catching hit I presentation, So of is chain. on the it

faster been margin it's X we biggest than And improvement. those So the the better had coming are in we than had gross and what what expected of drivers expected.

in of happening for. what terms a catch-up faster more of than planned timing So have the we

of terms of quarter parallel and costs, parallel in -- some think -- ran So X we value operations. I we for incur did costs -- in the as kind

for say year. now it's significant think that's post-spin. item I behind wouldn't next lap us I a

did we weren't significant So standpoint. incur really a costs, they but lap from

Michael Lavery

away perspective sharper. real Can some the on Is remarks just you? And are you in to either you of with that, about have elasticities or it then obviously, talking just of XXXX. just that getting But release as in little from stretched Is in what consumer quarter, fourth color the curious of seeing for the maybe expect home? better? Is a touched see they're worse? in the dynamic a theory, trading of bit Okay. a trade-down, of packaged food the your and down in seen consumer we've where all driver. like, pressure this that for just the give dynamics you and more just the quarter And behind you but That's that broader consumer, sense it give or thoughts follow-up on how but prepared on us helpful. the for are what maybe nets on visibility obviously, ahead. would, You much out it same? the volume looking from the a looked some you lift how terms That food,

Pamela Kaufman

private consumer. evidence the we're resilience say luxuries, degree trips, the of really is some when when down There smaller take that, a not There's And channel shifting. still trading much traffic for of it past. label the is high degree percent about think in about in points we're past, otherwise the decline the volume we've obviously, line seen to overarching is definitely catch-up. of you There's we're terms said those some strained. our we've at more particularly aggregate meaningful I'd real patterns in type Michael, type things. Having the is you're than in pricing, the of or watermark XX still change in affordable consumer we've But of expect. talking though, the talking clearly you that I talked any said XX-plus recently, to that elasticities. in seen the think that last We've seeing categories, the they're would There's And all of to shift I of anything about shopping, months, a of over sizes. this more structural dynamics. And types all pricing probably consumer smaller that.

of our return As the are environment on are we are to more to well used this of we're the points. We go believe lot macro a things all much to and that going putting next to quality different a consumer. lapping pressures pressure understood to point into that talked about despite lot pricing. a year, are Consumers becoming price industry good merchandising,

Operator

Our of next BNP question Max comes Paribas. Gumport from

Max Andrew Gumport

on volume North America. in Just the

build last color you've already. I year. some given the the and merchandising lapping touched innovation inventory on return to know also trade slower You've of and

How I of So to just of is terms I those you decline share all do. was return? of the this very maybe some And much just then was magnitude. due maybe could just tough slower to category performance? the to the order much lap? to How buckets in or is quantify was hoping growth due much lower realize due how of

hoping for a there. more bit Just color

Steven Cahillane

the X as plan; a we the directionally, merchandising and activity buckets, I innovation, better the innovation. got the future. the we've the all the we're activity, and buckets big look big Those the entirely Max, merchandising pricing The lapping; think just returning. are controllable really are we're Yes. pricing, to

signs Cheez-It, diminution So Rice look Krispies that brands talking very about health when we're no power Pringles, loved of that's you're by these say when encouraged. are we why showing Because with loyalty. Treats, the at are big the brands, consumer, I our of consumer

up those point. the this make to that that's X are really so up biggest items the pressured And volume buckets

Max Andrew Gumport

U.S. that off a allotments that Got out SNAP called retailer emergency rolling expected. they more that the the morning they a one and this grocery have evidence maybe impact of then bigger results, it. reported There And been than now have on large was

on their on think initially were impact point sales sales, point XXX I basis would now minus numbers more have growth. it's looking impact and -- expected basis minus a the XXX like

type of impact Just curious among a if similar lower-income seeing you're your consumers.

Pamela Kaufman

Yes. taken, I SNAP as an one consumer under story. yet. But pressure. We've elasticity haven't industry, seen the those obviously part been of results the has significant is pricing while

think what it's the I overall -- that you're it's -- study certainly quantify we'll us, just so you've mentioned. is And elasticities. probably seeing What SNAP in to hard for but

Operator

Spillane from comes question America. of Bank next Our Bryan from

Bryan Spillane

the -- a In appendix currency-neutral for the question. ask EBIT and have by Day clarification dollar to one at of sales and targets are segment. I presentation, one there hard had just I just K wanted

coming So -- are to algorithm but not -- valid just targets. really Just I'm for just you the the anymore? is understand, didn't on because reiterated hard those address trying 'XX

be still we guide should as make -- modeling as So we should be using a I to sure still just those we're want 'XX? for

Amit Banati

Yes.

to be growth out think Bryan, for I details So we expect I think, from the algorithm said, I give growth we'll 'XX, close a when right? long-term you we standpoint, XXXX. like fully rate on

assumptions are different at mentioned close where the we close had that ahead the we August. Like made think had months, out X from on of will the guidance of versus I we appreciate, in we standpoint. are -- you'd be 'XX right, out we versus pace given 'XX, when end that I a currencies we so as and 'XX had

budget. were differ, right work algorithm. our of our to that I So would the middle I growth And part on of think in long-term rates pace and as absolute expect those be to cause adjustments fully currency kind we but the of

Bryan Spillane

are currency-neutral but I -- ranges those that you provided. guess

it is get the maybe we'll so guess wait It's to know I till just February I So don't -- changing. accounting but...

Amit Banati

Yes.

Where the that's for had that So in ones included given impacted numbers, for we we the 'XX. Company, it's those of currency, won't total currency-neutral, depending rates. by of a given those we view up preliminary So guidance. rates right? are where currency-neutral the right? The overall right, 'XX there had change, long-term on Kellogg the rates view on end that company our be base number the But

Bryan Spillane

Okay. happening And kind normal. then of little faster just you bit talked a margins than recovery about

the that was middle there next XX%, of I an just margin year. again, under range, is that implied So currency-neutral guess,

ahead, of that a bit even should we you're since recovery terms -- year? margin in be possible for little So is next ahead could further running it we

Amit Banati

budgeting talked kind of We process, we as that Bryan. the Yes. complete

a it's premature recovery But bit to me faster. for margin comment is recovering think that. I yes, on

it. results. You'll you give 'XX And that we in to see specifics we'll get our on the when

Operator

Our Howard comes Alexia next Bernstein. from of question

Alexia Howard

So here. a of questions couple

that bit mentioned times run the in activity you of and about would your promotional that I'm see wondering think developed and mean know the about that we the merchandising increases, we actually should therefore, that, lap how the back timing first the were lower could of a markets, I price You a pricing it promotional rate quite but late that Does be. XXXX lower couple just coming that with down? in than normal was cadence. that of half in XXXX period don't modestly

Steven Cahillane

see you'd No, pricing down. I say wouldn't

return see are higher to off of merchandising think inescapably prices. a I quality you list just what

you'll that the really see. And dynamic so that's

Alexia Howard

particularly put you side? would that if And X.X, looks And which you -- what you if Kellogg. terms -- your of does does $XXX geographies the clear. in with that That's mean make W.K. the on you leverage type be of further X.Xx about acquisition it deals, at on as comfortable How where on criteria leverage, fairly about though or Great. front? then aspirations, million moment, and that at thinking thinking probably the on M&A around were is

Amit Banati

Yes.

potential think So strong. discussion, front despite in firstly, the got our right, I growth short-term I I the of us. opportunities. that's organic volume of organic we We've of opportunity think And portfolio like the think plenty is growth

the in emerging of markets, the opportunities, the priority. immediate organic allocation a always think capital Pringles I and in emerging largely We'd standpoint, kind in I snacking expansion in think prioritizing into evaluate opportunity, M&A is capacity particularly areas from of markets. investments

if evaluate on So something a continue both. and process, we we so -- run to opportunities disciplined very

Operator

Our of comes Jefferies. Robert next question from Dickerson

Robert Dickerson

around volume you also SKU think some price Steve, of I architecture the said -- pack ask the to about -- some just I wanted and changes to impacts rationalization.

probability So a I if overall kind just detail. of portfolio we think about that, is not that able kind as next have year, the little we more maybe fully in across of this the just us driving should that's you through global which, higher end be sure bit if dive term. And it guess, growth some America-based I'm rationalization or that allows to we better rationalization North base then, coming therefore, the yes, 'XX, volume of could end if year, near it's with this into in kind what's in by -- more and and of next year?

Steven Cahillane

Yes.

Rob. things, So a couple of

made America, SKU in worked last America, Latin was impact how price purposeful with we when program the also business, we North that and there's and pleased year package very where reductions, for SKUs out bottlenecks profitability. elements. to We biggest to First, the -- improve of the performance And very lower-margin architecture We've and we're get out. In did had severe cracker shortages some rationalize in gotten example. plants. better

is headline that. followed North America. biggest Latin America And so But lapping definitely we'll be

Robert Dickerson

kind line. Okay. clearly And right. is of quickly, then pricing on still part Fair top just of enough. side. All secondly, Pricing the the

sure of in 'XX, as segment But us a some pricing are at I foresee AMEA But be of in how pricing gone per something think many you of I'm sound kind at relative said, that's we currency, kind little are incremental more opportunities. have of when needs? Doesn't this on there there Alexia and exactly of into not can do incremental some this through a point. discussing to Maybe pricing certain kind like geographies. like bit I potential rounds to look some maybe markets, basis. many and pertains emerging the think what time

Steven Cahillane

couple of say I'd things. Yes. a

markets. a that's that X mean just flat. going But a hard relative taken benefits it's that more of any in year, we emerging forward. mitigate forward. feel that environment of for First, seen and we've next emerging the and pricing. again, that past course markets, same happening year, to it activity last at pricing benign markets means measured in shopping X in levels promotional quality take taking be the markets the It doesn't in every doesn't we thing -- emerging doing a, environment cost those inflationary to we're the affordability, But returning And not merchandising mean forward. are potential consumer. In we're markets, going have we our enough to in RGM And the years. emerging the in the like going going the the all developed more although And normalized just to to whether means fairly to the to Whether say, I to levers and generally, working same pricing price baskets be consumer currency, more be of we'll has needs maintain emerging increases of more routine. looking business, more to deflationary years. would over And consumers the the exercise our inflation, that maintain markets certainly see

Operator

next comes from of question Deutsche Powers Steve Bank. Our

Stephen Robert Powers

pick on just from Rob, specific that question to AMEA. last up Maybe

headwinds. the while, above pricing currency a was For running well

seeing growth. double-digit were U.S. dollar you So

Now pricing is below. running

but the double-digit So dollars. seeing of in you're U.S. growth, declines seeing kind you're organic double-digit

be what's could all when net that that of been real timing a in dollar of us bit for in can -- you relative just to over thinking growth of market about us how time? terms a kind there? currency So give has in tutorial And taken you're of then on that, Maybe around or frame going how you fluctuations? market of pricing little sort more

Amit Banati

Yes.

basis the a and So we've when the on XXXX, way transaction of and half rate operating an I the is devaluation that of been 'XX the first But all devaluation our from about there's it on business our multiple happens naira to easiest route think operating to basis lag that official pricing the ground seeing and shares have has the remarkable held have the through despite a think the the an between our a the that. moved. of up held market, have testament volumes it's up. we've I to price. And taken, and done of that job cover rounds strength news, taking taking been just the brand think great and And pricing way to

through we've elevated devaluation that said, first you half seeing come with rates growth in 'XX into last through the And that's like So happening. quarter. you that of been been the happened 'XX. Then have the

so result a gotten And of have translation sync as the transaction more the in and that.

of why the the cycle, go team, of the growing is protected there and mean I P&L. But now a that's the think a cover that's we pricing a kind flowing through in, whole and so overall route hand. volumes seeing And you're lag. our pricing, done from in margins. market, bit business that a we rates been at lag continues we've in to an of standpoint, double-digit to way through the And strong taking focus take I of our continue be that's it's to to margins but this the

Stephen Robert Powers

Okay, similar just the quick, you third headwinds in okay. And real currency great. quarter fourth relative the quarter. talked about to That's

So mean around a take to on we that about FX? from like drag $X.XX EPS

Amit Banati

so to have, probably EPS, yes. X, an a flattish. that I the a -- X% hit quarter top was EPS it's the actually the was line. But Well, That's X% there from about EPS. been help been a positive And right? exchange line reference the growth. the -- we I'd in in from -- think standpoint, And EPS standpoint, using about has line a a line drag top from say, to top top

EPS. impact more much So top the than on line the

John Renwick

Okay. Operator, time. are at we

call do you And have for to follow-up please you, hesitate everyone, your So questions. do thank interest. not if

Operator

for call. Thank today's you joining

You may your disconnect now lines

Kellogg (K) 8 Nov 232023 Q3 Earnings call transcript