MKC - Earnings call transcript Q3 2024 | McCormick & Company, Incorporated

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Faten Freiha

Good morning. This is Faten Freiha, VP of Investor Relations. Thank you for joining today's third quarter earnings call. To accompany this call, we posted a set of slides on our IR website, ir.mccormick.com. With me this morning are Brendan Foley, President and CEO; Mike Smith, Executive Vice President and CFO; and Marcos Gabriel, Senior Vice President, Global Finance and Capital Markets and incoming CFO.

will certain we financial call, this refer non-GAAP to measures. During press measures of are related morning's those nature and included and non-GAAP this results The GAAP financial the slides. the reconciliations in release to comments, our certain rounded. In are percentages information. refer Please for our presentation to complete contains forward-looking statements. projections other and presentation Today's results materially projected. from Actual could differ those update The new or events information, to publicly forward-looking or undertakes company obligation statements, any future other revise no whether of factors. because statement forward-looking refer Slide for more our Please information. X on to

turn now I this Brendan. over will to

Brendan Foley

thank and everyone, Good joining for morning, you us.

Before results, address we I would Hurricane Helene. reviewing our begin financial like to

Our thoughts by go out devastating impacted to all this those storm.

to continue the We situation monitor closely.

our to moving results. Now

Our third we and as an quarter especially evolving performance is complex consumer our expectations, to navigate with continue landscape. aligned

the and we most capitalize Our drive the unit will improved on areas that volume success results our investments demonstrate the growth value believe trends, of share drive our categories. and advantaged in prioritized

growth are building confidence our our on to Day. we support remains Investor and objectives. We're and strategic investments have share our objectives long-term these support that company, upcoming that excited our XXXX a road in in top-tier results long-term map McCormick said, blocks our As at Delivering yielding

my quarter an top remarks will of our overview third This I drivers. morning, results, begin the on focusing with line

quarter have trends, Next, then questions, I will go and consumer will results, we I comments. before outlook. some your provide of Marcos work perspective on closing And and our on. Rick XXXX into third highlight success continue the areas some financial on will will the finally, depth to areas review that more

constant in the divestiture. of mix quarter, results the our as well pricing, X% canning on volume In to product third Turning flat sales our in were flat reflecting X. currency, as impact now Slide

despite This quarter, milestone volume we a delivering challenging growth by meaningful positive environment. the total reached

Our consumer improved flavor volume solutions. across sequentially and trends both

of with on growth our our mid- to our to plans, to end deliver continued high Our sales growth the our guidance. in proven ability coupled fuel constant results currency date, confidence

the Consumer innovation quarter, reflects delivered to In expanding volume the for consumer X% and third consecutive Americas, accelerating volume improvement focus growth with alignment our we and leading trends on Volume in distribution. segment our continued solid sequential growth.

continuation improved as management add price Our planned. We continue gap the In we of volumes across markets categories our from positive to innovation volume to third and support and quarter. the for EMEA, plans product new reflects consecutive pricing our major realized benefits core growth distribution. drive

consumer-preferred the outside slightly we growth China, volume-led our of Asia new well of our was performance core as we spices portfolio seasonings rollout China, strong delivered packaging sales benefit to we had by as originally gains. expected. In tempered for from Pacific, continue than This distribution more as

look challenged, is ahead he outlook covers in within year. will the guidance. the this remainder to more Marcos provide of we the our As and to our expect for environment fourth we remain on China quarter, color reflected this when the

of of impacted primarily customer quarter. strong promotions. fourth prior to the third as the the by a profitability timing the relative quarter results volumes. the customers Moving trends QSR In to improvement, in growth by sequential our results delivered volume primarily Americas. Pacific, by Solutions. were the in Asia our impacted in And softness perspective, to we from delivered year timing volume driven shifting the which From benefited were are Play strong We investments, EMEA, our

a item discrete operating of results with income tax we line largely at due share to slightly results second in earnings expectations and the the As benefit. are ahead year, remained look half our per

quarter on share reported now our me Let we state of similar second results. consumer, the the which view since remained has our

reducing need. behavior challenged. baskets trips they stretching with focused They and store shopping their for are exhibiting smaller remain Overall, on making consumers just frequent value-seeking are what budgets. and grocery more to waste are They but also resilient the

traffic cook and Consumers starting home, income driven perimeter are food shift further to Foodservice most reinforces condiments growth home, by at is benefit shopping included for and to as increasingly soft particularly across in trends flavor proteins. well and McCormick's lower well types, they This this and households. as the These overall are protein restaurant for QSRs. older in and spices seasonings at their continue sauces. remains and generations as categories, as demand

as a extracts value Labor the is to Spices growth category. use offering. small sacrifice. trial are sizes our flavor match store as that are or for time, need willing the the exploration highlighting mixes, plans consumers to there several elevated. sizes remains remains with center trends. product important and larger seeing remain to Demand onetime perspective, and that not is something for recipe we right demand demand At well same increased consumers #X From

and seasoning to up premium meals. pick velocity our Gen and future gourmet flavor seek line, Gen seeing cooking also at restaurant in We're that they and blends from convenient. Z, quality cooking higher quality Interestingly, items. on They're into it's new as customers, recreate make are they home. are leaning and coming our interested Z easier

step of we our it on mindset, the everything of entire we is reinforces at back and consumer-centric heart It's importance which the do As our reflect that all trends, at business. present these across McCormick.

with consumer most right continually innovation. informed customers. are have in meet our broad and and what evolving our we plans delighting the to portfolio And that place believe consumers we strengthening are them by We demands to matters

X. Slide to Moving

In key Global highlight some areas drove unit the we EMEA our of for this volume Americas, of across competitiveness spices In the our and the in our solid Pacific. as and seasonings spices our label key consumption me growth and in quarter. private success. consumption U.S., for outpaced relative on improve quarter, to to Consumer label private the we segment, our Let continue markets Asia seasoning

packaging portfolio preferred for drilling consumer to in ahead quarter, velocity Grill we begin fourth of displays, Mates, our outpaced next And season. unit category This drilling quarter, and are distribution. growth rollout on of sales, the our new excited the year's

the continue volume we and in to in trends Americas, In the consumption unit both and driving recipe U.S. share private label outpacing strengthen mixes,

driver continues Our line be Cholula to a growth. of significant

category, mixes, Cholula new consumers millennials bringing recipe innovating younger We families. particularly and to the are with

EMEA, mixes significant gains growth [indiscernible] had a U.K. X quarters. both quarter share and for Mustard, volume realized volume a In consecutive strong unit of recipe in we Americas. drove driver market dollar In were the share and

unit our private addition, label and growth the outpaced In volume U.S. in

last share continues pleased and We dollar In to plans consumption Poland, to quarters over gains. are improvement. the mustard see X and are that and realizing great unit are grow, we made the expected progress our market driving

Asian, like we seeing have the of in declines represent experienced the food we Frozen categories small part portfolio, which stabilized, a and growth. improved consumer, and Americas we prepared that now our previously participate In in, are

to make points. continue distribution total We progress on

spices in expanded recipe the mustard and and We seasonings, gained Americas. TDPs in TDP mixes and share

growth the of in EMEA, a consumption our we unit market. as was to Americas the drove E-commerce consumers outpacing the significant Finally, double-digit continue seek driver and quarter growth consumption in for e-commerce, convenience.

both points branded market, insulated and in expanded and In product we condiments. foodservice foodservice Americas and branded spices In grew the overall distribution of categories, our technically saw Flavor foodservice flavors. Solutions, volumes in of business, seasonings across and we high-margin strength despite softness

the food packaging distribution, consumer we improvement volumes addition, some behind and their packaged EMEA. customers in own are hot promotion. are Americas new winning In Flavors, within In in seeing and share tabletop sauce both our business

in Nutrition nonalcoholic customers innovator as alcoholic as outpacing our with In remain Performance high-growth solid performance We strong. Americas, beverages delivered category well beverages, the growth. growth and

Let seeing touch some we're now on where me areas pressure. some

strong hot business loyalty. have base underlying we and continue In consumer sauce, to strength our in

trends that is a peer Our remain the share sequentially. improved In disruptions. chain lapping unit by share impacted our trends own supply their Americas,

However, volumes by many trial are sizes. impacted

We flavors. to are category minis. of performance far Minis and are new pleased the driving the of are trial our so with Frank's incremental

EMEA. distribution we our particularly improve exit impacted QSR to marketing our In traffic, brand slower and innovation, XXXX. Solutions, as expanded our help by volumes expect We Flavor in were trends

several We to have It's results difficult this our pressure seen for traffic. QSR impact predict quarters.

However, remain of by our their China, was aligned in innovation we some value focus collaborating trends. impacted volumes Australia improving boycotts. In customers impacted notably of by and as as and consumer Southeast was are Pacific, Asia, our slower customers Asia QSR geopolitical soft most with through where volume traffic outside with they on

quarter, our the positioned this plans, and the promotion innovation we well ahead about Looking entering With fourth excited are season. to season. holiday are we

are supporting increasing with holiday holiday season. our marketing strong a our expecting levels portfolio merchandising are We brand campaigns and

wrap will up, let which X, growth me I reiterate to continue in plans XXXX Before and success on Slide XXXX. year-to-date our our our performance and into drive support

and categories. is core major Our base markets strengthening business across

Investor will have sharing to forward details differentiation. our initiatives that this on plans at And I flight Day. and these performance in continue to We several look more upcoming drive

trusted interest and our fuel points. in remains To flavor consumer cooking And strong. long-term interest wrap exploration me cooking, X strong. continue that up, key healthy, importantly, The let categories, consumer to be flavorful share trends in brands

We are our volume trends. dedicated accelerating to

refine are and our drive volume-led plans investments impactful results We sustainable adapt and return prioritizing growth. to and needed our as to

should into You as our which categories leadership. execution our our plans growth will and we for We close and consumers, the expect a and and to be of XXXX year will customers, strengthen improvement continue believe differentiate the beyond. McCormick, continue win to

Mike. Now over to

Michael Smith

entire good on bittersweet pride as I more one incredible X and company immense filled their decades, team of appreciate my morning, Brendan, of years. as I of with CFO retire. for the it Today's gratitude tenure earnings is and efforts call our contributions Reflecting for everyone. last marks you, over before my Thank and this than me all and am

of like time to the years. and you, our investors, engagement Lastly, and analysts all over I for thank would sell-side

commitment our business been have your strategy. insights and to they questions thoughtful understanding me, and to reflect and Your long-term invaluable

Now for third let's the move to our quarter. results

the by third Slide growth, quarter. reflect comparable growth, impact volume Consumer solid from divestiture the improvement our prior Starting segment, were by volume year sales sales of of sequential the including the of and pricing. the were as offset with offset last the was second line X, X% our X% canning quarter pricing on comparable X% In investments partially impact year, top to reflecting

the this X% This our volume core were by On consumer by in prior reflects volume was and growth Slide pricing with growth offset the driven X, year. Americas categories. sales comparable investments,

take data-driven approach still We surgical investments price consumer are our impact segment. continue to to gaps, expected and managing XX% to our a about Americas of and

our was major consumer in X%, pricing of by offset volumes currency of across sales constant product driven EMEA, X%, the increased growth partially markets. In X%. categories Sales broad-based by

delivered to We we are volume momentum growth pleased continue the in expect EMEA through and XXXX. with the

we primarily to the sales environment was China. were Constant currency APAC in and the due China, that across region in categories Outside consumer flat, markets. growth of delivered volume-led macro broad-based

segment on Slide Flavor Turning XX. our to Solutions

Third contribution the X% of a divestiture was by and increased canned the solutions constant prior a sales by branded currency sales constant quarter offset a In customer well from of comparable of business. strength as X% X% reflecting timing price, fully Americas, the contribution impact price which in activities currency volume, a year, as reflecting were to increase driven X% flavor and from in foodservice. the the

by QSR the customers and X%, mix from X%. of business, constant currency the a price In impact of including the X%, of X% sales the lower reflecting EMEA, divestiture decreased volume product of and canning volumes lower impact

were In price contributions Flavor Solutions the both APAC with in sales and currency, minimal from comparable volume. region, constant

slower were customers This Brendan to by Australia traffic boy promotions. some in by QSR customer growth As impacted by was our due where notably China remain mentioned, of in most of Southeast cuts. APAC outside and China, our offset volumes Asia, in impacted geopolitical QSR

driven versus profit our Slide the of program basis comprehensive quarter As Solutions gross impact and by margin XXX favorable or primarily by seen expanded mix period, within segment Flavor third CCI. the our XX, improvement in continuous points year ago on the

Slide Now moving XX. to

the by Selling, generated to lower or relative decreased administrative quarter and general by benefit distribution our third expenses, last lower and driven employee-related costs year, CCI of expenses. program SG&A,

SG&A As decreased of a basis net percentage sales, XX points.

in investments, timing Marcos he our remainder the will of for income the in address from our gross quarter and shift compared both third now when will our this with shortly which SG&A lower in a XX% of expenses outlook year. XX% quarter operating fourth results. XXXX contributing. the of increased reviews Operating be reflected margin as expansion Adjusted currency, or benefited to profit constant the

currency, the increased minimal continued income constant segment profitability. Flavor in in Consumer with our Flavor increased restoring reflecting operating or Solutions, adjusted Solutions from on operating Adjusted impact currency. X% focus income In XX% XX%

fuel our us to growth. and commitment quarter performance to to continued well Our realization investments reflects increase profit our make positions top line this

tax. And touching on

the resolution sales Our rate year-ago third as several our outstanding the effective XX.X% The of rate benefited compared state quarter in matter tax XX.X% an tax tax dating was adjusted to back well mix. from period. as years,

just year, our which had I discrete reflects XX% the tax for be expect XX% result, better slightly now the provided we the is items rate rate we approximately As a discussed. to previously and than

income largest the joint quarter Mexico. in reflects strong de venture, third performance from unconsolidated McCormick in Our operations our

mayonnaise, Mexico, product We are contribute to the branded to McCormick and our leader and meaningfully mustard and business market income the results. with net marmalades our continues lines operating in capital

that as strong per earnings adjusted line, third the benefits lapping compared mentioned the increased the increase I It in tax de as period. was year was quarter, results bottom for XX, that share due quarter period prior as XXXX well year in operating will fourth to $X.XX the on Slide This discrete $X.XX to primarily ago for to profit note as our earlier. important is the be At shown we Mexico. McCormick

sheet balance XXXX. me With and who over turn Marcos, for outlook our cover that, the call let to will

Marcos Gabriel

highlights to the The $XXX offset balance for and capital, from the of our and we've of benefit earnings Through cash increased million $XXX compensation flow year-over-year was more in payments increasing first XXXX. operations the for Mike. cash summarized tax cash sheet. X million On Thanks, months cash Slide quarter-end compared flow SPXXX working from payments. the than XX, XXXX, by incentive impact was used

cash returned shareholders dividends $XXX million to through million expenditures. capital $XXX used and of We for

optimize capital reminder, and a demand, transformation growing advance increase digital projects capabilities As our meet expenditures and to include of structure. cost capacity to

growth, investments a down shareholders have Our to priority to dividends significant balanced through of remains to a portion cash set on and debt. our paying drive return

below strong Xx working with and XXXX driven leverage to capital to year committed strong another profit of for our cash remain ratio flow breaking we be expect and Importantly, by initiatives. investment-grade

on XXXX turning Now Slide financial to outlook our XX.

Our in drive to the our trends prioritized key strengthen long-term, growth, and while outlook of environment. reflect continues investments categories appreciating to the sustainable uncertainty volume consumer

to Turning details. the

from are operating per expected line, previously on impact a anticipated sales, at net currency to share, we between continue the minimal decline earnings adjusted our a be the and rates currency expect to top change of and mid high X% of approximately now to our have the adjusted growth impact income range. anticipate At range constant unfavorable First, to a X% sales of guidance will to of end X%. results

in to a to anticipate to demand. be impacted what last consumer, APAC pricing, of reflected from presently China said terms continues be by the we we down it full our X% business, XXXX about included year, In for we expect we is is be guidance. quarter. increase to the And for food China, away lower similar In to home year, expect while now flat, sales consumer this slightly compared and within our which

recognize While the trajectory to we believe business. we there continued China, demand weak continue the of in has long-term China in been

income. to operating Moving adjusted

to to continue growth. expect X% We constant X% currency

a the product the single-digit higher cost low inflation margin projected our This from is favorable to gross of and XXXX savings than GOE margin CCI expansion and XXXX. investments. gross in impact basis to offset between points from range reflects impacts pricing, Our by XX anticipated increased partially and XXX programs, cost mix increase

margin to volume brand investments will growth, expansion, savings offset by our including to SG&A benefits from gross drive In be cost marketing. addition partially

to expect For marketing double-digit reflecting the increase brand by a in CCI our year, we investment savings. increase partially single high to offset continue spend digits,

provided In mentioned and the of to the previously XX% which earlier. had be terms benefit tax for discrete slightly reflects of year, is rate rate items now we we approximately expect tax, better the Mike than our XX%

our We continue strong McCormick we unconsolidated for to Mexico operations, year. the expect de income anticipate the reflecting mid-teens performance increase in from

of our range be improved a the of the earnings $X.XX per our share results $X.XX X% benefit to we close To compared we reflects to the X% will XXXX, from high as to tax XXXX anticipate to increase rate. adjusted end projection and summarize,

the quarter, into consider. head let of we to some puts As me fourth summarize the takes and

We both expect growth Flavor in volume drive to Consumer and

by third the from expected the investments Pricing partially our slight improvement impact only Consumer sequential Flavor to and negative offset with have segment, Solutions. Solutions quarter. price is in a

investments support quarter be and sequentially to relative by prior a to the margins gross comparable third flavor expect from supply year-over-year growth. mix and price solutions chain driven We to the plant year, improve product flat to

in shifting upcoming investments increase to these and I to expect year-over-year Day. We investments third SG&A IT will in digital from our transformation into talk fourth the more related ramp the Investor quarter an investments and at quarter, anticipate sequentially brand and marketing about our

our profit As the a to be result, operating will comparable likely with the our prior mostly time due of year investment.

However, perform year. to half line this second the remained in how the of had profit expected operating we largely with for

As to Brendan continue investments impactful results. we prioritize to our noted, drive

are on direction, remain our outlook Our underlying right of delivering in long-term business the time. underscores return the growth we XXXX and in light to fundamentals and we financial that over confident objectives volume moving our and

Brendan Foley

you, Marcos. Thank

like our moving Slide to Before to key close Q&A, takeaways I would XX. with on

it that This results in volumes especially an objectives. confidence as are We for company are demonstrates our most total and reinforces the inflection areas plans investing point we drive long-term with pleased our the quarter, for and our positive. the value in marks turning that

continue execute speed capitalizing and consumer attractive map We further across in agility our trends, our on on categories with segments. to strategic with road alignment and

In addition, yielding our results. are plans expected the

We manage by These investing in cost mix we to are and our margins costs savings the programs. also our business. favorable expand continued led as product improvements and are

our line with of the second quarter from benefited Our results continue and third timing operating these we be results half our to the to in investments, profit expect expectations. in

sales our for confidence end of plans currency the with growth coupled achieving in us high to performance, give projected our year-to-date Our XXXX. constant growth mid-

and results this drive particularly recognize we my together, dedication to to shareholder value. contributions, we that confidence navigate will environment. reiterate I their Finally, all as and want for continue differentiated and McCormick complex employees

Now for your questions.

Operator

Lazar comes line first Our question today of with Instructions] Andrew the from Barclays. [Operator

Andrew Lazar

Americas. in improvement to nice sequential continued volume the Brendan, in consumer, see the it's certainly especially

was that to I right, these and than point, pretty think seeing But made? I'm were. lift, in a expected X that if the was less little and you've pricing where actions of consumer some from curious of magnitude volume pricing expectations close you're investments

I keep this in rate the bit momentum the guess, items? be lean you would little going, tax line you've And even reason if from some a below and like got a to to are, maybe year things further, right, flexibility given there some

Brendan Foley

Yes. Thanks, Andrew.

it turned maybe started we we in with as obviously, couple I thoughts to the volume, just of our second right the our with here. was progress, growing be. a on me we We the mean, leave make year, we're track of and in do to expect half continue opening which Let the the year. corner where goal

I label think the private across our region. flavor the core last progress that solutions, and in importantly, volume of and we're in all we're I do making this outperforming especially in categories, Americas quarter like

that, be satisfied. going said we're to Having never

working, So I delivering see our 'XX and to But think strengthening 'XX. we believe we continue and in plans into the that that an programs opportunity rest are back, we our the thought execution would. still they that going of the growth are

levers launched XXXX, Just increased more innovation to in core was our 'XX. to really contributed here and It that add meaningfully part context really you which of important that's a we in that had marketing XXXX lot that's categories. exciting we And been cap business. of we that innovation an We've because all that an launched goal our is that brand management that's performance. driving on investment all to and referred in think on just are that top price across those our A&P

We're core categories. expanding distribution in our

too, we've terms terms program there our we think good quarter. in quarter we out I a really quarter, I as is that we in of management had gap only to the It strategy, yielding but build. continue price the expected expected portion expected And will that. think pricing, maintain play that it to that from of about fourth results the performance but talked as would we start it's third in of it in a

And I would add, just we're categories. great operating also in

say operate forget the, strong is think, we strength also that level, not saw spices let's global and to global performance So saw part behind business broadly segment for EMEA, good Australia, a broadly volume really really also Asia, including consumer entire we level, in in of across segment do a Southeast growing categories. the do that the I I consumer performance want at our seasonings we just at definitely McCormick. the good across category that's

given that, said dynamic the Having guidance our appropriate, consumer think of all I environment. is

our make we right end have to China So high we're and line. of sure we at I plans, expected, But in our mid- on confident think, does reflect in what's to challenging. remain Hey, be than top environment slightly really, will we going also that it and is we the worse now. that

thinking. that we're factoring So our into

to a bit be trends uncertain. QSR continue

factored quarter, And the fourth so our too. as you the year is as thinking, part that's biggest us. of go into kind this the know, we of And for all into of

balanced So quarter it we and sure deliver us. our want we on to is big expectations, make we're but for a that

Andrew Lazar

manufacturers That's foods trends of I better, mentioned the think Americas, look food mentioned. other then make you bit X quick helpful. that your in were that business sort weaker and in was to the to you prepared I sort is stabilizing sales And packaged think a of starting been had that which you

I some space. happen, on trends when starting gradually. guess your better your the to suggest relates and sense seemed it maybe on into aspect. that's get to volume your that sort that to businesses right, the sort of the see whole, of to view viewing do as sort curious across start based recover whatnot to to I'm you've of albeit the industry some is a of got we where big the debate as So that

Brendan Foley

Yes.

-- quarter off or certainly second I quarter. was and performing which some expected, More were to expecting think plans as improvement less, -- were bridges compared the customer our call. we that second of our

play start did largely out. And to we so that believe

we those customers. in region, innovator results consider good Our areas Flavors we across that high the like Americas saw business growth

also I that broadly flavor some in Nutrition alcoholic there. think, of beverages, our the outperformed categories improvement across in broadly seeing business. we nonalcoholic out And branded played the we're beverages foodservice believe plays category the Performance that but or or into, solutions, So see then did strength that segment. like And we we

and but back level than that weak that, was said speaking QSR Having traffic to would probably we have that's again slower expected, of uncertainty.

being that, said our we do what's growth, trying to and et drive having market to However, in responsive on going volume customers cetera. the see

should quarter. do as into third QX, that So go see continue from that we the broadly, think we improvement we sequential trend

Operator

question Goldman Our line is the of Ken JPMorgan. with from next

Kenneth Goldman

thanks Mike again you much you everything, I all if years. help and timing forgive of did, for your of appreciate if Number questions, can. I think we the the Two activities the quantified, one, that don't me benefited over how your customers, XQ.

I you in shift but of making say And that just Flavor in think XQ, clarify to a Solutions, it largely kind Americas we reversing should was will wanted have of and I just then that reflected model follow-up. did XQ in all that. sure be results,

Michael Smith

Branded talked is we there's positive have really happened. the of Brendan year-on-year come the kind and in comparisons. into a the impact other that in about said did the in normalize a last QX Yes, But we going Yes. as biggest. and underlying positive that was Food wasn't good call, Solutions Service Flavor as quarter Mike. to a will in think It performance about which of from This bit third QX, that areas. QX,

Kenneth Goldman

a the follow-up, anyway. quick to for -- I'll it's I'm that about the kind my reiterated bit Okay. reason have year, step growth you little I'll a shot. talked question I guess next of And know I today. Is you it a there talk be think too And algo. is any is you XXXX, give -- you're then but asking reason into on early main to volume at won't take

you level that rise. said expect investments don't You right have previously to the in of so place, I

great have always You CCI.

hot there there's get there's general happening sauce, but you're sense, back, trying seeing? anything other you could China just in a as QSRs, that hold So Obviously, is there's there's to well. positives

the down I'm wanted X% that around said is wasn't to year many contribute years would repo mean then just the the answering algo EPS you but and ago, ex sense. what And average it, that I EPS, you're underlying M&A.? of I how sure get M&A broke in you combination curious, just that to while today. So

sense. makes that hopefully, So

Brendan Foley

last that like few to maybe buried have there. I a in Well, follow-up question,

ask best I'm do everything, and to this. to Marcos out me with my going going I'm Mike So to to but help remember

Yes, 'XX to we're point. guidance about this talk at not prepared

feel we So like will share which historically Day, looking the at done. although volume think growth, in our how we we've what Investor is and long-term we're about something drive we'll future overall context how more that about and performance

we'll so talking from drivers be will we as time look view And a spend our some perspective. about what those into long-term

I going that the believe should why do things the when think 'XX, in what's these programs And well in it's we continue it right just 'XX are about and and right to in And categories. part as our we our delivering of and believe good you a these within things that business. job want Mike, are to do growth doing just to add [indiscernible]?

Michael Smith

momentum January year not talked to you in investments with Brendan performance, do if more, would guidance early that we about happy which but things CAGNY, build this go XXXX. totally the as into We're second drive in half late really to the love the add, is or attaining. growth, we're to too, just I We'd back said. satisfied, volume making

feel would hear you'll well uncertainty more market, we're is, Investor weeks. there economic from I think like we be always the And as in but There's in Day, positioned. which X

Brendan Foley

Yes, that's right.

Operator

Our next of with the of Peter question Bank Galbo line is from America.

Peter Galbo

guidance, gross follow margin this maybe around think Ken's on getting the we're this up morning. question year. I just questions to

just understand there's of basis maybe continue there. a up in higher change and wouldn't of to the through timing trying factors maybe well there guidance bit kind if XXX some you the Obviously, as just margin that Just didn't quarter. there's But conservatism gross you're rate of fourth move points. and why

Michael Smith

Yes.

here and half, so unit of half second try a this perspective we think second year. on half. first measure, as half. seen know, good quarter some a some really it, keep we've small And can sometimes to we about level high pretty If half you But into improvement you moves. a get first about year a -- sequential half such lot, Because, you talked this

fourth quarter the going than actually the by quarter, our actually, way, third which that see quarter, higher trend. normal We And gross margin it's is too.

really we're with that. So happy

sometimes get to Year-on-year, normalizing mix to about from last happens. a third you necessarily We last quarter the year quarter, that year. not always talk this Solutions on side, Flavor versus fourth little mix year from fourth of but

chain a bit some pricing about a of don't a whole talk lot. second. I'll a comparison that in pressure, about bit there's let puts little Why year-on-year investments. quarter supply there you that. of highlighted slight talk a little him Marcos And not that the

Marcos Gabriel

Yes.

margin gross QX the QX, about thinking and is mix Flavor a QX. normalized puts about QX think and you if So Solutions more the we're between product of takes than and

So We're of also some around so that invest had particularly supply for in will year. about capacity, platform we have be than it we the more chain heat the that the thinking year QX to think impacting we rest the about the platform planned the around investments that continued of way. building

is So there. impact that an

also, in Flavor line have going that -- pricing I impact continue QX Solutions, offset be as going to little negative a there's a partially would by business of growth. in slightly but a And we the by offset top that say going of pricing to back little to drive into invest pricing, to we're in bit negative consumer through

between and QX are elements So QX. some there

As takes in some quarters. puts said, Mike X and

second the what with think at very line expected is much half, you look I if profitability before. in we

Brendan Foley

you'll investments a but on the talked chain, but is in the past hear those be it's about in talk Investor see to which think us you'll Day I heap making heat great. lot excited we're we've growth, about potential, about of our that And supply driving as XXx, really see

Peter Galbo

you Brendan, pivoting. China Great. ask then Okay. And I just specifically. to maybe on wanted

least the of you and the be in so exposed market stocks at spent week there macro the back to of past earlier there. think or seems rewarding on year, China I this time maybe some the some

Just to get how perspective curious or consumer helpful. there improved some of there. in would thinking perspectives about psyche improved policy your kind China, you're consumer of stimulus Any be kind if demand is on

Brendan Foley

to in broadly slightly do expect environment we the we probably our expect business China, challenged. become On Peter. do Sure, 'XX. going It's there. remain And

year. our the looking we're for I So for that's of of just sake the outlook clarity, the mean, at that balance

taken you on of that. reference, think, will though, I of actions business. the of the that a latest the in stimulus, had I necessarily country predict our not in impact this know I'm a previous to -- don't when in stimulus, that sort in been say, But consumption position in on regarding impact have terms news just they our of sort I material

And so now, just progress. speed we it that It's we might good at to the sequentially right continue moment, at thought they'll this believe make just happen. not

lot year didn't begin way, by China think, to with. a the plan And we on in I this

we think still I little So expected. to bit just of out that latest the might impact country, And it's what economic it's we're the given than more muted kind waiting news have. a -- see of

Operator

Alexia is Bernstein. Howard question the next with line of from Our

Alexia Howard

margin ask can recovery So about Flavor I the in Solutions.

by I been side wondering mix. on have more is that think was? may product driven continued it and mentioned I'm what just runway there the that partially you mix specifically how much improvement for driver

Michael Smith

Yes, Alexia.

to growth quarter, in driving the migration a portfolio like lean When are Performance portfolio, and Solutions, about had things again, within our recently. You we're flavors, that, good talked on that really about mentioned, share, long-term some we've as Foodservice, think journey Branded of the in within higher side of and margin that in things. Nutrition, share gaining the categories margin the more past which higher Brendan things think gaining you about Flavor

Flavor Solutions there. margins global through that journey Day, X We'll too. in Investor our bad talk program, indication years last vision about another taken proof effectiveness someone of CCI considering that a luck. mentioned as CCI a margins to more We've migrate at the CCI, approved we we these little continue of our it's operating move again, CCI portfolio -- the point our higher the So before, and

think Quarter-to-quarter, positive I term. Solutions very talked on we're this business yes, being Flavor So we've longer about lumpy. sometimes

think volatile. be is I again, But got there improvement with margin another we've for since I'll a here. come But word to up leaving. room

Marcos Gabriel

P&L, is glad and business, And as that also going to we'll to forward. for our through also margins me, continue see just that, the we Mike, going leverage grow to the coming impact

Alexia Howard

Great. follow And then just to up.

what's on happening? big side restaurants service share happening you foodservice is traffic side. gains? for Or driver the quick Is picking trying of Just that's I different value service branded the something food a driving margin it mentioned is on Flavor are mentioned to as that? menus improvement think improving a You the their that what's flavor being the get Solutions branded up? in and because

Brendan Foley

on flavor The we you in the Alexia, -- time, drivers repeat at subdued from sort saw in in give a within of perspective depressed they to with when foodservice. to we trends segments just [indiscernible]. just to last do of quite a most reported, point even and them second that, the been have for this less Branded traffic Foodservice We quarter have traffic. the see still

like in and seems The share, with or of our and I is more things the think tabletop to and placements our driver sauces. both spices winning also on growth just marketplace platform seasonings getting full Frank's RedHot of gaining broadly, and condiments be

tend a that that seen on And Frank's we use because driving you'll those to often to appealing we're with in excitement of is obviously or like so that like leverage RedHot be time to like offers drive we run. what Brands Cholula quite ways our think, are And that lot I and their the see, as brands that doing we've menu programs flavors and we brands. interest business of consumers. limited are operators

of that our our because promotions those And pick of up bit Branded lot even little part so customer with seeing running we're a been business a of types programs and more more Foodservice base. we've

broadly doing So the I tough answer it's think, give. in I is really marketplace, well a would

Operator

from is of Gumport line Max the BNP Paribas. Next question with

Max Andrew Gumport

Just to follow up margin. Flavor on Solutions

XXX So you up strong year-over-year. basis a very had points quarter,

And like seen for pretty we're our we've since implies a back seem in would you big in margin pandemic highest Solutions guidance a Flavor year that it full assumptions the the the started. the few math it's step margins. by have think making, segment I in and XQ

and headwind you abnormal other compare 'XX like 'XX. seeing the is conservatism mix although XQ in XQ the segment? the clear any abnormal take it if is horizon? really or a I'm this it's factors curious tough step volatility seeing lumpiness back mix towards me I there's sounds a horizon, you're in if product It wasn't the you're on just But you're a on XQ of Or normal in 'XX. for some and product was to more mix saying X mean

Michael Smith

here. again, I'd some variability say quarter-to-quarter, going it's you're more mean to balanced, honestly. I get

so I if It's chain back things normalizing If flavor margin the honestly, more the doing a you get last you the as look base, think on chain improvement back solutions. sales we're quarter plan. before, impact mentioned at it, supply with we're there. you smaller gross and going I margin impact. investments, probably to a mix, comment, about about, supply talked investments, We're the fourth of on too, for Marcos But year, year, kind it's heat of compare think, your the happy

Marcos Gabriel

But full year going overall, operating improve the I for -- as we to terms to in continue sequential should versus operating were mean, should profit margin our make the margin. last of year improvement

before. will by So XXXX, year we've basis versus the operating interest XXX had points XXXX to continue planned up full for as margins drive and that margin to we

Max Andrew Gumport

in hot the turning U.S. And Great. to sauce then

remains it sounds challenge. So like a it

give pleased expect the you packages. your quarters? offerings. You're sounds update can reaction to you that size what from what still us plans you're initial with your seeing seeing trial from also own package an But peers on It coming over you're the there, just pressure trial-sized action like

Brendan Foley

question Yes. entering always There's the category. competition Hot for on Max, yes, thank you sauce. sauce is hot new category. the an attractive

part -- do remarks, deal our increased this that as investment. and with continued portfolio that's all receiving our something base prepared loyalty. but business the the we fair strong we of really consumer of I also said underlying that's health just also like amount in So And we a is time. -- of sort And the of

perspective, from on prior theirs. affect a but big ours is things much, [indiscernible] of marketplace. thing from particular lapping hasn't X X is a that's there year, But going chain as the which our really, just in affected constraint share I impacting the supply business think, definitely

seeing And we're under so label. volume their that return back

quarter. of sizes, in to these which we we're also, participate lot seeing able were third unit to or surge in But begin in participate from the volume in, a trial many

up Our holding units in this well too. are category,

category. fair amount a is on noise hot there sauce going So in of the

some of pickup minis, those just velocity. look when And that, in around we to you more give at seeing perspective a so lot we're

What it's it's helping trial flavors. doing on us is new drive

we just have Both to are have $X, Buffalo there, good. the low think sriracha creamy it I and loves consumers But a at also really really, price sauce. for to these are super we in barrier points trial.

we'll nice pickup many positive that part obviously, sizes be velocity those on a expect that a to brand our moving so in And trial assortment or forward. and portfolio that of seen have we've

to. also attention I draw to do want

rolling early innovation acceptance like Frank's coming our out, hot half that back we've products performance market we strong seen in have are overall the and the of that an are sauce. We of perspective pickle our there. These and this innovation, items year, squeeze kind on Frank's the RedHot deal in out from the like

this area is attention have the that. end performance exciting quarter. an of XXXX, store. and third in the as But move versus to, work believe we improved of to a it's We towards area continue we'll better lot we an through sequentially the we'll get So that

Operator

Powers next line Steve Bank. of The question the from with is Deutsche

Stephen Robert Powers

much guidance. implied quarter first maybe that's programming marketing ROI is holidays just advertising fourth called and support versus demand of sort out question I'm on more that how of to of intense durable programming XQ in the 'XX? Just sort in as has around and more the that you maybe more the ramp planned specific and in that everyday stimulating to a curious

Brendan Foley

driving and we that's its have the when will of fourth And posture good way fourth think think you Well, the been quarter business our quarter, I into it is a quarter. to the continue walking still strength we level going about results. maybe that about activity programs same fourth our and expect the in think into

getting But portfolio the we're anything like So and those those the that. results investments with pulling the programs. that like we back across or plans and we're not progress and

our do holiday plan our big have It's customers. setup holiday quarter. strong also really we And believe season very with we

And so really area is holiday. in to an we this performance good have that the expect in,

it when to quarter, And about expected. obviously you sequentially that from that's and tick be something so is the a up third think

Michael Smith

day, made every mentioned, that early hot year. we about you a year that the every you this Frank's related in turning as this, day, of some so is sauce talked But on tune

Stephen Robert Powers

Okay.

morning, if know from I'm And how issue but is visibility relatively before But I strike levels? I impact workers' guess extend, becomes how this long Okay. a very that's long lived, material more on perspective, it's inventory your the from the this news assuming That's is on this your in then dock [indiscernible]. this current relatively new, manageable. outside, short based that the you for

Brendan Foley

this, on for Steve. the question Thanks

strike, port maybe contingency We like planning really been potential Coast of East from that as on happen. this April an the perspective this On the year. something thinking been have this about for since planning we've on could this for inbound supply us,

possibility. we've United counting planning because be been might coming so our from outside also And our actions around We've domestic the plans inbound on that States. they mitigation suppliers coordinated with supply

So we believe broadly we're strike the of believe with risks we mitigated covered. those we've now most occurring. officially But

supply, but that sure don't we We feel are have monitoring it planned though, interruption we just to make for like daily, this. of any we

want long something Overall, event. a that else. -- right we extended is see because those and as have that though, this pace this we thoughts can productively to it everyone as now our on to and we're encourage But closely that, sides to they don't going are with obviously work like both through watch

Operator

of Rob line the from is question with Dickerson Next Jefferies.

Robert Dickerson

Great.

like QX, around to like ones. quick the sounds than on little it then sequentially but bit first relative gross at bit of get maybe implied normalized, comments still better just maybe down kind the in we're looks and like around sales maybe kind little a guess, could midpoint bit year-over-year. X I a color XX% I QX year-over-year. gross because margin, time, better of be think margin, to But same more wanted QX flat more EPS of it's about little seeing is X the Just guide, a

implied, versus there clearly unconsolidated like should income SG&A like decent been it's is then tax year-over-year, is know but a right, we're I mid-teens talking of up headwind, what's of about, I rate then the year-to-date guess up -- also kind from a bit So amount. like implied is XX% And be everything little guide.

like core QX, decline it of So I'm absolute kind the gauge EPS to implied like in what's just that it's SG&A. driver and year-over-year of sounds trying

Michael Smith

Yes.

was I squeeze that highlighting the think the investments in We timing of you some of P&L of there. making, kind shift talked we're about investments. a kind and SG&A the supply well very chain walked the

other on the consolidated really touch bit I'll of are the let But to tax Just Marcos tax. little stuff. briefly, that and a cover

by a timing some that related, of tax for call, about in little bit the we So call rate more the a talked which down headwind we after were large pretty favorables but the did performance pretty by significant. last unconsolidated, that pace X%. performance whole great in McCormick But quarter the continues. great the fourth lapping really but of year We're a year, also valued has really

to I about a that to bit So Marcos P&L. the turn line. But I'll to think that's may maybe of wonky more part that on it look little talk it you the reason

Marcos Gabriel

yes. Yes,

about gave going that line. range to sequentially high from top in the the in of double talked think you means Consumer terms the both to QX We Flavor year. and from if we But Solutions I full QX. QX, So mid it's QX. into improve the mean, about improving

margin if is Even the to compare on gross pricing margin. within QX given going Flavor to that's the Flavor of making mix continue I supply partially terms consumer normalization side some mentioned we're Solutions to to going be sequentially be offset the flat, of that bit before of the going by that in it's the improve the investments Solutions. QX. chain, and year, that The gross to reasons into same from applies you prior with in a

we QX about to around we that market transformation But gross QX. terms the and So had around particularly that margin SG&A, going data know, we have analytics. as I'm the in across more investments to we some digital shifted -- from a well, digital investments QX digital IT into of company. Investor that's coming On see journey some be how commenting in see you Day. as transformation QX the at

manufacturing. business across as a are to around We efficiencies well analytics some hub serve the putting as data

Some there really of of lending kind the investments that QX. we're making a in is terms of in digital transformation,

be profit takes are impact to so that And last that's the kind we QX. from operating a that QX. you But bit year, those going to puts is that of little So comparable of and see. to for QX see

Michael Smith

thing, the squeeze X out it's a think to fourth if get bit X. It's it's quarter other you little of Again, I quarter. the Rob, again, biggest a quarter, the play. of

to the said X% in essence. sales already, year, mid- we've X of never kind fourth X by gone the in the quarter. We've in essence, we've in below high narrowed So to the earlier spread going of

that So you math it's little get into bit a to just exercise. get a

But range you've that in the more than a I is little bit think the understood like. maybe So you'd past.

Robert Dickerson

bit. I for transformation there couple mean very Day. coming want probably the could of it digital I kind yes. also of like that I I we're of And sound that's of you're -- something talk All Or don't a is be That's a, that easy spend, little there throughout the But for fact just that, piece IT there's long mean call to a the kind that like share side, of yes. let's just more term. like Investor more little more that? I IT of follow-up. respect yes, bigger digital clear. Yes, timing very is talking lion's maybe call Is little right? like the be then an in the doesn't bit even what's And a that's could it, kind and like to of heard viewing no, a times not a you of like, kind QX X mentioned QX. around ongoing Maybe just of thing? some 'XX program shift. kind investment helpful, where and that

Marcos Gabriel

about our journey digital QX, continuing line to drive our performance. top transformation to that the going can Investor investments talking more sustain particularly around Day in We're be rob. And Yes. at

Digital that of I others, to marketing to in mentioned that them in particularly, X continuing and is QX be going as we're call. do the

covering point. into program for we're XXXX. early our going that digital all the too to get impact it's of plans Day, specifics at the We're part and long-term So transformation going to to as be Investor

Operator

the . Moskow is with Robert of question next line TD Our from Cowen.

Robert Moskow

X%. headwind just like $X.XX of not I'll being material. versus discrete an FX a no just tax also your all I'm right prior and raised Maybe if it's the math I'm longer things. doing a benefit. or that When up by guidance You is if wondering you the together, benefit this couple expectations? clean add that

Brendan Foley

Well, incentive there's with things these you when comp things a lot of programs anything that. and in like look circularity other to at

we've So FX, kind X% reason, to tax moved due really of to that. due in the essence, kind it of that reflects

Robert Moskow

your digit Okay. on And similar guidance did investment another comments. hearing question in quarter, it high quarter the third I about for don't increase year? in to remember brand third the single

Michael Smith

talked We're heavy first investment. mean this half, in -- about we've the half I again Rob.

Second the we're which talked up doing. moving half, about third and dollars we the fourth,

about we haven't . what's talked quarter-on-quarter. So up really

Robert Moskow

Okay.

for halves, So just the the not guidance the For quarter? for is year... the

Michael Smith

[indiscernible] that the yes. into half,

Robert Moskow

some of for long-term kind the then now a screeching the not -- algo a that any off pricing think given of head lever for And includes that of do reason And assumptions. years of this further until long-term you But as finally, algo? additional appear we've Okay. terms you room notice? of how come And lot to pricing in there Is that and think it's that kind it is couple in pricing. to XXXX, about believe halt. there's hyperinflation into for a I environment been would your

Brendan Foley

position of in Mike talked Rob, well very outlook of we're long-term thoughts has today couple think a objectives. in a maybe anything I always our algorithm, wrap open these here in in there be changed little we've it a like not our up to or say there. bit long-term and prent I materially sort of But about with up. don't I'll might to think whether ask

broad algorithm. sort we play mean, pricing, top healthy deal to there terms the of there? end -- that sorry, from healthy long-term regarding will growth back we've Predicting the volume I a anything challenging near add order I But with you bit to we line in as want it do pretty or Mike, it's we're XXXX the clearly, perspective, decisions unless just quickly. inflation make some think to an future in standpoint made speaking sure out get how

Michael Smith

Yes.

think, been things I there's of others. are too, us for lot -- price year gap focus this real so a management and like there

to I these and things drive. which management in as continue initiatives, revenue we've think long-term category of management, invested really

has understanding it And talked to in price to things cannibalization does. get impacts product Mark lines, some continue about of quarter the what investment fourth of closer innovation, how

continue think this that think So really to and best-in-class we I year. close going to in we're into area really next

up have So right always pricing that of go the I costs toolbox up commodities your We the to or freight go that think in you or don't dock docks, tool because may know because down, price right. now. may have

trust So you we've really keeping that have pass been on lever. -- And with very sure versus we been And customers of market. to been have the our we've about increases that at margin cost forward. good we've making and our into think going I'm banner that I there. we'll Marcos we a flavor consumer both customers And sure future. won solutions lot will look carry from

Marcos Gabriel

so us, right? in us a the P&L work about us that our working think algo. we that, at program add addition continue for be lever holistically, is we would What look long-term the in and CCI mean a is of have working will that future. been the for to for And pricing -- continue many I has we years and I last to over to will it part

kind the lever investments a that need growth. way is to line of that using the So first that the as go we CCI continue drive top like is to we of funding about,

it's top bit important always through. of line So these coming about pricing, the little through levers, about line, a all CCI top to volume very it's a the mix coming

levers of those standpoint, I from we manage all So holistic kind more say. would a

Operator

Sachs. line question Samuelson next The from Goldman the of Adam with is

Adam Samuelson

of has U.S., spices to been in & back wanted maybe if covered. lot I grounds A come may. I the seasonings to

private points smaller but that think brands you the And to category, in pretty wondering But label the there competitive of either. just the kind you you maybe do rapidly how say alluded that maybe price maybe or are in or and outperforming see which if to to continue how the respond quarter. about still some to and growing. adjustment about consumption there's are some talk needed have notably in isn't adjustment category. -- of kind that to positioning the growth some assortment brands smaller we grow label, what category you private that if think share necessarily Nielsen, I'm and the really I of in your didn't And outpacing could environment

Brendan Foley

broad of nicely, quite perspective business from checkout and But seeing we're a category, growing From is right a what metric. the to competitors forms is in that we're in a as across have all what now the across enter. category what broadly attractive that compete we're category, for our seeing volume when part of is very and we an especially well the we of doing people we're offering think share quite particular with a that we perspective category

the and you, of we And so time, give that is competitors label. smaller same always have private something with that just dealt I would at sort

going of a on as look the really like quarter. kind have of of we the dynamic take feel doesn't third any this new sort So at we performance

seeing healthy volume unit both category sure and What across McCormick our what and consumer measures the capturing is in focused is we're making you're really growth that on growing business.

we're all of across our the core also or across of a gain total whole across our or Now But distribution growing nice this point points TDPs, portfolio. seeing part also frankly, distribution categories. -- we're

we share us. performance perspective helping quarter as and think fourth also terms of that's into are So right our I now I in the the But these quarter. go would third

Adam Samuelson

year. for quick flow. of guess was full -- there source capital a know the as last cash I I was just year, a working helpful. That's cash big on Okay. follow-up

there know working a generally a been or closed? the book expectation once that it's is Is quarter full big year-to-date, use Just for year is sized cash. a capital working capital decent of is reversal. of source use the an fourth I cash

Michael Smith

a Yes, quarter, little drivers why strongest We cash fourth year. short prior you of the Yes. versus quarter talked is know. as some year-to-date of flow we're It's our interesting. about

is and some us planning that strike, is our to that contingency to due he part capital. One to we were alluded of And working of port those of sure drivers the Brendan make ready. mentioned

that we're strong cash flow So but unwind, hopefully should a naturally still expecting year.

Operator

Tom with is Palmer Citi. question the final of line Our from

Thomas Palmer

on see apparently? particular on profit SG&A basis. where I'm And most ask kind step-up a I wanted just really we're to the XQ. trying this to Is here coming in going get operating segment to there of a segment

flattish maybe got we'll growth is but You X there than other? overall, where see area the more

Brendan Foley

Solutions, Not Consumer going across to yes. Flavor be segments, and specifically. both It's

Thomas Palmer

But close we And the on growth maybe to the consolidated answer a respect tougher of the what anything of comparison more little year's conservatism. earnings XQ. again, past a at to rate when lot the just call in pressure? level is is look But XX%. the I this operations, know last is just to incremental run reiteration that Or about couple thinking is being so out with XQ notable there year, trigger could quarters, strong? the of

Michael Smith

pesos Well, before, in now XX last around if versus I the I that XX.X dancing FX think the year. mentioned --

we pretty back our earnings P&L. their as a impact that's to material translate So

Operator

I'll remarks. the closing for time, to floor turn back management this At

Faten Freiha

today's Thank all you, call. thanks joining to for and

this If today's regarding morning. conference any feel questions to contact you information, me. That further free concludes for call our have please

McCormick & Company (MKC) 1 Oct 242024 Q3 Earnings call transcript