Q4 2020 Kraft Heinz Co Earnings Call
[music].
Okay.
Yeah.
Ladies and gentlemen, and thank you for standing by and welcome to the Kraft Heinz Company fourth quarter results Conference call.
All participants are in listen only mode.
After the Speakers' prepared remarks, there'll be a question and answer person to.
You asked the question Chris.
And then one on your touch tone telephone.
The amount of today's conference call is being recorded.
I went out and spend the conference and to your host Mr. Chris starting and again.
Thank you and Hello, everyone. Thank you for joining our Q&A session today as you know during our remarks today, we will make some forward looking statements that are based on how we see things today actual results may differ due to risks and uncertainties and these are discussed in our press release and our filings with the SEC. We will also discuss of non-GAAP.
Measures today during the call and these non-GAAP financial measures should not be considered of replacement for and should be read together with GAAP results and you can find the GAAP to non-GAAP reconciliations within our earnings release before we begin I do want to highlight that we will provide greater details on our 'twenty 'twenty one initiatives.
During our presentation at the Cagny conference this coming Tuesday, So today's session will be most productive if you limit yourself to one question and focus of your questions on our results and the announcements that we have made today with that I'll hand, it back to the operator and we can start the Q&A.
Thank you I'd say anything like asking questions and Thats Star then one of your price.
On top of them.
One moment.
Our first question comes from Andrew and Lazard and Barclays. Your line is open.
Good morning, everybody.
Good morning, Andrew Good morning.
Hi, there.
So I guess from my question and I'd I'd like to explore a bit to your expectations for full year 'twenty, one really in terms of your planning stance for demand and I guess from some companies have been more aggressive in terms of their expectations around return to normalization and the impact on consumption others, maybe somewhat more conservative so I'm just I'm trying.
And get a sense of of how she is thinking about this and its guidance or went into this and of the spectrum. The company is on and thinking about this and how conservative or not Youre planning stance may be for 'twenty. One. Thank you.
Hi, Andrew This is Miguel speaking.
Well, we are we are looking at 2021 and conservative way.
And we but I have to say that we saw very strong consumption gains in January and February as it's coming it's coming good as well.
And if this if this persists.
Type.
At this level.
We may have and upsides in our and our results but.
I think that with the environment. So volatile we better continue taking a quarter by quarter and approach, which was the outlook that we gave you.
And really concentrating our minds and our efforts on our transformation through our operating model.
Paul I don't know if kind of anything to words, but from my side.
No. That's it to me I think also.
Voice it to come and that we are and our outlook, we are including the view that we have for the inflation and also we are not.
Considering the two divestitures that we we have announced.
Great. Thank you very much.
Thank you.
Thank you.
Our next question comes from Chris World.
Your line is open.
Yes.
Hi, good morning.
Good morning, Hi.
Just had a question if I could.
Have you defined the amount of inflation you expect for the year and then how and how you hope to overcome that I suspect that's through a combination of pricing and promotional efficiencies, but I want to get a better sense of like the magnitude of the inflation and.
I Wonder if you could speak to that a excluding planters and and and cheese and all of those were kind of pass along commodity type categories, but just trying to think about the ongoing portfolio and the effect on the business over all of this year.
Sure Chris.
Paul will here so.
We are seeing the same inflation, you're also seeing the inflation of that Youre seeing.
And coming from non commodities, non key commodities ingredients, especially packaging and transportation into us.
And we think that the level and the type of inflation of that we're seeing.
It's manageable and is in our outlook as I mentioned and.
And we have two reasons that you know.
Behind it and at the first one is that we are we are very confident on the supply chain efficiency programs that we have.
And that we will expect to unlock savings across our supply chain.
And the second is and our revenue management initiatives across the globe that in combination with innovation renovation marketing investments that we're doing and can help us with pricing, if we need and as.
As I said that we have incorporated this inflation and our outlooks today and.
Louis Carlos wants to comment something on top of that.
No I think you reiterate your point and Paulo that we feel that is manageable and and I think that we are taking the appropriate revenue management initiatives to make sure that we can handle dosing because they come thank you.
Yes.
Just to be clear on that is that mostly U S based inflation as I think about freight in particular, that's more of a U S issue.
Or is there of any kind of a wider array of inflation across the portfolio. Thank you.
Yes.
And when you think about the commodity the non commodities.
Commodities ingredients and packaging across the globe and think about the day of freight transportation is more focused and the U S. And one thing also that you've mentioned when you think about the key commodity the big four commodities that we have a we are not.
We're really seeing a lot of year over year inflation.
Okay. When you add all of them. So we were really talking about the non key non big four commodities and packaging and transportation and day West.
Yeah.
Thank you.
Okay.
Our next question comes from Daniel.
Ken Goldman of Jpmorgan. Your line is open.
Hi, good morning.
Just to stay on the subject of cost and pricing.
Two years ago. Some manufacturers tried to pass through of some list pricing because of higher transportation costs I think some of their customers at that time.
On the retail side pushed back saying look.
I'll give you some pricing when your ingredients go up we've done that and the past, but kind of trucking as youre on your own I would imagine that this time around it's a little bit different I, just kind of wanted to get a sense for.
Given your higher cost and packaging higher transportation.
And given the lack of elasticity among consumers right now.
Reluctant or some of your customers to allow you to take some pricing whether it's on the lift side or on fewer promos I just wanted to get a sense for your relationship with them and how much pushback you're getting on any kind of price increases you are you trying to push through.
Yeah.
Okay.
Let me, let me I'll take that one.
Just to give you a kind of a of you in terms of the of the.
And what we're seeing with our customers.
First of all we'll say is.
Well, we see and let me start with the consumer our consumer right now.
And as we have shifted towards being very much focused on understanding where they are going through and so forth and I think they are they are certainly showing quite of amount of resiliency through this process.
And we're going through and I think for US our focus is how do we make sure we drive the renovation of our portfolio to make sure that we think continues to drive the right value for US is for the consumer now we're balancing that too with making sure that we have the right revenue minus thing and just to.
And what I say that I say using the full availability of our tools and our toolbox to be able to kind of handle the different pressures that may coming at us because of inflation.
So the way I think about it is our focus is driving that better value to consumers by making sure. We are improving our portfolio, making sure we continue to invest behind and marketing.
And improving the quality of our media.
And making sure that we have seen how that actually translate and driving.
And driving our improvement and shares throughout like we did in 2020 so.
At this point and I want to say it.
These are things that we can manage and we don't see that as a familiar derailleur of as we go forward.
Okay.
Thanks, Thanks for the question.
Our next question comes from glass of line of Bank of America. Your line is open.
Hey, good morning.
And so so I guess my question is.
Just related to.
The divestitures and maybe Paolo could you give us a sense of I know, we have a sense now of what the deleveraging impact will be but.
Could you give us a sense of maybe what the dilution would be to EBITDA or the earnings and.
And just trying to get underneath.
Not just EBITDA going out the door, but maybe the scope of stranded overhead or.
And there is there any other any other meaningful cost that we should be thinking about as we're sort of trying to look at the model X divestitures.
Sure. So when you look at this business is a business that has it and average margin that is lower than the average and there has a margin that is lower than the average margin of the company.
And we are really expecting a minimal dilution from these divestitures, okay, yeah and when.
And also we are also working down of the year from from now until we close to try to even offset that so I think what I could tell you today is exactly that that it sets of business with a margin below the average of the company.
You know and and you're upset and I'm expecting minimal dilution and I think we have time, even forties and minimal dilution to working down Lee.
To try to offset it.
Okay, and Thats and Thats true for the cheese business as well so we look at both divestitures.
We shouldn't expect a lot of earnings dilution from from both of them.
When you look about the cheese divestitures I as I as I mentioned before.
You were expecting around a 5%.
Dilution.
And but again the same way for these divestitures. We are also working now with these two business out of the company 22222 to limit. This are there the dilution okay. Great. Thank you.
Thanks, Paul next question.
English Goldman Sachs line as well.
Hey, good morning folks thanks for sneaking me and I appreciate it.
And I guess kind of on and collapses of similar question, but it's all about trying to determine of where you're going to land and EBITDA for the year can you put a finer point on the comment that you made in your press release that you expect EBITDA to come in ahead of your strategic plan.
And what does it imply like where would your strategic plan plays too.
How much upside do you see and.
Back to <unk> question.
How much EBITDA is leading with planters and she's please thank you.
So and so.
Paulo again, so at least and we we are not giving point estimation as part of our full year 2021 EBITDA.
But what what we're conveying here is that B, we as Miguel mentioned, we are having a very good stocks of our 'twenty to 'twenty one.
I think we gave a good clarity on the hour Investor day about the curve that we had for all of our EBITDA.
Through our strategic plan and egg and we're seeing upside on at and and there is upside is coming from from not only from at home consumption that we are seeing income coming from this COVID-19 situations, but also from our pharma steps of having the business in many areas of the business, including supply chain.
So that is how we are we are seeing that and and.
And again of course, they're going to be lapping a very strong 2020 per farmers, but we're very confident and how we're starting the year and and the potential upsides that we have and I'm very happy that we have seen of I don't know.
A stronger a beginning of the year and a stronger potential of performance for us and 'twenty 'twenty one.
About the day back from divestitures, it's pretty much what I was mentioning the question before about we expect pretty much from the planters business of minimal dilution minimal dilution and we are walking down this dwarf staffing and given this this dilution.
All of the illusion that we we can see now.
Yeah.
Thank you.
Next question comes from David Palmer Evercore ISI your line.
Okay.
Hi, Good morning, just wanted to follow up on the cost picture and our productivity savings.
And other things that might impact 'twenty, one versus 'twenty. It sounded like you said that that commodity costs would be fairly benign, but perhaps you can dig into that versus freight and logistics, where we've heard about some inflation and how that might net across.
Against your productivity plans. Thanks.
[laughter].
Oh, you're going to start on that one sorry can you repeat the question and I I.
You got here.
Sure I question on <unk>.
On some of the gives and takes with regard to your margins and EBITDA for 'twenty one.
Okay, you mentioned commodity costs were fairly benign and I'm wondering if maybe you can put some.
Expectations or quantify that a little bit more about your commodity outlook.
And.
And and also.
Talk about freight and logistics and we've heard of a good bit of.
Inflation is out there on the shipping side, if you could maybe break that out or speak to that net of productivity plans for this year. Thanks.
Yes.
Yes, no that's clear.
We're seeing the inflation as it was mentioned before we are seeing the inflation rate and when you separate there's we see inflation coming from the same type of inflation that that youre seeing and so it's a broad inflation from non key commodities and also packaging and also see inflation coming and the transportation and day worse okay.
On the Big four co Morbidities that we have we are not see any fleet I D O of inflation okay.
And it is more stable and as I was mentioning the type of inflation that we're seeing and the level that we're seeing we believe it's manageable.
Not only the the supply chain initiatives that we have but also with the revenue management initiatives that we would describe and causes was mentioning.
Few questions ago, but again, we are seeing the inflation.
We believe is manageable and is embedded in our outlook.
Thanks.
Okay.
Our next question.
Yeah.
And I was hopeful.
Good morning, everyone.
Good morning, good morning.
And so.
You talked about the tastes elevation platform doing very well and you got to slide seven and see lots of demonstrate that can you talk explicitly about exactly which products.
And which geographies are are working best out of whether you expect that momentum to continue.
Yeah.
Well actually we are doing pretty well and pistol of vision across the board and Theres not a.
One specific country of course that since you asked is so so critical in our portfolio.
U S is a big part of this growth.
But I would mention Canada U K.
Australia, but even the emerging countries right, Brazil, Russia, and middle East and.
We are doing very well and TV, we got heavy record chairs with with our brand Heinz.
And with ketchup and sauces.
Everywhere and the world.
But he is not totally Heinz we have Lee and parents and we have.
Heinz Mayo, we have.
Basically our portfolio of the entire portfolio and on pace of innovation to be very very well.
Both growing volume and share.
And do you expect that moment and you.
Even as the pandemic eases.
I do and I think that we have a pretty strong utilization.
Plan that.
And that will strengthen the performance I think we have great momentum.
And that will continue.
Great Thanks, and just.
And just to build and Miguel point, and Youre going to hear more about it when we go through our Cagny discussions and.
Because I think that they.
Our.
Cash generation has proven to be an advantage and part of our business that there will be something that we'll continue to lever as we go forward. Thank.
Thank you.
Great and then just.
To continue building on that.
This is our true global platform and we are benefiting from experiences and tests that we're doing in countries and.
And leveraging and scaling it up and other countries much faster than we did in the past.
Working much better and as a team.
And relative.
Thank you.
Thank you our next call.
And I can tell from Michael Library of Piper Sandler Your line is open.
Good morning, Thank you.
You noted that your marketing spend was up 11% last year does that gets you to where you think that's about the right level or should we expect more investments there and when you say further prioritization efforts are underway is that of reallocation of spending or does that mean.
Giving more money to the priority initiatives or where a bit of both.
So we and our strategic review, we talked about increasing 30% Mark do you mean in five years, So last year, we increased.
More than what would be the CAGR of four five years of course.
And this year, we are seeing great opportunities for us.
One on efficiencies in marketing.
We were buying media and a much better way you would have a new contract with great savings on media.
We are improving.
Our our creative and content.
And and really.
Sweating.
The assets and and and leveraging of better ROI.
So I think that's Uh huh.
Things are at and according to plan and marketing and and and.
We're going to get better every year, we are very excited with net.
Carlos I don't know if there's anything you want to add but.
And can you cover it well thanks Niko.
Great. Thank you very much.
Okay.
And then if you'd like to ask this question from Chris.
And then one on your telephone.
And.
Net.
Jonathan Feeney of consumer edge.
Your line is open.
Good morning, Thanks, very much for the question.
What I look at the natural cheese divestiture versus planters and certainly some similarities around the challenges and differentiate any of your customer, but it's also sort of an important differences and I would love to know what's the bright line within planners and listed some things that make sense today, but you have.
Well you decided it was maybe of divesting something that wasn't a problem not worth trying to solve relative to any.
And any other brands.
And we're having success.
Rethinking Reframing.
Yeah.
Driving the brand of success, where maybe there hasn't been in the past just what was the accurate and some of it that really put you over the line.
And that's better in someone else's hands.
Look planters.
Is a very iconic very strong brand so.
Is this is not something that we took lightly but.
And to improve.
Our portfolio, we must focus on areas, where we see the greatest competitive advantage the greatest potential and returns.
And.
When we look at the plant planters is is one of the brands that is most affected by private label.
And our portfolio.
And it's it's also.
Of course of effect of does of commodity.
And and so when we looked at that in order to have more flexibility towards the future and building a portfolio.
I think that.
And we've made that choice and we are very happy with net.
Yes.
Thank you very much I appreciate it thank.
Thank you.
Thank you and that's tough and counsel and colleagues.
Uh huh.
Yes, hey, thanks, So I guess two.
Follow up on on the plant through divestment.
First is just the 15 times EBITDA multiple that you articulate on slide 22 of your deck today and just want to clarify does that include overheads in the implied EBITDA base that will be stranded I appreciate that you'll try to offset that but just wanted to confirm.
And then strategically I guess just of precedent.
Jonathan <unk> question from a moment ago.
Back in September of real food and Snacking was something that you highlighted as a growth platform and I'm, assuming it's still is.
<unk> was part of that and so you know.
And I appreciate and understand.
The rationale, particularly.
Particularly in today.
Around why planters might not fit as well going forward, especially at the the deal price that you've announced today, but.
What was the was there a strategic pivot was there something that happened between September and today aside from an offer coming in the changed your perspective on <unk> because it could cause of good because again it was positioned as part of that growth platform.
About six months ago. Thank you.
Okay. So let me get the first one here and then Carlo.
Carlos too to take the second part of your question.
So yes, I mean, when you look at the <unk>.
The multiple that we disclose that is like a fee of 15 times, 'twenty and 'twenty and and at 17 times.
19.
It includes some smaller location of of strength costs of a small part of that.
And that it includes both and both numbers, Okay and in the 17 times 19 and of 50 times, our 2020 and when I ask Carlos to get the second part of your question about the platform.
Yes, Thank you and.
You're right David.
The idea of was focusing of real food and snacking and something that we laid out in September and we continue to be very much focused and driving that as part of our growth platform and then just wanted to be clear that has not changed.
I think she is today you so and the press release that we.
We highlighted theres still the two specific areas within vehicles neck and that we believe we have huge amount of advantages and we're going to continue to drive those as we go forward.
Specifically, we think about.
Europe fuel for kids wear Lunchables is a cornerstone of that particular area and segment as well as real meat alternative when we think about adult opportunities to substitute meals and things like what we see and areas like P. Three for example, so when I look and the entire strategy I think is for US we can see.
And to stay focus of vehicles Nanking.
And second today, it's actually only going to help us add additional fuel to support the strategy that we laid out of September.
Yeah.
Thanks for the question.
Thank you.
Next question and South Louisiana.
And Ali Goldman Sachs. Your line is open.
Hi, good morning, Thanks, so much and they're taking the question and.
And your prepared comments, you said that it was important to you, but obviously without sacrificing the speed of the transformation I'm curious in your mind, where the business and and leverage needs to be in order to get to I E and in your mind what are the primary benefits of achieving that rating. Thank you.
Hi estimate and you take these one is and we believe non investment grade as I said this is important for the company.
And as as I as we were mentioning else shall we.
We closed the three seven times.
We want to do to be consistently before below four times net leverage.
In the in the organization and this is and we believe we are on track to get.
Stay there two states to get any stay below four times even without.
The two divestitures that we've announced okay. This is of dish.
The proceeds of these two additional divest of divestitures.
And would give us additional half of third of deleveraging.
And this would give us.
Our flexibility and I think that is important and flexibility to accelerate those stoppage and there's acceleration would kind of like organically inorganically with the initiatives that we are where we are falling.
Falling here and and and again that is that the plan that we have today, we want to keep the leverage below four times and we are on track to be there I think that the proceeds from the divestitures.
And to give us additional flexibility trucks of the day, it's always stoppage.
And again, we are very comfortable with that the bad debt.
And that's we're having in terms of deleveraging with our credit position.
Position.
So we are we are feeling very good on the on the capital structure and credit side.
Okay.
At this time I'd like to kind of call back out with some of the opportunity of Frankfurt.
Uh huh.
Okay, well wanted to thank you all four of for being with Us here.
Just wanted to finish and and and and and say that we are couldnt be more optimistic and positive about the momentum that we have and the company right. Now we are progressing fast and this transformation journey that we are and we have today.
Very different company that we had just 12 months ago have a much better team.
We have a far better employee morale and engagement.
Despite the fact that we've been all of working from home.
We have.
The priorities in terms of threat that you and geographies very well defined so we have of north, we we talked about efficiencies and and and the supply area and and we brought them we executed them. Despite the fact that we had the best year in quality and safety.
And our in our plants.
And we put back in and marketing of hundreds of millions of dollars and 2020.
And we have started the year strong.
Wrong churn and further strong months for us.
Of new households, with getting better and and market share every every quarter.
We have a very strong renovation and innovation.
And we're going to share with you better.
At Cagny.
Investment levels are ramping up and.
You know from a financial standpoint.
This is just from my son is well underway. We are on track to to remain below four times leverage them to 'twenty or 'twenty, one financial will be ahead of our strategic plan and and the divestitures that we just announced we will accelerate the deleveraging increasing flexibility for four.
Our creative.
Investment. So we you know one year ago, we had a lot of hopes and.
And and plans.
I would say we are ahead of where we thought we could be.
Thank you very much. Thank you for your time.
Ladies and gentlemen, this does conclude today's conference. Thank you all.
Yes.
Of a great day.
[music].
[music].
Ladies and gentlemen, and thank you for standing by and welcome to the Kraft Heinz Company fourth quarter results Conference call.
At this time all of wireless.
And listen only mode average.
To speak of wherever Mark there'll be a question and answer.
The asset class and please press Star then one on your touch tone telephone.
And as a lot of great top of colors being recorded.
I went out and spend a couple of your house, Mr. Christopher Bergen and yes.
Thank you and Hello, everyone. Thank you for joining our Q&A session today as you know during our remarks today, we will make some forward looking statements that are based on how we see things today actual results may differ due to risks and uncertainties and these are discussed in our press release and our filings with the SEC.
We will also discuss of non-GAAP financial measures today during the call and these non-GAAP financial measures should not be considered of replacement for and should be read together with GAAP results and you can find the GAAP to non-GAAP reconciliations within our earnings release before we begin I do want to highlight that we will provide greater details on our <unk>.
21 initiatives during our presentation at the Cagny conference this coming Tuesday.
So today's session will be most productive if you limit yourself to one question and focus of your questions on our results and the announcements that we have made today with that I'll hand, it back to the operator and we can start the Q&A.
Thank you I'd say anything like that from class One thing Thats Star then one of your pet sounds all of them.
One moment.
Our first question comes from Andrew Lazard and Barclays. Your line is open.
Good morning, everybody.
Good morning, Andrew Good morning, Hi.
Hi, there.
I guess from my question and I'd like to explore a bit to your expectations for full year 'twenty, one really in terms of your planning stance for demand and I guess from companies had been more aggressive in terms of their expectations around return to normalization and the impact on consumption others, maybe somewhat more conservative so I'm just I'm trying.
And get a sense of of how KFC is thinking about this and its guidance or went into this one and of the spectrum. The company is on and thinking about this and how conservative or not Youre planning stance may be for 'twenty. One. Thank you.
Hi, Andrew This is Miguel speaking.
Well, we we are looking at 2021 and a conservative way.
And we.
I have to say that we saw.
Very strong consumption gains in January and February is coming and it's.
It's coming could as well.
And if this if this persists.
And types.
This level.
We may have and upside in our and our results but.
I think that with the environment. So volatile we better continue taking a quarter by quarter and approach, which was the outlook that we gave you.
And really concentrating our minds and our efforts on our transformation through our operating model.
Paul I don't know if kind of anything to words, but from my side of this.
No. That's it from me guys. Thank also.
Of course, it to come and that we are and our outlook, we are including the view that we have for the inflation and also we are not.
Considering the two divestitures that we've we've announced.
Great. Thank you very much.
Thank you.
Thank you. Our next question comes from Chris Brown of.
Your line is open.
Okay.
Hi, good morning.
Good morning, Chris Hi, just had a question if I could.
Have you defined the amount of inflation you expect for the year and then how and how you hope to overcome that.
And that's through a combination of pricing and and and promotional efficiencies, but I want to get a better sense of the magnitude of the inflation.
And I wondered if you could speak to that excluding planters and and and cheese and all of those are kind of pass along commodity type of categories, but just trying to think about the ongoing portfolio and the effect on the business over all of this year.
Yes.
Sure Chris This is Paulo here so.
We are seeing the same.
Deflation, we're also seeing the inflation of that Youre seeing and coming from non commodities non key commodities ingredients, especially packaging and transportation into us.
And we think that the level and the type of inflation of that we are seeing it's manageable and is in our outlook as I mentioned and.
And we have two reasons that you know.
Behind that and the first one because that's what we are we are very confident on the supply chain efficiency programs that we have.
And that will we expect to unlock savings across our supply chain.
And the second is and our revenue management initiatives across the globe.
And in combination with innovation renovation marketing investments that we're doing and can help us with pricing, if we need and as.
As I said that we have incorporated this inflation and our outlooks today and I know, it's Carlos and I want to comment something on top of that.
No I think when you reiterate your point and Paulo that we feel that is manageable and and I think that we are taking the appropriate revenue management initiatives to make sure that we can handle those things because they come and thank you.
Just to be clear on that is that mostly U S based inflation as I think about freight in particular, that's more of a U S issue.
Or is there of any kind of a wider array of inflation across the portfolio. Thank you.
Yes.
And when you think about the the commodity.
And you called them out of it as ingredients and packaging across the globe and think about the day of freight transportation is more focused and the U S. And one thing also that you've mentioned when you think about the key commodity the big four commodities that we have.
We are not really.
And really seeing a lot of year over year inflation through the year. Okay. When you add all of them. So we were really talking about the non key non big four commodities and packaging and in transportation and the west.
Yeah.
Thank you.
Okay.
Our next question comes from Daniel Kim.
Ken Goldman of Jpmorgan. Your line is open.
Hi, good morning.
Just to stay on the subject of cost and pricing and a few.
Years ago, some manufacturers trying to pass through of some list pricing because of higher transportation costs I think some of their customers at that time.
And the retail side pushed back saying look we'll give you some pricing when your ingredients go up we've done that and the past, but kind of trucking as youre on your own I would imagine that this time around it's a little bit different I, just kind of wanted to get a sense for.
Given your higher cost in packaging and higher transportation.
And given the lack of elasticity among consumers right now.
How reluctant or some of your customers to allow you to take some pricing whether it's on the lift side or on fewer promos just wanted to get a sense for your relationship with them and how much pushback you're getting on any kind of price increases you are you trying to push through.
Yeah.
Yeah.
Let me, let me I'll take that one.
Just to give you kind of of you in terms of the of the U S and what we're seeing with our customers.
First of all we'll say is.
Well, we're seeing let me start with the consumer our consumer and right now.
As we have shifted towards being very much focused on understanding whether going through and so forth and I think they are they are certainly showing quite of amount of resiliency through this process.
And we're going through and I think for US our focus is how do we make sure we drive the renovation of our portfolio to make sure that we think continues and drive the right value for us as you know for the consumer now we're balancing that too with making sure that we have the right revenue management initiatives.
And what I say that I say using the full availability of our tools and our toolbox to be able to kind of handle the different pressures that may coming at us because of inflation.
So the way I think about it is our focus is driving that better value to consumers by making sure we are improving and our portfolio, making sure we continue to invest behind and marketing.
And improving the quality of our media and making sure that we have seen how that actually translate in us driving an improvement and shares throughout like we did in 2020.
And at this point and I want to say it.
These are things that we can manage and and we don't see that as a familiar derailleur of as we go forward.
Okay.
Thanks for the question.
Our next question comes from glass of line of Bank of America. Your line is open.
Hey, good morning.
And so so I guess my question is.
Just related to.
The divestitures and maybe Paolo could you give us a sense of I know, we have a sense now of what the deleveraging impact will be but.
Could you give us a sense of maybe what the dilution would be to EBITDA or the earnings and.
And just trying to get underneath.
And not just EBITDA going out the door, but maybe the scope of stranded overhead or.
And there are there any other any other meaningful cost that we should be thinking about as we're sort of trying to look at the model X divestitures.
Sure. So when does when you look at this business is a business that has eight and average margin that is lower than the average and there has a margin that is lower than the average margin of the company and.
And we are really expecting a minimal dilution from these divestitures okay. Yeah.
And also we are also working down of the year from from now until we close to try to do even upset that so I think what I could tell you today is exactly that that it sets of business with a margin below the average of the company.
You know and and you're upset and I don't expect the minimal dilution and I think we have time, even for minimal dilution to working down Lee.
And to try to offset it.
Okay, and Thats and Thats true for the cheese business as well so when we look at both divestitures.
We shouldn't expect a lot of earnings dilution from from both of them.
When you look about the cheese divestitures I as I as Ive mentioned before we were expecting around a 5%.
Dilution.
And but again the same way for these divestitures. We are also working now with these two business out of the company to two.
2222 to limit this author of the dilution okay, great. Thank you.
Thanks, Paul our next question.
And the English from Goldman Sachs.
Hey, good morning folks thanks for Slotting me and I appreciate it.
And I guess kind of on and collapses of similar question, but it's all about trying to determine of where you're going to land and EBITDA for the year can you put a finer point on the comment that you made in your press release that you expect EBITDA to come in ahead of your strategic plan.
And does it imply like where would your strategic plan place you.
How much upside do you see and back to <unk> question.
How much EBITDA is moving with planters and she's please thank you.
So and so.
Paulo again, so at least and we we are not giving point estimation as part of a full year 'twenty 'twenty one EBITDA.
But what what we are conveying here is that B, we as Miguel mentioned, we are having a very good stockpile plenty of 'twenty one.
I think we gave us good clarity on the hour Investor day about the curve that we had for all of our EBITDA.
Through our strategic plan and egg and we see upside on that and and Theres upside is coming from from not only from at home consumption that we have seen income coming from this COVID-19 situations, but also from better performance of that we're having the business in many areas of the business, including supply chain.
So that is how we are we are seeing that and and and again of course, they're going to be lapping a very strong 2020 per farmers, but we're very confident and how we're starting the year and and the potential upsides that we have and I'm very happy that we are seeing of I don't know why I.
A stronger beginning of day here and a stronger potential performance for us and 'twenty 'twenty one.
About the the big bag from divestitures, it's pretty much what I was mentioning the question before about we expect pretty much from the planters business of minimal dilution minimal dilution and we are walking down this dwarf staffing and given this this dilution.
All of the illusion that we we can see now.
Yeah.
Okay.
Thank you.
Our next question comes from David Palmer with Evercore ISI Your line.
Okay.
Hi.
Good morning.
Just wanted to follow up on the cost picture and our productivity savings.
And other things that might impact 'twenty, one versus 'twenty. It sounded like you said that the commodity costs would be fairly benign, but perhaps you can dig into that versus freight and logistics, where we've heard about some inflation and how that might net across.
Against your productivity plans. Thanks.
[laughter].
Oh, you want to start on that one sorry can you repeat the question and I I got here.
Sure.
And on the on some of the gives and takes with regard to your margins and EBITDA for 'twenty one.
Thank you.
Mentioned commodity costs were fairly benign and I'm wondering if maybe you could put some.
Expectations are not quantify that a little bit more about your commodity outlook.
And and also.
Talk about freight and logistics and we've heard of a good bit of.
Inflation is out there on the shipping side, if you could maybe break that out or speak to that net.
Net of productivity plans for this year. Thanks.
Yes.
And yes that no that's clear.
We're seeing the inflation as it was I was mentioned before we are seeing the inflation rate and when you separate there's we're seeing inflation coming from the same type of inflation that that youre seeing and so it's a broad inflation and from non key commodities and also packaging and we also see inflation coming and the transportation and day worse okay.
On the big four or more of it is that we have we are not seeing any fleet I D O of inflation okay.
And so it's more stable and as I was mentioning the type of inflation that we see and the level that we're seeing we believe it's manageable.
Through not only the the supply chain initiatives that we have but also with the revenue management initiatives that we would describe and Carlos was mentioning.
And few questions ago, but again, we are seeing the inflation.
We believe is manageable and is embedded in our outlook.
And.
Thanks.
Okay.
Thank you our next question will come from.
Alexia Howard of bonds.
Your line is helpful.
Good morning, everyone.
Good morning, Bonnie.
And so.
You talked about all of the tastes elevation platform doing very well and you go to slide seven and see what types of demonstrate that can you talk explicitly about exactly which products.
And which geographies are a walking back there or whether you expect that momentum to continue.
Yeah.
Well actually we are doing pretty well and pistol of vision across the board and there's not one specific country of course that since you asked is so so critical in our portfolio.
U S is a big part of this growth.
But I would.
And Canada UK.
Trade.
But even the emerging countries right, Brazil, Russia and Middle East.
And we are doing very well and day celebration, we got heavy record chairs with with our brand Heinz.
And with ketchup and sauces.
Everywhere and the world.
But he is not totally Heinz we have Lee and parents and we have a high.
And as Mayo, we have.
You know basically our portfolio of the entire portfolio and on pay TV to be very very well.
And it's growing volume and share.
And do you expect that momentum and you even as the pandemic eases.
I do and I think that we kind of a pretty strong utilization.
And that will strengthen the performance I think we have great momentum.
And that will continue.
Great. Thanks, and just to just to build and Miguel point and Youre going to hear more about it when we go through our Cagny discussions and.
Because I think that day.
Are they.
Taste elevation has proven to be an advantage and part of our business that there will be something that we'll continue to lever as we go forward. Thank.
Thank you.
Great and then just.
And to continue building on that.
This is our true global platform and we are benefiting from experiences and tests that we are doing and countries.
And leveraging and scaling it up and other countries much faster than we did in the past.
Working much better and as a team.
And again.
Thank you.
Thank you.
And I can tell from Michael Library of Piper Sandler Your line is open.
Good morning, Thank you.
Thank you.
And you'd noted that your marketing spend was up 11% last year does that gets you to where you think that's about the right level or should we expect more investments there and when you say further prioritization efforts are underway is that of reallocation of spending or does that mean, just giving more money to the priority Ines.
Or a bit of both.
So we and our strategic review, we've talked about increasing 30% Mark do you mean in five years. So last year, we increased.
More than what would be the CAGR of four five years of course.
And this year, we are seeing great opportunities for us.
One on efficiencies and marketing.
We agree we are buying media and a much better way you would have a new contract with great savings on media.
We are improving.
Our our creative and content.
And and really.
Sweating.
The assets and and leveraging of better ROI.
So I think that's Uh huh.
It seems out of it and according to plan and marketing and and and.
We're going to get better every year, we are very excited with net.
Carlos I don't know if there's anything you want to add but.
And can you cover it well thanks Miguel.
Great. Thank you very much.
Thank you.
And if you'd like type of question. Please press Star then one on your telephone.
And yet.
And.
Your line is open.
Good morning, Thanks, very much for the question.
What I look at the natural cheese divestiture versus planters and certainly some similarities around the challenges and differentiated customer, but it's also sort of important differences and I would love to know what's the bright line within planters and listed some things that make sense today, but you have.
Well you decided it was maybe of divesting something that wasn't a problem not worth trying to solve relative to any.
And any other brands.
And we're having success.
Rethinking refining.
Driving the brand of success, where maybe there hasn't been in the past just what was the accurate piece of it that really put you over the last night and this is up.
And that's better in someone else's hands.
Look planters.
Is a very iconic very strong brand so.
Is this is not something that we took lightly but to.
And to improve.
Our portfolio, we must focus on areas, where we see the greatest competitive advantage the greatest potential and returns.
And when.
And we look at the plant planters.
<unk> is one of the brands that is most affected by private label.
And our portfolio.
And it's it's also you know.
And of course effect of does of commodity.
And and so when we looked at that.
To have more flexibility towards the future on building a portfolio.
Net.
We made that choice and we are very happy with net.
Clear answer thank you very much I appreciate it thank.
Thank you.
Thank you our next question and counsel and calling from Deutsche Bank. Your line is open.
Yes, hey, thanks, Thanks, So I guess two.
Follow ups on on the planters divestment if I can.
First is just the 15 times EBITDA multiple that you articulate on slide 22 of your deck today I just want to clarify does that include overheads and the implied EBITDA base that will be stranded I appreciate that you'll try to offset that but just wanted to confirm.
And then strategically I guess just of press a bit.
Jonathan <unk> question from a moment ago.
Back in September of real food and Snacking was something that you highlighted as a growth platform and I'm, assuming it's still is.
Clampers was part of that and so you know.
And I appreciate and understand the the rationale, particularly and today.
And white planters might not fit as well going forward, especially at the the deal price that you've announced today, but.
What was the was there a strategic pivot was there something that happened between September and today aside from and offer coming in the changed your perspective on planters because it could cause of good because again it was positioned as part of that growth platform.
Perhaps six months ago. Thank you.
Okay. So let me get the first one here and then Carlo.
Carlos too to take the second part of your question.
So yes, I mean, when you look at the <unk>.
And the multiple that we disclose that is like a fee of 15 times 2020, and and 17 times.
19.
It includes some smaller location of of strength cost of small part of that.
And that it includes both and both numbers, Okay and in the 17 times 19, and 50 times, our 2020 and I'm going to ask Carlos to get the second part of your question about the platform.
Yes, Thank you and.
You're right David.
All of our focus and real food snacking is something that we laid out in September and we continue to be very much focused and driving that as part of our growth platform and then just wanted to be clear that has not changed.
And I think today, you so and the press release.
And we highlighted theres still the two specific areas within vehicles neck and that we believe we have huge amount of advantages and we're going to continue to drive those as we go forward.
Specifically, we think about.
Europe fuel for kids wear Lunchables is a cornerstone of that particular area and segment as well as real meal alternative when we think about adult opportunities to substitute meals and things like what we see and areas like P. Three for example.
So when I look and the entire strategy I think is for US we continue to stay focus of real food snacking.
Transaction today is actually only going to help us add additional fuel to support the strategy that we laid out of September.
Yeah.
Thanks for the question.
Thank you.
Next question and South Louisiana.
And Ali Goldman Sachs. Your line is open.
Hi, good morning, Thanks, so much for taking the question and.
Your prepared comments, you said that it was important to you, but obviously without sacrificing the speed of the transformation I'm curious in your mind, where the business and leverage needs to be in order to get to I E and in Europe.
And what are the primary benefits of achieving that rating. Thank you.
Hi estimate and me.
These one and you said and we believe non investment grade as I said this is important for the company.
And as as I as we were mentioning else. So we are we close day three seven times.
We want to do to be consistently before below four times net leverage.
In the in the organization and this is and we believe we are on track to get north of two.
And to stay there you know two states to get any stay below four times even without.
The two divestitures that we announced okay. This is of dishes.
The proceeds of these two additional divestiture of divestitures.
And would give us additional half a turn of deleveraging.
And this would give us a flexibility and I think that is important and flexibility to accelerate those stoppage and this acceleration would kind of like organically and inorganically with the initiatives that we are we are we are we are falling here and and and again that does that the plan that we have today, we want to keep the leverage below four times.
And.
And we are on track to be there I think there and the proceeds from the divestitures are going to give us additional flexibility for the day stoppage and.
And again, we are very comfortable with the path.
And that's we're having in terms of deleveraging with our credit position.
Position.
So we are feeling very good on the on the capital structure and credit side.
Thank you.
At this time I'd like to turn the call back over some of the LPG.
For any closing remarks.
Okay, well wanted to thank you all four of for being with Us here.
Just wanted to finish and and and and and say that we couldn't be more optimistic and positive about the momentum that we have and the company right. Now we are progressing fast and this transformation journey that we are and we have today.
Very different company that we had just 12 months ago have a much better team.
We have a far better employee morale and engagement.
Despite the fact that we've been all working from home.
We have.
The priorities in terms of strategy and geographies very well defined so we have of north, we we talked about efficiencies and and and the supply area and and we brought them we executed them. Despite the fact that we had the best year in quality and safety.
And our in our plants.
And we put back in and marketing of hundreds of millions of dollars and 2020.
And we have started the year strong churn and fab are strong months for us and.
And I have new households.
Yeah.
Getting better and market share every every quarter.
We have a very strong renovation and innovation.
And we're going to share with you better.
And at the Cagny.
Investment levels are ramping up and you.
From a financial standpoint.
This transformation is well underway, we are on track to to remain below four times leverage them to 'twenty and 'twenty, one financial will be ahead of our strategic plan and and the divestitures that we just announced we will accelerate deleveraging inquiries and flexibility of four four.
Our creative.
Investment so we are.
And year ago, we had a lot of hopes and.
And and plans.
I would say we are ahead of where we thought we could be.
Thank you very much. Thank you for your time.
Ladies and gentlemen, this does conclude today's conference. Thank you all.
And I have a great day.