Q4 2024 McCormick & Company Inc Earnings Call

January 23, 2025

Good morning. This is fucking VP of Investor Relations. Thank you for joining today's fourth quarter earnings call to accompany this call. We've posted a set of slides on our IR website IR Dot Mccormick Dot Com with me. This morning are Brendan Foley, Chairman President and CEO.

Michael Gabriel: And Michael Gabriel Executive Vice President and CFO.

Michael Gabriel: During this call we will refer to certain non-GAAP financial measures the nature of those non-GAAP financial measures and the related reconciliations to the GAAP results are included in this morning's press release and slides.

Michael Gabriel: In our comments certain percentages are rounded please refer to our presentation for complete information.

Michael Gabriel: This presentation contains projections and other forward looking statements actual results could differ materially from those projected the company undertakes no obligation to update or revise publicly any forward looking statements, whether because of new information future events or other factors. Please refer to our forward looking statement on slide two for more information.

Michael Gabriel: Lastly, I'd like to call out that we made changes to our release and slides to streamline and enhance our communication and these changes are in alignment with investor and analyst feedback in terms of metrics to simplify we are adopting the organic sales measure, which is defined as the impact of volume and mix plus price and excludes the impact of FX.

Michael Gabriel: And any divestitures or acquisitions as a reminder, the reconciliation of our sales measures can be found in the appendix of our slides and in our press release I will now turn the discussion over to Brendan.

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

Brendan: Pleased to report on our strong performance for the fourth quarter and fiscal year 2024.

Brendan: Important year for Mccormick, and which we built momentum and strengthen our leadership and differentiation returning to quality volume led growth. We invested another core categories drove improved unit and volume share trends, while also expanding our margins and delivering strong earnings growth our results demonstrate the success of our priorities.

Brendan: Investments in the areas that we believe will drive the most value and set us up to continue to drive momentum for 2025 and beyond.

Brendan: Mccormick remains a growth company, we have robust plans that leverages the demand for flavor and the strength of our brands our strategies have proven to be effective in driving growth and compounding that growth over the years and I remain confident that we have the right leadership team in place and engaged employees globally to deliver on our near term.

Brendan: Long term objectives with industry leading performance.

Brendan: This morning, I will begin my remarks, with an overview of our fourth quarter, focusing primarily on topline drivers next I will highlight some areas of success and the areas that we continue to work on.

Brendan: Then I will briefly reflect on our full year performance and share our plans at a high level to continue to drive momentum in 2025.

Brendan: Next I will review, how Mccormick is positioned relative to an evolving consumer landscape.

Brendan: <unk> will then go into more depth in the fourth quarter as well as 2020 for fiscal year financial results and review, our 2025 outlook and finally before your questions I will have some closing comments.

Brendan: Turning now to our results on slide four in.

are joining us.

Brendan: Total volume improved sequentially for the fourth consecutive quarter, despite a challenging environment. And this improvement in the fourth quarter was driven by our consumer segment, where volume and product mix increased approximately 4% compared to the prior year.

Brendan: In America's Consumer, we delivered meaningful sequential volume improvement, leading to more than 5% volume growth year-over-year. This growth reflects continued focus on our core categories, investing in brand marketing, accelerating innovation, and alignment with consumer trends.

Expanding Distribution and Price Gap Management Plans.

Speaker Change: and Ian Mea. We continue to drive positive volume growth across our major markets and core categories. We realize benefits from new product innovation as well as expanded distribution.

Speaker Change: and Asia Pacific, our results were impacted by China as the environment in this market remains challenged.

Speaker Change: Looking forward we expect a slight and gradual recovery in 2025 relative to the prior year. Marcus will discuss this when he covers our outlook for 2025.

Speaker Change: Moving to flavor solutions, volumes were flat for the global segment. Volume performance was primarily impacted by volume softness in our CPG and QSR customers volumes.

Speaker Change: Sequentially, relative to third quarter volume growth, our results were impacted by the timing of customer activities.

Speaker Change: Let's move to slide 5 and let me highlight for the quarter some of the key areas of success.

Speaker Change: In our global consumer segment, we successfully executed on our plans with increased investment and competitive focus towards driving growth across our four categories.

Speaker Change: In the Americas, across all categories, we drove unit, volume, and dollar consumption growth. Notably, our unit and volume consumption outpaced both branded food peers and private label in the fourth quarter.

Speaker Change: and Global Spices and Seasonings, which are of solid unit, volume and dollar consumption growth across key markets in the Americas, EMEA and Asia Pacific.

In the U.S., we continue to improve on our competitiveness.

Speaker Change: Our volume consumption outpaced both branded competitors and private label for the quarter.

Speaker Change: Overall holiday performance was terrific. We saw high demand and sell-out on our displays that featured core holiday items as well as new innovation.

Speaker Change: We had strong performance across the portfolio, and our holiday limited-time offer, Finishing Sugars, contributed to our share momentum and were incremental to the category.

Speaker Change: In Recipe Mixes, we continue to strengthen consumption trends in the Americas and EMEA, driving overall share.

Speaker Change: In the U.S., our Cholula line remains a significant growth driver. We are innovating with Cholula recipe mixes, bringing new consumers to the category, particularly with millennials and younger families.

Speaker Change: and Mustard. We made great progress globally over the last three quarters and are pleased to see that our plans are driving great results.

Speaker Change: In the fourth quarter, we drove unit, volume, and dollar share gains in the Americas. In Poland, one of the top mustard-consuming countries, our mustard consumption continues to grow, and we are also realizing unit and dollar share gains.

Speaker Change: In hot sauce, we continue to have underlying strength in our base business and strong consumer loyalty. We drove positive unit volume and dollar growth in the fourth quarter, demonstrating that our plans are working.

Speaker Change: Sequentially, we drove significant improvement in dollar and unit share trends. This improvement was driven by distribution gains, increased brand marketing, and innovation.

Speaker Change: We continue to make progress on total distribution points. We expanded TDPs across spices and seasonings, recipe mixes, mustard, and hot sauce in the Americas. In EMEA, we are also seeing distribution growth across markets in spices and seasonings and condiments and sauces.

Speaker Change: We are also gaining distribution and growing channels like discounters and e-commerce.

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

Speaker Change: In flavor solutions, we saw strength in our technically insulated high-margin product category, flavors, and in branded food service. In flavors, in the Americas, we remained focused on being the partner of choice across four case competencies.

Speaker Change: savory, heat, naturally sweet, and citrus and fruit. These are areas of deep expertise and strength and where we are recognized as leaders within the flavor industry.

Speaker Change: As a result of this continued focus, our performance with our high-growth innovator customers remains strong, and we outperform the industry across most end categories.

Speaker Change: Let me now touch on some areas where we are seeing some pressure.

Speaker Change: As I mentioned earlier, in our Asia-Pacific consumer business, the environment in China remains challenging. Consumer sentiment remains low, and October and November distributor inventory buildup was below prior years due to the expected softer consumption.

and Flavor Solutions.

Speaker Change: In both Americas and EMEA, some of our CPG customers experience continued softness and volumes within their own businesses.

Speaker Change: And at E&EA, some of these customers were impacted by geopolitical boycotts in the region related to the Middle East conflict. This geopolitical impact may continue into 2025.

Speaker Change: In addition, QSR traffic remains soft in the EMEA and in the Americas. We have seen this pressure impact our results for several quarters. It's difficult to predict QSR traffic, however, we are collaborating with our customers as they focus on improving their volumes through innovation and value, and aligned with consumer trends.

Speaker Change: Now, I would like to reflect on our performance for the fiscal year on slide 6.

Speaker Change: We successfully delivered on the goals we set and shared with you for 2024. We demonstrated our dedication to improving volumes.

Speaker Change: We refined our plans and prioritized our investments to drive impactful results and returned to differentiated and sustainable volume-led growth, the kind of growth that investors expect from McCormick.

Speaker Change: I am very proud of what we achieved, and you should expect continued momentum in 2025. Our team remains focused on returning to our long-term growth algorithm, strengthening our profitability, continuing our strong cash flow, paying down our debt, and reducing our leverage ratio.

Speaker Change: all have put McCormick in a position of strength to invest further with a sustained focus on growth.

Speaker Change: A few highlights for the year. On the top line, sales growth came in close to the high end of our guidance range as we expected.

Speaker Change: Importantly, we drove total positive volume growth for the year, with the consumer business delivering 1% volume growth for 2024.

Speaker Change: We continue to invest in our business, as well as drive margin expansion, in line with our guidance. Importantly, we made significant progress in advancing our flavor solutions operating margins.

Speaker Change: Our growth for 2024 on the top line and the bottom line reinforces our confidence in achieving the 2028 targets we set out at our Investor Day as well as our long-term objectives.

Speaker Change: Our results demonstrate that our foundation is strong. We have proven and powerful brands, and the results we are seeing from our refined and strengthened plans provide confidence in the effectiveness of our strategies and investments.

Speaker Change: We've made significant progress this past year, and we have plans to continue that momentum in 2025 and beyond.

Let me now share our perspectives on consumer trends.

Our portfolios breadth and reach in consumer and flavor solutions.

Speaker Change: and our shared insights give us a strong understanding of consumers, flavor needs, preferences, behaviors and trends. We are continuously monitoring these trends across the globe and adapting our strategies accordingly.

Speaker Change: Demand for flavor remains the foundation of our growth. Our business is differentiated. We do not compete for calories, we flavor them.

Speaker Change: Importantly, our opportunity continues to grow no matter where calories are shifting, and the demand for flavor continues to have a long runway.

Speaker Change: Our products in the consumer segment help flavor home-cooked meals, and in the flavor solution segment, we are collaborating with many of our customers through reformulations and flavoring to meet the evolving consumer needs for healthy products, including snacks and beverages.

Speaker Change: Overall trends continue to evolve. Consumers remain challenged, particularly lower-income consumers. While everyone continues to watch their spending, there appears to be some easing with mid- and higher-income cohorts.

Speaker Change: Yet, all still remain focused on maximizing value without compromising flavor. Demand for larger sizes remains elevated, as they are seeking value. At the same time, there is increased demand for small or trial sizes, highlighting that flavor exploration remains important.

Furthermore...

Speaker Change: Consumers continue to cook at home and are increasingly shopping the perimeter for protein and produce.

Speaker Change: Healthier and better-for-you trends, as well as a desire to stretch budgets, are fueling this continued interest in cooking from scratch, reinforcing demand for flavor and for McCormick's categories. Spices and extracts remains the number one center store growth category.

Speaker Change: Lastly, our consumer-centric mindset remains at the heart of everything that we do, and we believe we have the right plans that are continually informed by what matters most to consumers and customers.

Speaker Change: As outlined on slide 7, our growth plans remain consistent to drive growth through category management, brand marketing, new products, our proprietary technologies, and our differentiated customer engagement.

Speaker Change: Our base business is strengthening across major markets and core categories, and we have a number of initiatives in flight that will continue to drive this performance and differentiation. Let me highlight a few areas that support and enable these growth plans.

Speaker Change: First, our decisions to optimize our portfolio over the years allows us to concentrate our focus on four global categories.

Speaker Change: spices and seasonings, condiments and sauces, branded food service, and flavors.

Speaker Change: We are intentionally focused on these categories as they are critical to driving our profitable sales growth and strengthening our flavor leadership.

Speaker Change: They drive the greatest value for McCormick, and we are excited about our plans to continue to drive growth in each of them.

Speaker Change: Furthermore, consumer demand for hot and spicy is strong and remains a significant tailwind to our growth. We are uniquely positioned to win and eat with our global iconic brands, deep consumer insights, meaningful scale, technology, and expertise that we've been building for decades.

Speaker Change: He is a growth enabler in both of our segments and yet another reason to believe in our long-term objectives.

Speaker Change: Lastly, underpinning our long-term growth objectives is a unique system of advantages that work together to drive our industry-leading growth.

Speaker Change: These advantages include the breadth and reach of our focused global portfolio, powerful leading brands, our HEAP platform.

Speaker Change: unique consumer insights, global sourcing capabilities, and our disciplined approach to acquisitions and integrations.

Speaker Change: Importantly, our power of people culture is at the foundation of it all. These advantages, together with the execution of our strategies, are critical to ensuring we deliver on our growth potential.

Now, over to Marcos.

Marcos: Thank you Brendan and good morning everyone. I'm pleased to be reporting on strong results for both the quarter and the year.

Marcos: Starting on slide 9, our total organic sales grew 2% for the quarter. This increase was volume-less, with more than 2% volume and product-mix growth partially offset by pricing.

Marcos: We drove strong sequential volume improvement, as you can see on the slide.

Marcos: Moving to our consumer segment on slide 10. Organic sales increased 3% as volume growth of 4% was partially offset by 1% impact of price investments.

Consumer organic sales in the Americas increased by 4%.

Marcos: This increase reflects 5% volume growth, partially offset by price investments of 1%.

Marcos: Volume growth was focused in our core categories and was driven by our investments in brand marketing, innovation, and expanded distribution.

Marcos: Our investments are yielding positive results, as seen in improved consumption, and we expect the momentum to continue into 2025.

Marcos: In EMEA, we grew consumer organic sales 3%, driven by a 5% increase from volume, partially offset by promotional pricing of 2%.

Marcos: The volume growth was broad-based across product categories in our major markets.

Marcos: We're pleased with the strong sustained volume-led growth momentum in EMEA in 2024.

Marcos: Consumer organic sales in the IPEC region declined 10%, driven by an 11% decrease in volume, partially offset by a 1% contribution from price.

Marcos: This volume decline was primarily attributable to the microenvironment in China.

Turn to our flavor solution segment on slide 11.

Fourth quarter organic sales increased 1% driven by pricing.

Marcos: In the Americas, Flavor Solutions' organic sales increased 1%, reflecting a 2% contribution from price, partially offset by a 1% decrease in volume, driven by softness in our CPG and QSR customers' volumes.

Marcos: This was partially offset by volume growth in flavors with high growth innovator customers as well as growth in the branded food service business.

Marcos: In EMEA, organic sales decreased by 4%, including a 2% decline from price and a 2% impact of lower volume and product mix, reflecting the impact of soft, CPG, and QSR customers' volumes.

Marcos: In the impact region, flavor solutions organic sales increased 6%, with volume growth of 7%, driven by QSRs, customer promotions, limited time offers, as well as new products, partially offset by pricing of 1%.

Marcos: At scene on slide 12, gross profit margin expanded by 20 basis points in the 4th quarter versus the year-ago period, driven primarily by the benefits from our Comprehensive Continuous Improvement Program, or CCI.

Marcos: For the year, Rosmarin expanded 90 basis points with incremental benefit from product mix and pricing.

Marcos: Selling, general, and administrative expenses, or SG&A, increased relative to the fourth quarter of last year, driven primarily by increased technology costs that shifted from the third quarter, as we expected.

Marcos: As a percentage of net sales, SG&A increased 80 basis points.

Marcos: For the fiscal year, H&A increased 40 basis points relative to 2023, primarily due to increased brand marketing as planned.

Marcos: For the fourth quarter, adjusted operating income declined by 1% with minimal impact from currency.

Marcos: This decline was driven by the increase of Sine as expected.

Marcos: with Gross Margin Expansion more than offsetting the increase in SG&A expenses, including our planned increased investments in remarketing.

Marcos: Our performance in 2024 reflects our commitment to increase our profit realization and positions as well to make continued investments to fuel top-line growth.

Marcos: Our fourth quarter adjusted effective tax rate was 25.4%, compared to 22.3% in the year-ago period, as expected.

Marcos: For the year, our adjusted tax rate was 20.5%, a decrease of 150 basis points from 2023, driven by a greater level of discrete tax benefits than in the prior year.

Marcos: Our income from unconsolidated operations in the 4th quarter declined 3%.

Marcos: As we mentioned on the last call, our results were impacted by the strengthening of the U.S. dollar against the Mexican peso, which more than offset the strong performance in our largest joint venture, McCormick de Mexico.

Marcos: The U.S. to Mexican peace exchange rate was around 17 in the prior year compared to more than 20 in the fourth quarter, reflecting approximately an 18 percent fluctuation that impacted our reported results.

Marcos: For the fiscal year, unconsolidated income increased 32%, reflecting strong performance in McCormick, New Mexico.

Marcos: We remain the market leader with our McCormick-branded mayonnaise, marmalade, and mustard product lines in Mexico, and the underlying business continues to perform well and has contributed meaningfully to our net income and operating cash flow results this past year.

Marcos: Turning to our segment operational results on slide 13, adjusted operating income in the consumer segment decreased 3% with minimal impact from currency.

Marcos: The decrease was primarily due to pricing and increased H&A costs, partially offset by cost savings generated by our CCI program.

Marcos: 2024 was a year of investments, and as such, adjusted operating income in the consumer segment rose 1%, while adjusted operating margin declined 10 basis points as we invested to drive top-line volume-led growth.

Marcos: We are well positioned to continue this volume-led growth trajectory with strong margins.

Marcos: In Flavor Solutions, adjusted operating income increased 5% or 7% in constant currency.

Marcos: driven by product mix, pricing, and cost savings, partially offset by increased H&A costs.

Marcos: For the fiscal year, our Flavor Solutions operating income grew 14%, and operating margin expanded 140 basis points, reflecting our continued focus on storing Flavor Solutions profitability.

Marcos: At the bottom line, as shown in slide 14, fourth quarter 2024 adjusted earnings per share was $0.80, as compared to $0.85 for the year-ago period.

Marcos: This decrease was primarily due to the unfavorable tax rate as well as the increase in SNA that I mentioned earlier.

Marcos: For the year, we deliver adjusted earnings per share of $2.95, which represents a 9% increase over 2023 and above the high end of our guidance range.

Marcos: On slide 15, we've summarized highlights for cash flow and the year-end balance sheet.

Marcos: Our cash flow from operations in 2024 was $922 million compared to $1.2 billion in 2023.

Marcos: The benefit from the increase in earnings year over year was more than offset by the impact of cash used for working capital, primarily inventories driven by strategic buying decisions, increased incentive compensation payments, and timing of cash tax payments.

Marcos: We've returned $451 million of cash to shareholders through dividends and used $275 million for capital expenditures.

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

Our priority remains to have a balanced use of cash.

Marcos: This means funding investments to drive growth, returning a significant portion of cash to shareholders through dividends, and maintaining a strong balance sheet.

We remain committed to strong investment grade rating.

Marcos: With another year of strong cash flow driven by profit and working capital initiatives, we successfully reduced our leverage ratio to below three times in 2024 and improved our cash conversion cycle by 10% as compared to the prior year.

Marcos: In 2025, we expect to continue to deliver strong cash flow driven by profit and working capital initiatives.

Marcos: Overall, our results for 2024 were consistent and in line with our guidance and reflect the success of our strategies and focus investments in the areas that drive the greatest value.

Now turning to our 2025 financial outlook on slide 16.

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

Marcos: In addition, this outlook is in line with the expectations we laid out on Investor Day in October and reinforces our confidence in our 2028 targets as well as our long-term objectives.

Marcos: Turn to the details. First, currency rates are expected to have a one-point negative impact on both net sales and adjusted operating income, and two points on adjusted earnings per share.

Marcos: At the top line, we expect organic net sales growth to range between 1 and 3% and our growth to be volume-led with minimal pricing.

Marcos: In China, our food-away-from-home business, which is included in the APAC consumer, continues to be impacted by slower demand.

Marcos: As a result, our outlook assumes a gradual recovery and we expect China consumer sales to improve slightly year over year.

Marcos: While we recognize there has been weak demand, we continue to believe in the long-term growth opportunity of the China business.

Marcos: Our 2025 gross margin is projected to range between 50 to 100 basis points higher than 2024.

Marcos: This gross margin expansion reflects favorable impacts from product mix and cost savings from our CCI program, partially offset by the anticipated impact of a low single-digit increase in cost inflation.

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

Marcos: For the year we expect our brand marketing spend to increase in the highest single digits reflecting a double-digit increase partially offset by anticipated CCI savings.

Marcos: A balanced outlook that gives us the flexibility to continue to invest in the business while expanding margins in line with our 2028 objectives.

Marcos: In terms of tax, we expect our tax rate to be approximately 22% for the year, compared to 20.5% in 2024, where we benefited from a number of discrete tax items that are not expected to repeat in 2025.

Marcos: We expect our income from unconsolidated operations to decline in the mid-teens range in 2025, reflecting the strengthening of the U.S. dollar against the Mexican peso, which is impacting the results of our largest joint venture, Macorro Economexico.

Marcos: Excluding this currency headwind, McCormick of the Mexico continues to deliver a strong performance.

Marcos: To summarize, our 2025 Adjusted Earnings Per Share projection of $3.03 to $3.08 on a reported dollar basis reflects currency headwinds and the impact of the increased tax rate relative to the prior year.

Marcos: On a constant currency basis, adjusted EPS is expected to grow between 5 and 7 percent.

Marcos: As we head into 2025, let me summarize some of the puts and takes to consider related to our performance. As we head into 2025, let me summarize some of the puts and takes to consider related

Marcos: We expect to continue to deliver total volume growth across both segments.

Marcos: for the first quarter is expected to be modest relative to the prior year, primarily due to price gap management investments that were mostly in place since the second quarter of 2024.

Marcos: We expect Gross Margin to build over the year, consistent with historical trends.

Marcos: We anticipate our SG&A will be impacted by a consistent increase in brand marketing every quarter, in line with our full-year guidance.

Marcos: In addition, our stock-based compensation expense will shift from the second quarter to the first quarter, impacting comparisons to the prior year.

Marcos: Our adjusted operating profit will be impacted by this shifting timing, causing the first quarter to be flat or slightly down relative to the prior year. However, this will be more than offset by operating profit growth in the second quarter, and we expect our profitability to build throughout the year.

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

Marcos: Our continuation of volume net growth underscores that we are moving in the right direction.

Marcos: and we remain confident in the underlying fundamentals of our business and delivering on our 2025 financial outlook, near-term and long-term objectives.

The Long-Term Trends That Fuel Our Categories.

Marcos: Consumer interest in healthy flavorful cooking, heat, flavor exploration, and trusted brands continue to be strong and importantly consumer interest in cooking remains elevated.

Marcos: We are pleased with our results for the quarter and for the year. These results demonstrate that we are investing in the areas that drive the most value and reinforces our confidence in our plans and long-term objectives.

Marcos: We continue to execute on our strategic roadmap with speed and agility and in alignment with consumer trends.

Marcos: further capitalizing on our attractive categories across segments and driving category leadership. Our plans are yielding strong results, and we expect the momentum to continue into 2025.

Marcos: We also continue to expand margins and manage our costs as we are investing in the business.

Marcos: These improvements are led by our favorable product mix and cost savings programs.

Marcos: Our performance, coupled with our growth plans, gives us confidence in achieving our near and long-term objectives.

Marcos: We believe the execution of our growth plans will be a win for consumers, customers, our categories, and McCormick, which will continue to differentiate and strengthen our leadership.

Marcos: Finally, I want to recognize all McCormick employees for their dedication and contributions.

particularly as we navigate this complex environment.

Marcos: And, reiterate my confidence that together we will continue to drive differentiated results and shareholder value. Now for your questions.

Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Marcos: A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please, while we poll for your questions.

Speaker Change: Our first questions come from the line of Andrew Lazar with Barclays. Please proceed with your questions.

Great, thanks so much. Good morning everybody. Good morning.

Andrew Lazar: I guess to start off, Brendan, consumer organic sales came in almost two and a half percent, well ahead of what you know the street was anticipating, and within that volume growth of four was was obviously quite strong even despite the the weakness in China.

Speaker Change: particularly in the context, I guess, of the broader packaged food environment. So, I guess, to what do you attribute this strength and, I guess, more importantly, how do you see this momentum continuing into fiscal 25?

Brendan: Thank you, Andrew. Well, just to kind of lead off, we believe we're really well positioned to win in an evolving environment, and I think you saw, obviously, some of that come through in our performance in the fourth quarter.

Brendan: evening leading up through up to the fourth quarter I think here today so we've been delivering on our plans and our guidance for the year essentially you know accomplishing what we said we would do.

Thank you.

Brendan: So, you know, specifically from a consumer perspective, just, you know, looking at it, we're really pleased with the performance of the portfolio in the fourth quarter.

Brendan: So, you know, we're seeing volume growth in our core categories. I think a way to think about it is leading up to the fourth quarter, there are a lot of, you know, very healthy things in place, which will increase investments across our business.

Brendan: You know, increasing brand marketing, we've had increased innovation. You know, a lot of the new products that we're launching are meaningful to our performance. Expanded distribution.

Brendan: And then we also implemented price gap management, too. So all those were things kind of in the face, kind of leading up to the fourth quarter, which were all quite positive in providing and supporting already what was, you know, emerging as really strong, healthy volume growth. I think on top of that, what was different in the fourth quarter

Brendan: in which you sort of accelerated that performance. It was just a great holiday season execution. It's one of the best I've seen us execute, and, you know, we're really, really happy with the way that unfolded. We also had very successful, you know, limited time offering in these finishing sugars. I mean,

Brendan: That was like a 90% sell-through. It just really flew off the shelf, so we had really good performance off of that.

Brendan: We are also running a brand new marketing campaign supporting broadly the umbrella of McCormick and especially in the holidays and we think that campaign is a refresh of what we had been running and it's really performing quite well.

Brendan: And I would also add on top of that, we're growing faster in unmeasured channels like e-commerce. And it's just sort of great execution beyond just grocery and mass.

Brendan: Overall, we saw that 5% increase in volume also translate to 5% consumption growth.

Brendan: It was in line with shipments, so I think it was a really pretty healthy quarter.

as we look beyond the fourth quarter into 2025.

Brendan: I would, as we said in Investor Day, continue to increase in our brand marketing investment. We get great ROIs on that, we get great performance, we'll continue to sort of lean into more brand management investments. I continue to increase in innovation.

Brendan: So as we look ahead, we'll have strong performance on the items that we launch in 24, but it will also have more launching

and 25.

Brendan: We'll also have continued focus on renovation. We spent some time talking about this yesterday, but we'll have the new package for our grilling line.

fully on shelf by the time the grilling season starts.

Brendan: and we have the gourmet launch sometime in the second half which is a relaunch of just you know product packaging and graphics and so that'll be exciting.

Brendan: and the existing price cap management plans will remain in place. So that's part of our basis as we move forward. We'll share more details at CAGI, but we do feel reasonably pretty good about, you know, I think the performance in the fourth quarter around our consumer business globally.

Speaker Change: Thanks for that and then just briefly Marcos, you know, no surprise that fiscal 25 is another reinvestment year as you all highlighted at your analyst day last fall. I was hoping you could talk a bit more about where this investment is targeted and then how this all plays into your broader guidance for the year. Thanks so much.

Speaker Change: Yes, so Andrew, so we are expecting that we'll continue to make investments on technology.

Speaker Change: We talked about technology being one of the levers that shifted from Q3 into Q4, and you saw that HNA was impacted in Q4 by that, but you look at HNA for the full year was at 40 basis points.

Speaker Change: and that was primarily driven by brand marketing and a little bit of technology.

Speaker Change: But that technology in Q4 will continue to be a line item into 2025. We're stepping up investments there. We'll continue to drive.

Speaker Change: our ERP implementation program, plus also the new generation of capabilities, I would say, AI, things like that, and machine learning capabilities. We are building a new data analytics hub across the organization. So we are stepping up the investments in technology, and I believe that over time, we'll continue to drive CCI and productivity savings for the company.

Thank you.

Speaker Change: Thank you. Our next questions come from the line of Peter Galbo with the Bank of America. Please proceed with your questions.

Peter Galbo: Hey guys, good morning. Thanks for the question. If I could just follow up actually on Andrew's question around kind of organic sales and the acceleration.

Peter Galbo: you know that you saw in the fourth quarter and you know was expected for 25.

Peter Galbo: Maybe just two things, Brendan. One, I think, you know, when we talked investor day, we were looking more for like a two to three on organic sales for 25 as an initial.

Speaker Change: who could be helpful, thanks. Yeah, we have to provide some perspective around the guidance specifically on net sales.

Speaker Change: You know we're actually in 2024 with a strong performance and good momentum like you called out and it does set us up for you know even good stronger performance in 2025.

I think from a top-line perspective

This guy reflects.

Speaker Change: the volume driven plan, you know, around our business, and it's really on algorithm, if you will, from a volume perspective, somewhat like we called out, you know, at Investor Day. So it does call for meaningful volume improvement year over year, and there's very little, if any, price in the aggregate. We are building off a stronger base of performance, you know, let's say compared to 23.

Speaker Change: And there's balanced growth between, let's say, both the consumer business and the flavor solutions business.

Speaker Change: We also believe this guidance reflects just the context in the balding marketplace.

Speaker Change: I think I'd kind of maybe speak to two points. When frames are arranged on the low end,

Speaker Change: is China from a consumer perspective. We're still seeing weak consumer confidence there, and we expect.

Speaker Change: It's sort of slight to the gradual recovery there It's also the weakness, you know, I think about flavor solutions. It's the weakness that we're seeing in QSR channels particularly an EMEA

Speaker Change: with Frames. The high end though is the strengthened consumer volumes in the Americas and EMBA. I think overall this, you know, our outlook is strengthening from what we said in 2024. It reflects kind of a prudent view of a changing marketplace. It's consistent with what we said at Investor Day.

Speaker Change: and nothing's really changed in our thinking since then, it's all...

Speaker Change: Frankly, you know, quite consistent as we look at how we were thinking about 2025, you know, back then in October and how we're thinking about it today.

Speaker Change: That's helpful. Thanks for framing that, Brendan. And maybe just to follow up, you know, the less talked about, outside of America's consumer, just your perspectives...

Speaker Change: You know, U.S. Food Service, it seems like maybe we're setting up for a bit better year in 25. EMEA as well, you know, you talked about the weakness on QSR, but just the EMEA consumer business has been delivering strong as well. So just how you're thinking about Europe in 25. Thanks very much.

Speaker Change: I think we saw a lot of strength in 2024 out of EMEA from a consumer business. It certainly offset what was weakness in labor solutions. I think our view is we still see continued strength in our consumer segment. They're in the market, their plans are strong.

Speaker Change: Similar points to what I said in just a sort of the fourth quarter, you know, those continue as we go into 25 on the on the flavor solution side of the business

Speaker Change: We see a sort of gradual strengthening of where we are there, but we have to kind of call out right now. It is sort of rebond. So that's where we're seeing life today. But I think as we look towards the year, improvement overall in our performance in that part of the world from a flavor solutions perspective.

you know.

Speaker Change: from a CPG customer to a QSR customer and we think the strength

Speaker Change: you know, will come in, you know, certainly from a CPG, it'll start to build. There is one, you know, a couple still issues geopolitically happening within that part of the marketplace. So we're seeing that come through.

Speaker Change: and some of not only the perspective that we're getting from our customers, but that is playing out a little bit. The Middle East conflict is starting to affect not just the QSR side of the business, but CPG.

However, we still see improved performance versus 24.

on the flavor solution side.

Thank you.

Speaker Change: Thank you. Our next question has come from the line of Alexia Howard with Bernstein. Please proceed with your questions.

Good morning, everyone.

Thank you. Bye.

So, first of all, can I ask about the

Speaker Change: that you're doing in the flavor solutions segment into these new faster growth innovative customers. I know you started that maybe a year or two ago.

Speaker Change: How quickly is that happening? Are you able to share what proportion of sales those new customers represent and how that might develop over time? And then I have a follow-up

Speaker Change: Sure, happy to provide some perspective around that. We're not going to necessarily speak to sort of, you know, how the whole portfolio breaks down.

but if

Speaker Change: Despite what we're seeing in terms of just sort of overall platish, you know, volumes as you saw in the fourth quarter, you know, broadly, we do see just faster performance.

Speaker Change: And to give you some context, just these tend to be, you know, as we describe them as sort of, you know, higher growth innovator, you know, sort of customers. But it's happening in categories like...

bars of granola, crackers,

Speaker Change: soups and broth, beverage, whether it's with alcohol or without alcohol, or even just sort of performance and nutrition. We continue to see strength in a number of these sort of end categories, if you will, up against those taste competencies that we called out at Investor Day.

Speaker Change: So, these are customers that we continue to seek and acquire, and we believe that as we go to 25, we continue to really drive growth across this business, not only as volumes improve, but also as we gain share in the marketplace overall.

Speaker Change: So, you know, if I were to think about what that added context might be, you know, given the spirit of your question, that's probably, I think, the context of it is, you know, think about it from a market category perspective, we're just seeing a little bit faster growth in these areas.

Speaker Change: So just to add, in Food Away From Home, you think about

Speaker Change: branded food service, we're still seeing a very healthy year in 2024.

Speaker Change: are in that part of our business, and we expect that to also, because that contributes to it, Alexia, is our performance in branded food service, too. And, you know, we expect traffic to incrementally get better, but we're gaining share and we're just driving a lot more activity with our customer base. There has been pretty healthy growth.

Speaker Change: Perfect. And as a follow-up, and this is another broader-based question,

Speaker Change: If we see a number of our food additives like red number three or some of the others

Speaker Change: eliminated from the generally recognized as safe designation and we see a round of

Speaker Change: reformulation across the broader industry. How do you position yourself to best tap into that on the flavor solution side to be part of that cycle if it plays out? Thank you and I'll pass it on.

Speaker Change: Sure, you know, we see ourselves as actively in that going on right now today.

Speaker Change: you know, the way we sort of have an opportunity to sort of, you know,

[inaudible]

Speaker Change: to play into those changes that may or may not occur. You know, as you talked about changes in food regulation or just, you know, sort of a push towards healthier eating.

Speaker Change: We actively play a part right now with the customer base that we have today in terms of

and working on reformulations and product improvements.

Speaker Change: I believe that this is where innovation really drives the industry, it has for.

Speaker Change: decades and will continue to moving forward and so we believe we're poised pretty well to be able to work with our customers on making any product formulation changes that you know they would like to make. This could be the removal of artificial colors.

Speaker Change: Sodium reduction, just increasing in clean ingredients. These are areas that we have been working on well up in prior to 2025, so we're quite confident that we'll participate in that.

Great. Thank you very much. I'll pass it on.

Speaker Change: Thank you. Our next questions come from the line of Robert Maskell with TD Cowen. Please proceed with your questions.

Hi, thanks for the question. Actually, I have a couple.

Speaker Change: I want to know if I could hone in a little bit more on the guidance range of one to three. You mentioned that the low end factors in weakness in China.

Speaker Change: and I wanted to know, could you be more specific about your expectations in China? Would the low end of the range, the 1%, entail China getting worse?

Speaker Change: or are you not that specific on what the 1% means? And then I had a quick follow-up.

Speaker Change: I think our characterization, you know, in terms of what starts to sort of provide context around where that loan might be is

Thank you. Thank you.

you're thinking about

Speaker Change: At times, China is not in that expectation, right? We certainly saw that in 23 and then we saw it again in 24. And so I think what we're doing is we're kind of factoring that into our thinking, Rob,

Speaker Change: You know, as China, we do expect it to get sort of that slight and gradual improvement.

Speaker Change: And, in fact, Marcus and I were there actually just in the first week of January, spending time.

Speaker Change: with our leaders in that business looking over just the changes in the marketplace.

Speaker Change: as well as what are the growth plans for the year and what expectations should we have. So I think we're seeing, you know, a level of prudence from us just in terms of how to think about China. And I think that's kind of the context, I would say, that sort of provides that low-end context.

you know, obviously.

Speaker Change: juxtaposed against, you know, what I framed is sort of what's driving the high end.

Speaker Change: Yeah, Rob, this is Dynamic Environment. We want it to be balanced in our call right now, not only in terms of top line, but also in terms of from an OP perspective.

Speaker Change: and EPS, as you saw in the guide. So we wanted to really be, I mean, I think it is a positive.

Speaker Change: guide, but also its balance given the environment that we are in.

Speaker Change: Okay, and the follow-up, in fourth quarter, you know, the flow through the operating income wasn't quite as strong as we and I think the street had expected.

Speaker Change: And, you know, you talked about some really strong volumes in Consumer. It looked really great.

Speaker Change: and my perception is that consumer is higher gross margin than flavor solutions or just higher margin.

Speaker Change: So, can you explain, was your operating income in fourth quarter in line with your expectations? Or was there a little more incremental spending on distribution, which you mentioned in your press release, or the tech spending?

Speaker Change: I mean, it was pretty much in line with our expectations, I mean, how we came in in Q4. I mean, we talked about in the last call that we were going to be shifting some of the expenses

Speaker Change: And that is what is kind of, you know, taking us down to a negative OP, slightly negative OP. But if you think about it from the HNA perspective, on a four-year basis,

Speaker Change: It's in line as well with our expectations, 40 basis points incremental year-on-year on the back of A&P, continued technology investments as I mentioned before, and this step-up in technology will continue into 2025.

Okay, great. Thank you.

Speaker Change: Thank you. Our next questions come from the line of Rob Dickerson with Jeffries. Please proceed with your questions.

Bye-bye.

Great, thanks so much.

Speaker Change: I guess just, you know, in terms of pricing, the commentary that, you know, you gave maybe about Q1, you know, as you continue to look to manage, you know, price gaps.

Speaker Change: I guess, you know, my question is kind of, like, how much more, I guess, do you think you need to actually manage price gaps? I think we talk about investment, but you're talking about, you know, technology investment, kind of brand building in general, a lot of different investments. If we focus just on price,

Speaker Change: Do you feel like there's actually that much more price investment that needs to come through with Q1 than maybe any perspective on kind of how that flows through for the year? And I just ask given especially Consumer America's volumes.

Speaker Change: you know, we're fairly strong in Q4. And I'm not sure that's, you know, Q4 specific because of some of the holiday, you know, products you had in the marketplace, or if volumes continue, like, kind of, why do you need to continue to invest in price caps? Thanks.

Speaker Change: Yeah, Rob, on price, I think there's really kind of two points maybe there to address in your question.

Speaker Change: As we think about price and, you know, we called out, you know, we're still going to be overlapping the beginning of those investments in Q1.

Speaker Change: That's consistent, that level of investment is consistent with what we were doing previously like Q2, Q3.

Speaker Change: this sort of year to date. So if we go into Q1,

Speaker Change: We're not seeing a step up in that. We're seeing sort of a maintenance of it if you will As we go into q1 is the way I would

Speaker Change: asked you to think about it for the balance of year is maintaining that investment in our baseline if you will.

Speaker Change: of how we think about supporting our brands and supporting the volume group that we've been driving. So, the Price Gap Management, you know, as we have plan for right now, 25 is a continuation of how we applied it in Elesh.

Thank you. Bye.

Speaker Change: Of course, throughout the year, we just don't set those numbers and leave them and never look at them. We're constantly evaluating how they're performing.

Speaker Change: You mentioned a little bit about the performance in the fourth quarter and its strength. Let's also remember that the fourth quarter is our biggest quarter of the year in terms of performance.

and I think what you saw was just

Speaker Change: obviously a really strong execution, a pickup from consumers in terms of more scratch cooking, the holiday season, that holiday season was a bit compressed but it didn't seem to hurt us in any way.

Speaker Change: and we had really overall pretty good performance, but those are just a little other points of context I would add as you think through the profile of our performance.

Speaker Change: Okay, great. And then maybe just kind of more broadly speaking, you know, as you think of your portfolio, at least on the consumer side,

Speaker Change: You know, it does seem as if, let's say, at least through the pack half of last year, right, that kind of more meal-related items.

Speaker Change: seem to be doing a little bit better, right? Like Primrose Store, whether it's chicken pasta, etc., you know, versus, you know, maybe some more incremental pressure or ongoing pressure and some more discretionary items.

kind of my guess is...

Speaker Change: you know, there is still some benefit, right, from those meal-related items. It's something we've been talking about for years, right? You know, consumers cooking from scratch and at home and hurt all through COVID and...

Speaker Change: I'm just kind of curious kind of what the updated perspective is, you know, on some momentum, let's say on the perimeter and some of these mail-related items, and then clearly how that would benefit, again, your consumer American's business. And that's all I have. Thank you.

Speaker Change: Rob, I think there was a little bit there where you may have cut out, but I think I got your question, and that was more, so what's our outlook on sort of the consumer in 2025?

Rob Dickerson: You know, I would say our outlook on the consumer environment hasn't changed significantly, but that doesn't mean it's boring. There's a lot going on right there, and I think a lot of it does, you know, really position us well to win in this environment.

Rob Dickerson: involve in environment. Demand for flavors is pretty strong. As we've said before, others compete for the calories. We flavor them.

Rob Dickerson: And we are seeing a continuation of cooking at home and a focus on healthier eating. And we believe that, obviously, this positions our portfolio well, to perform well in an environment like this. You know, we believe that value is going to remain important for consumers.

She saw some of my prepared remarks.

Rob Dickerson: You know, it's still that lower-income consumer is, still remains quite challenged overall. And they're looking for value and affordability, and not just in the United States. They're looking for it in Europe. They're looking for it in Asia. And so these are things that we believe are kind of, you know, globally consistent themes that we're seeing and influence our plans and the way we think about our portfolio.

Rob Dickerson: overall. So, you know, that's our context with the consumer going into 2025. I would say, you know, remaining, you know, focused on, you know, driving towards healthy eating.

Rob Dickerson: when we see people go to the perimeter to buy more produce, to buy more protein.

Rob Dickerson: We think they're doing it for two reasons. They're doing it because they're looking to obviously, you know, save money, you know, stretch their budgets, but also there's a bias towards eating healthier.

All right, super. Thank you.

Go to Beadaholique.com for all of your beading supply needs!

Speaker Change: Thank you. Our next questions come from the line of Ken Goldman with JP Morgan. Please proceed with your questions.

Ken Goldman: Hi, thank you. I was hoping for a little bit of color on your outlook for margin expansion growth between the two segments.

you know, this past year, 2024.

Ken Goldman: Consumer was flattish. Obviously, Flavor Solutions, you know, had a great performance in terms of margin growth.

Speaker Change: Are you expecting, you know, maybe not the same magnitude, but sort of directional similarity, just given some of the pressure that a consumer might feel from higher ad spending, maybe a little bit more promotion? I just wanted to get a sense for how you would like us to kind of think about that progression from here.

Speaker Change: Yeah, sure Ken. So, first of all, I mean, we're very pleased with the gross margin expansion we had in 2024. I mean, it was 90 basis points.

Speaker Change: at the high end of our guidance range. And we have really good reasons to believe that this will continue into 2025.

So our call is for 50 to 100 basis points.

Speaker Change: into 2025 as well. You know, a couple of items there I would say that is driving these expectations for us. Obviously, CTI and our productivity savings that we have in place right now is working very well for us.

Speaker Change: I mentioned technology before, technology will also help drive more savings in the future, years. The users of global business services organization will continue to tap on that, simplifying processes.

is with us today.

Speaker Change: as we continue to shift our portfolio to high-margin categories such as flavors, brand and food service, those categories drive higher margins.

Speaker Change: So, if you think about it between the two segments, I would expect...

more gross margin coming from the flavor solution segment?

Speaker Change: versus the consumer segment. That is also in line with our strategy of continue to drive profitability at the bottom line for flavor solutions. As you saw, we've improved our operating margin by 140 basis points.

Speaker Change: in 2024, and we have a commitment to get back to 14.5% by 2028, so that was a very important progress that we made now two years in a row on flavor solutions. So that is the whole idea about our guide in terms of gross margin as well as operating margin.

Okay, thank you.

Speaker Change: Thank you. Our next question has come from the line of Max Gumport with BNP Paribas. Please proceed with your questions.

Thanks for the question. In the U.S. specifically,

Max Gumport: Your consumer segment is posting strong volumes, but you called out that your CPG customers and flavor solutions have soft volumes, which we can clearly see in Nielsen data as well So I'm just curious for

Max Gumport: for your color and what's driving that dichotomy. Thanks very much.

Food and Beverage within the United States.

Max Gumport: you know I think we first have to start there and these categories of healthy growth and so we benefit from that but also I believe that we jumped on execution quite early in 2024.

Max Gumport: you think about maybe my remarks back at the beginning at this time last year, I said that

Max Gumport: and really meet the consumer with where they were or where they are today. And that was a real intentional focus on our part, from the standpoint of being competitive and executing quickly.

Max Gumport: I think we've also benefited from that. You know, some of the categories in which we compete, you know, large ones like condiments and sauces, we're competing in what we believe are some of the faster-growing versions of condiments and sauces, like heat, as one example.

Max Gumport: But you take a category like mustard, we're growing it because we're making mustard important to consumers. It's, by the way, a very, you know, sort of healthy profile when you think about that condiment. So I think there's a number of

indicators here that that give us a little bit of

Max Gumport: You know sort of an improved profile and it's a combination of both our execution and and our commitment to drive the volume But also we're operating in in relatively healthy categories and the consumer environment right now You know certainly as it always has continues to favors the categories we plan

Speaker Change: Thanks and then Marcos there is the comment about cash flow in

Speaker Change: in 24 being impacted by decisions to increase inventory. I think there were strategic buying decisions. Can you just provide more color on what those were and how we should think about.

Speaker Change: Those in FY 25. I'll leave it there. Thanks very much

Speaker Change: Sure, I mean, the cash flow continues to be a very positive outcome for us this year, continues to drive a lot of cash, this company.

Speaker Change: for joining us today. This is business as usual for us, we make decisions for buying some of the commodities for us at times, so oftentimes we make those decisions to bring in inventory to protect service and to drive supply chain, be available for supply chain, but also to lock in some favorable costs.

Speaker Change: And so we do take those decisions oftentimes. Difficult to predict what's going to happen in 2025, but this is part of our playbook in terms of how we manage.

Speaker Change: all the input costs and components across the globe within our procurement organization. They have a very data-driven analysis and methodology that they use, and we leverage a lot of that to make those decisions.

Stephen Powers: Great, thanks very much. Thank you. Thank you. Our next questions come from the line of Stephen Powers with Deutsche Bank. Please proceed with your questions.

Stephen Powers: increase year-over-year was going to be pretty even throughout the year.

Stephen Powers: just wanted to play that back and validate and if that's not correct if you could give us a little

A little sense of the cadence of increase.

Stephen Powers: and then Brendan, I don't, the other part of that is just kind of the...

Stephen Powers: where that money is going to go, and is it—should we think about it as just more spending in the same directions, or—

Stephen Powers: Does the makeup of brand marketing and the focus of that marketing shift at all in 25 versus what we've seen, you know, looking backwards? Thank you.

Stephen Powers: So Steve, the first part of the question is yes, I mean the answer is yes, I mean we're going to be spending similarly to 2024 levels.

Stephen Powers: on A&P, high single digit, and it's going to be across all quarters. So pretty much even across all quarters, leading to the high single digit, which is the same as we saw in 2024.

Stephen Powers: Steve, you know, from the perspective of how we're spending that money, where we see, you know, obviously driving strong returns, I think it serves two perspectives on...

Steve: on that. If you think about the vehicles that we go into, and you think about the presentation that we shared at Investor Day.

Steve: you know, more dollars to, you know, to support the investment behind our brands.

Steve: I would also say we also look strategically across the portfolio and decide to, you know, increase spend levels on one brand versus another. If you think about this idea of, you know, driving resources and focus where we get the strongest return.

Steve: that also drives our thinking about that allocation of A&P. So, you know, as we said, for example, in the beginning of 24, we are going to add a lot more, you know, media coverage.

Steve: more 12-month coverage on a brand like Frank's Red Hot and we've seen good performance off of that and so that's in our baseline and we'll continue to build on it. There are other brands which we are going to start to flex even more A&P spend into.

Steve: So, this is the mindset that we use, but I think the review that Tabata gave, you know, as an investor there, I think is a good illustration of where we tend to spend the money, but it's also sort of starting to place, you know, increased spend on certain other brands.

Great. Thank you very much.

Steve: Thank you. Our final questions will come from the line of Tom Palmer with Citi. Please proceed with your questions.

Good morning and thanks for putting me in.

Tom Palmer: I wanted to, I guess, first ask on just the cadence of earnings relative to the annual growth ranges for organic sales growth and operating profit growth. Should we be thinking about starting off the year within these annual guidance ranges and sustaining it, or is there some build to be thinking about? Thanks.

Tom Palmer: So in terms of top line, we'll continue to drive top line momentum from 2024 into 2025. You'll see volume growth across both segments in Q1, and that should continue through Q4. So that's our expectations into this year. In terms of profits, in my prepared remarks, I mentioned a little bit of a shift.

Tom Palmer: from Q2 into Q1 now for our new policy, so that's going to impact Q1. But it's going to be more than offset by the increase of OP in Q2. So and then you should see the similar trend going into the back half of the year. So I'd say, you know, top line consistent across all quarters, a little bit of shift in OP between Q1 and Q2. Gross margin line pretty much consistent and growing across, you know, from Q2 through Q4.

Tom Palmer: Thanks for that caller. And just on the JV income, I just wanted to clarify the currency versus underlying trends. If we were to exclude the currency headwind,

Speaker Change: Would this business, in kind of how you're thinking about 2025, still be growing?

Speaker Change: Oh yes, I mean the business is still growing, the business is very robust down in Mexico.

and the team.

All right. Thank you.

Speaker Change: Thank you. We have reached the end of our question and answer session. I would now like to hand the call back over to Faten Freiha for closing remarks.

Faten Freiha: Thank you, and thanks to all for joining today's call. If you have any further questions regarding today's information, please feel free to contact me. This concludes our call for this morning.

Thank you.

Faten Freiha: Thank you. This does conclude today's teleconference. You may disconnect at this time.

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Faten Freiha: John F. Kennedy now owns 500,000 acres of land on machines. Fated to thrive, Faden gets his rebirth in America, 37 years after the death of filmace.

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The first time I've seen the

Speaker Change: and a few others. Thank you. This is a production of the U.S. Department of State. This program is educational and is not meant to replace proper medical or therapeutic treatment advice. Although EFT is widely used as a self help technique it is still in the experimental stages and can be used as a personal health treatment advice. Users should seek the advice of qualified physicians and health professionals regarding its use. These treatments can be made available at www.states.gov.au or at any of our other sites.

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Speaker Change: This is a production of the U.S. Department of State. No part of this recording may be reproduced without the support of the U.S. Department of State.

Music Music Music Music Music Music

Good morning. This is Faten Freiha, VP of Investor Relations.

Speaker Change: Thank you for joining today's fourth quarter earnings call. To accompany this call, we've posted a set of slides on our IR website, ir.mccormick.com. With me this morning are Brendan Foley, Chairman, President and CEO, and Marcos Gabriel, Executive Vice President and CFO.

Speaker Change: During this call, we will refer to certain non-GAAP financial measures. The nature of those non-GAAP financial measures and the related reconciliations to the GAAP results are included in this morning's press release and slides.

Speaker Change: In our comments, certain percentages are rounded. Please refer to our presentation for complete information. Today's presentation contains projections and other forward-looking statements.

Speaker Change: Actual results could differ materially from those projected. The company undertakes no obligation to update or revise publicly any forward-looking statements.

whether because of new information, future events or other factors.

Speaker Change: please refer to our forward-looking statement on slide 2 for more information.

Speaker Change: Lastly, I'd like to call out that we made changes to our release and slides to streamline and enhance our communications.

Speaker Change: And these changes are in alignment with investor and analyst feedback.

Speaker Change: In terms of metrics, to simplify, we are adopting the Organic Sales Measure, which is defined as the impact of volume and mix plus price, and excludes the impact of effects and any divestitures or acquisitions. As a reminder, the reconciliations of our sales measures can be found in the appendix of our slides and in our press release. I will now turn the discussion over to Brendan.

Speaker Change: Good morning everyone and thank you for joining us. I'm pleased to report on our strong performance for the fourth quarter in fiscal year 2024.

Brendan Foley: An important year for McCormick, in which we built momentum and strengthened our leadership and differentiation, returning to quality, volume-led growth. We invested in our core categories, drove improved unit and volume share trends, while also expanding our margins and delivering strong earnings growth.

Brendan Foley: Our results demonstrate the success of our prioritized investments in the areas that we believe will drive the most value and set us up to continue to drive momentum for 2025 and beyond.

McCormick remains a growth company.

Brendan Foley: We have robust plans that leverage the demand for flavor and the strength of our brands.

Brendan Foley: Our strategies have proven to be effective in driving growth and compounding that growth over the years, and I remain confident that we have the right leadership team in place and engaged employees globally to deliver on our near-term and long-term objectives with industry-leading performance.

Brendan Foley: This morning, I will begin my remarks with an overview of our fourth quarter, focusing primarily on top-line drivers. Next, I will highlight some areas of success and the areas that we continue to work on.

Brendan Foley: Then, I will briefly reflect on our full-year performance and share our plans at a high level to continue to drive momentum in 2025.

Brendan Foley: Next, I will review how McCormick is positioned relative to an evolving consumer landscape.

Brendan Foley: Marcus will then go into more depth in the fourth quarter, as well as 2024 fiscal year financial results, and review our 2025 outlook. And finally, before your questions, I will have some closing comments.

Brendan Foley: Turning now to our results on slide 4. In the fourth quarter, total organic sales increased by 2%, reflecting volume and product mix growth of more than 2%.

partially offset by pricing.

Brendan Foley: Total volume improved sequentially for the fourth consecutive quarter, despite a challenging environment. And this improvement in the fourth quarter was driven by our consumer segment, where volume and product mix increased approximately 4% compared to the prior year.

Brendan Foley: In America's Consumer, we delivered meaningful sequential volume improvement, leading to more than 5% volume growth year-over-year. This growth reflects continued focus on our core categories, investing in brand marketing, accelerating innovation, and alignment with consumer trends.

Expanding Distribution, and Price Gap Management Plans.

Brendan Foley: In EMEA, we continue to drive positive volume growth across our major markets and core categories. We realize benefits from new product innovation as well as expanded distribution.

Brendan Foley: and Asia Pacific, our results were impacted by China as the environment in this market remains challenged.

Brendan Foley: Looking forward we expect a slight and gradual recovery in 2025 relative to the prior year. Marcus will discuss this when he covers our outlook for 2025.

Brendan Foley: Moving to flavor solutions, volumes were flat for the global segment. Volume performance was primarily impacted by volume softness in our CPG and QSR customers volumes.

Brendan Foley: Sequentially, relative to third quarter volume growth, our results were impacted by the timing of customer activities.

Brendan Foley: Let's move to slide 5 and let me highlight for the quarter some of the key areas of success.

Brendan Foley: In our global consumer segment, we successfully executed on our plans with increased investment and competitive focus towards driving growth across our four categories.

Brendan Foley: In the Americas, across all categories, we drove unit, volume, and dollar consumption growth. Notably, our unit and volume consumption outpaced both branded food peers and private label in the fourth quarter.

Brendan Foley: And Global Spices and Seasonings, which are of solid unit, volume, and dollar consumption growth across key markets in the Americas, EMEA, and Asia Pacific.

Brendan Foley: In the U.S., we continue to improve on our competitiveness. Our volume consumption outpaced both branded competitors and private label for the quarter.

Brendan Foley: Overall holiday performance was terrific. We saw high demand and sellout on our displays that featured core holiday items, as well as new innovation.

Brendan Foley: We had strong performance across the portfolio, and our holiday limited-time offer, Finishing Sugars, contributed to our share momentum and were incremental to the category.

Brendan Foley: In Recipe Mixes, we continue to strengthen consumption trends in the Americas and EMEA, driving overall share.

Brendan Foley: In the U.S., our Cholula line remains a significant growth driver. We are innovating with Cholula recipe mixes, bringing new consumers to the category, particularly with millennials and younger families.

Brendan Foley: In the UK, our new short seasonings and recipe mixes, specifically designed for air fryers, are performing well and driving strong consumption.

Thank you.

Speaker Change: and Mustard. We made great progress globally over the last three quarters and are pleased to see that our plans are driving great results. In the fourth quarter we drove unit volume and dollar share gains in the Americas.

Speaker Change: In Poland, one of the top mustard-consuming countries, our mustard consumption continues to grow, and we are also realizing unit and dollar share gains.

Speaker Change: and Hot Sauce. We continue to have underlying strength in our base business and strong consumer loyalty. We drove positive unit volume and dollar growth in the fourth quarter, demonstrating that our plans are working.

Speaker Change: Sequentially, we drove significant improvement in dollar and unit share trends. This improvement was driven by distribution gains, increased brand marketing, and innovation.

Speaker Change: We continue to make progress on total distribution points. We expanded TDPs across spices and seasonings, recipe mixes, mustard, and hot sauce in the Americas.

Speaker Change: At EMBA, we are also seeing distribution growth across markets in spices and seasonings and condiments and sauces.

Speaker Change: We are also gaining distribution and growing channels like discounters and e-commerce.

Speaker Change: In flavor solutions, we saw strength in our technically insulated high-margin product category flavors and in branded food service.

Speaker Change: In Flavors, in the Americas, we remain focused on being the partner of choice across four case competencies.

Speaker Change: savory, heat, naturally sweet, and citrus and fruit. These are areas of deep expertise and strength and where we are recognized as leaders within the flavor industry.

Speaker Change: As a result of this continued focus, our performance with our high-growth innovator customers remains strong, and we outperform the industry across most end categories.

Speaker Change: In America's branded food service business, we drove volume growth and expanded distribution across spices and seasonings and condiments, outperforming the industry.

Speaker Change: In addition, we are winning in hot sauce tabletop unit share and with innovation, new distribution, packaging and promotion.

Speaker Change: Let me now touch on some areas where we are seeing some pressure.

Speaker Change: As I mentioned earlier, in our Asia-Pacific consumer business, the environment in China remains challenging, consumer sentiment remains low, and October and November distributor inventory buildup was below prior years due to the expected softer consumption.

and Flavor Solutions.

Speaker Change: In both Americas and EMEA, some of our CPG customers experience continued softness and volumes within their own businesses.

Speaker Change: And in the EMEA, some of these customers were impacted by geopolitical boycotts in the region related to the Middle East conflict.

This geopolitical impact may continue into 2025.

Speaker Change: In addition, QSR traffic remains soft in the EMEA and in the Americas. We have seen this pressure impact our results for several quarters.

Speaker Change: It's difficult to predict QSR traffic, however, we are collaborating with our customers as they focus on improving their volumes through innovation and value and aligned with consumer trends.

Speaker Change: Now, I would like to reflect on our performance for the fiscal year on slide 6.

Speaker Change: We successfully delivered on the goals we set and shared with you for 2024. We demonstrated our dedication to improving volumes.

Speaker Change: I am very proud of what we achieved, and you should expect continued momentum in 2025.

Speaker Change: Our team remains focused on returning to our long-term growth algorithm, strengthening our profitability, continuing our strong cash flow, paying down our debt, and reducing our leverage ratio.

Speaker Change: all have put McCormick in a position of strength to invest further with a sustained focus on growth.

Speaker Change: A few highlights for the year. On the top line, sales growth came in close to the high end of our guidance range as we expected.

Speaker Change: Importantly, we drove total positive volume growth for the year, with the consumer business delivering 1% volume growth for 2024.

Speaker Change: We continue to invest in our business as well as drive margin expansion.

in line with our guidance.

Speaker Change: Importantly, we made significant progress in advancing our flavor solutions operating margins.

Speaker Change: Our growth for 2024 on the top line and the bottom line reinforces our confidence in achieving the 2028 targets we set out at our Investor Day as well as our long-term objectives.

Speaker Change: We've made significant progress this past year, and we have plans to continue that momentum in 2025 and beyond.

Let me now share our perspectives on consumer trends.

Our portfolios breadth and reach in consumer and flavor solutions.

Speaker Change: and our shared insights give us a strong understanding of consumers' flavor needs, preferences.

as well.

Speaker Change: Demand for flavor remains the foundation of our growth. Our business is differentiated. We do not compete for calories, we flavor them.

Speaker Change: Importantly, our opportunity continues to grow no matter where calories are shifting and the demand for flavor continues to have a long runway.

Speaker Change: Overall trends continue to evolve. Consumers remain challenged, particularly lower-income consumers.

Speaker Change: While everyone continues to watch their spending, there appears to be some easing with mid and higher income cohorts.

Speaker Change: yet also remain focused on maximizing value without compromising flavor. Demand for larger sizes remains elevated as they are seeking value. At the same time there is increased demand for small or trial sizes, highlighting that flavor exploration remains important.

Speaker Change: Furthermore, consumers continue to cook at home and are increasingly shopping the perimeter for protein and produce.

Speaker Change: Spices and Extracts remains the number one center store growth category.

Speaker Change: Our growth levers are supported and enhanced through data and analytics as we continue to accelerate our digital transformation.

Speaker Change: First, our decisions to optimize our portfolio over the years allows us to concentrate our focus on four global categories.

Speaker Change: Spices and seasonings, condiments and sauces, branded food service, and flavors.

Speaker Change: We are intentionally focused on these categories as they are critical to driving our profitable sales growth and strengthening our labor leadership.

Speaker Change: They drive the greatest value for McCormick, and we are excited about our plans to continue to drive growth in each of them.

Speaker Change: Keith is a growth enabler in both of our segments and yet another reason to believe in our long-term objectives.

Speaker Change: Lastly, underpinning our long-term growth objectives is a unique system of advantages that work together to drive our industry-leading growth.

Speaker Change: These advantages include the breadth and reach of our focused global portfolio, powerful leading brands, our HEAP platform.

Speaker Change: unique consumer insights, global sourcing capabilities, and our disciplined approach to acquisitions and integrations.

Now, over to Marcos.

Marcos Gabriel: Thank you Brendan and good morning everyone. I'm pleased to be reporting on strong results for both the quarter and the year.

Marcos Gabriel: Starting on slide 9, our total organic sales grew 2% for the quarter. This increase was volume-less, with more than 2% volume and product-mix growth, partially offset by pricing.

Marcos Gabriel: We drove strong sequential volume improvement, as you can see on the slide.

Marcos Gabriel: Moving to our consumer segment on slide 10. Organic sales increased 3% as volume growth of 4% was partially offset by 1% impact of price investments.

Consumer organic sales in the Americas increased by 4%.

Marcos Gabriel: This increase reflects 5% volume growth, partially offset by price investments of 1%.

Marcos Gabriel: Volume growth was focused in our core categories and was driven by our investments in brand marketing, innovation, and expanded distribution.

Marcos Gabriel: Our investments are yielding positive results, as seen in improved consumption, and we expect the momentum to continue into 2025.

Marcos Gabriel: In EMEA, we grew consumer organic sales 3%, driven by a 5% increase from volume, partially offset by promotional pricing of 2%.

Marcos Gabriel: The volume growth was broad-based across product categories in our major markets.

Marcos Gabriel: We are pleased with the strong sustained volume net growth momentum in EMEA in 2024.

Marcos Gabriel: Consumer organic sales in the IPEC region declined 10%, driven by an 11% decrease in volume, partially offset by a 1% contribution from price.

Marcos Gabriel: This volume decline was primarily attributable to the microenvironment in China.

Turn to our flavor solution segments on slide 11.

Fort Core organic sales increased 1% driven by pricing.

Marcos Gabriel: In the Americas, Flavor Solutions' organic sales increased 1%, reflecting a 2% contribution from price, partially offset by a 1% decrease in volume, driven by softness in our CPG and QSR customers' volumes.

Marcos Gabriel: This was partially offset by volume growth in flavors with high-growth innovator customers as well as growth in the branded food service business.

Marcos Gabriel: In EMEA, organic sales decreased by 4%, including a 2% decline from price and a 2% impact of lower volume and product mix, reflecting the impact of soft, CPG, and QSR customers' volumes.

Marcos Gabriel: In the impact region, flavor solutions organic sales increased 6%, with volume growth of 7% driven by QSRs, customer promotions, limited time offers, as well as new products, partially offset by pricing of 1%.

Marcos Gabriel: At scene on slide 12, gross profit margin expanded by 20 basis points in the 4th quarter versus the year-ago period, driven primarily by the benefits from our Comprehensive Continuous Improvement Program, or CCI.

Marcos Gabriel: For the year, Rosmarin expanded 90 basis points with incremental benefits from product mix and pricing.

Marcos Gabriel: Selling, general, and administrative expenses, or SG&A, increased relative to the fourth quarter of last year, driven primarily by increased technology costs that shifted from the third quarter, as we expected.

Marcos Gabriel: As a percentage of net sales, SG&A increased 80 basis points.

Marcos Gabriel: For the fiscal year, H&A increased 40 basis points relative to 2023, primarily due to increased brand marketing as planned.

Marcos Gabriel: For the fourth quarter, adjusted operating income declined by 1% with minimal impact from currency.

Marcos Gabriel: This decline was driven by the increase of Sine as expected.

Marcos Gabriel: with Gross Margin Expansion more than offsetting the increase in SG&A expenses, including our planned increased investments in remarketing.

Marcos Gabriel: Our performance in 2024 reflects our commitment to increase our profit realization and positions as well to make continued investments to fuel top-line growth.

Marcos Gabriel: Our fourth quarter adjusted effective tax rate was 25.4%, compared to 22.3% in the year-ago period, as expected.

Marcos Gabriel: For the year, our adjusted tax rate was 20.5%, a decrease of 150 basis points from 2023, driven by a greater level of discrete tax benefits than in the prior year.

Marcos Gabriel: Our income from unconsolidated operations in the fourth quarter declined 3%.

Marcos Gabriel: As we mentioned on the last call, our results were impacted by the strengthening of the U.S. dollar against the Mexican peso, which more than offset the strong performance in our largest joint venture, McCormick de Mexico.

Marcos Gabriel: The U.S. to Mexican peace exchange rate was around 17 in the prior year compared to more than 20 in the fourth quarter, reflecting approximately an 18 percent fluctuation that impacted our reported results.

Marcos Gabriel: For the fiscal year, unconsolidated income increased 32%, reflecting strong performance in McCormick, New Mexico.

Marcos Gabriel: We remain the market leader with our McCormick-branded mayonnaise, marmalades, and mustard product lines in Mexico, and the underlying business continues to perform well and has contributed meaningfully to our net income and operating cash flow results this past year.

Marcos Gabriel: Turning to our segment Operational Results on slide 13, adjusted operating income in the consumer segment decreased 3% with minimal impact from currency.

Marcos Gabriel: 2024 was a year of investments, and as such, adjusted operating income in the consumer segment rose 1%, while adjusted operating margin declined 10 basis points as we invested to drive top-line, volume-led growth.

Marcos Gabriel: We are well positioned to continue this volume-led growth trajectory with strong margins.

Marcos Gabriel: In Flavor Solutions, adjusted operating income increased 5% or 7% in constant currency.

Marcos Gabriel: driven by product mix, pricing, and cost savings, partially offset by increased H&A costs.

Marcos Gabriel: For the fiscal year, our Flavor Solutions operating income grew 14%, and operating margin expanded 140 basis points, reflecting our continued focus on storing Flavor Solutions profitability.

Marcos Gabriel: At the bottom line as shown in slide 14, fourth quarter 2024 adjusted earnings per share was $0.80, as compared to $0.85 for the year-ago period.

Marcos Gabriel: This decrease was primarily due to the unfavorable tax rate as well as the increase in SNA that I mentioned earlier.

Marcos Gabriel: For the year, we delivered adjusted earnings per share of $2.95, which represents a 9% increase over 2023 and above the high end of our guidance range.

Marcos Gabriel: On slide 15, we've summarized highlights for cash flow and the year-end balance sheet. Our cash flow from operations in 2024 was $922 million, compared to $1.2 billion in 2023.

Marcos Gabriel: The benefit from the increase in earnings year over year was more than offset by the impact of cash used for working capital, primarily inventories driven by strategic buying decisions, increased incentive compensation payments, and timing of cash tax payments.

Marcos Gabriel: We've returned $451 million of cash for shareholders to dividends and used $275 million for capital expenditures.

Marcos Gabriel: As a reminder, capital expansions include projects to increase capacity and capabilities to meet growing demand, advance our digital transformation, and optimize our cost structure.

Our priority remains to have a balanced use of cash.

Marcos Gabriel: This means funding investments to drive growth, returning a significant portion of cash to shareholders through dividends, and maintaining a strong balance sheet.

We remain committed to strong investment grade rating.

Marcos Gabriel: With another year of strong cash flow driven by profit and working capital initiatives, we successfully reduced our leverage ratio to below three times in 2024 and improved our cash conversion cycle by 10% as compared to the prior year.

Marcos Gabriel: In 2025, we expect to continue to deliver strong cash flow driven by profit and working capital initiatives.

Marcos Gabriel: Overall, our results for 2024 were consistent and in line with our guidance and reflect the successful strategies and focused investments in the areas that drive the greatest value.

Now turning to our 2025 financial outlook on slide 16.

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

Marcos Gabriel: In addition, this outlook is in line with the expectations we laid out on Investor Day in October and reinforces our confidence in our 2028 targets as well as our long-term objectives.

Marcos Gabriel: Turn to the details. First, currency rates are expected to have a one-point negative impact on both net sales and adjusted operating income, and two points on adjusted earnings per share.

Marcos Gabriel: At the top line, we expect organic net sales growth to range between 1 and 3% and our growth to be volume-led with minimal pricing.

Marcos Gabriel: In China, our food-away-from-home business, which is included in the APAC consumer, continues to be impacted by slower demand.

Marcos Gabriel: As a result, our outlook assumes a gradual recovery and we expect China consumer sales to improve slightly year over year.

Marcos Gabriel: While we recognize there has been weak demand, we continue to believe in the long-term growth opportunity of the China business.

Marcos Gabriel: Our 2025 gross margin is projected to range between 50 to 100 basis points higher than 2024.

Marcos Gabriel: In addition to a gross margin expansion, we expect SG&A benefits from cost savings to be partially offset by investments to drive volume growth, including brand marketing.

Marcos Gabriel: For the year we expect our brand marketing spend to increase in the highest single digits reflecting a double-digit increase partially offset by anticipated CCI savings.

Marcos Gabriel: As a result, our adjusted operating income is expected to grow 4 to 6% in constant currency, a balanced outlook that gives us the flexibility to continue to invest in the business while expanding margins in line with our 2028 objectives.

Marcos Gabriel: In terms of tax, we expect our tax rate to be approximately 22% for the year, compared to 20.5% in 2024, where we benefited from a number of discrete tax items that are not expected to repeat in 2025.

Marcos Gabriel: We expect our income from unconsolidated operations to decline in the mid-teens range in 2025, reflecting the strengthening of the U.S. dollar against the Mexican peso, which is impacting the results of our largest joint venture, McCormick in Mexico.

Marcos Gabriel: excluding this currency headwind, McCormick of the Mexico continues to deliver a strong performance.

Marcos Gabriel: To summarize, our 2025 Adjusted Earnings Projection of $3.03 to $3.08 on a reported dollar basis reflects currency headwinds and the impact of the increased tax rate relative to the prior year.

Marcos Gabriel: On a constant currency basis, adjusted EPS is expected to grow between 5 and 7 percent.

Marcos Gabriel: As we head into 2025, let me summarize some of the puts and takes to consider related to our performance.

Marcos Gabriel: We expect to continue to deliver total volume growth across both segments.

Marcos Gabriel: Plus margin expansion for the first quarter is expected to be modest relative to the prior year. Primarily due to price gap management investments that were mostly in place since the second quarter of 2024.

Marcos Gabriel: We expect Gross Margin to build over the year, consistent with historical trends.

Marcos Gabriel: We anticipate our SG&A will be impacted by a consistent increase in brand marketing every quarter, in line with our full-year guidance.

Marcos Gabriel: In addition, our stock-based compensation expense will shift from the second quarter to the first quarter, impacting comparisons to the prior year.

Marcos Gabriel: Our adjusted operating profit will be impacted by this shifting timing, causing the first quarter to be flat or slightly down relative to the prior year. However, this will be more than offset by operating profit growth in the second quarter, and we expect our profitability to build throughout the year.

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

Brendan Foley: Our continuation of volume net growth underscores that we are moving in the right direction.

Brendan Foley: and we remain confident in the underlying fundamentals of our business and delivering on our 2025 financial outlook, near-term and long-term objectives.

The Long-Term Trends That Fuel Our Categories

Brendan Foley: Consumer interest in healthy flavorful cooking, heat, labor exploration, and trusted brands continue to be strong and importantly consumer interest in cooking remains elevated.

Brendan Foley: We are pleased with our results for the quarter and for the year. These results demonstrate that we are investing in the areas that drive the most value and reinforces our confidence in our plans and long-term objectives.

Brendan Foley: We continue to execute on our strategic roadmap with speed and agility and in alignment with consumer trends further capitalizing on our attractive categories across segments and driving category leadership Our plans are yielding strong results and we expect the momentum to continue into 2025

Brendan Foley: We also continue to expand margins and manage our costs as we are investing in the business.

Brendan Foley: These improvements are led by our favorable product mix and cost savings programs.

Brendan Foley: Our performance, coupled with our growth plans, gives us confidence in achieving our near and long-term objectives.

Brendan Foley: We believe the execution of our growth plans will be a win for consumers, customers, our categories, and McCormick, which will continue to differentiate and strengthen our leadership.

Brendan Foley: Finally, I want to recognize all McCormick employees for their dedication and contributions.

particularly as we navigate this complex environment.

Brendan Foley: And, reiterate my confidence that together we will continue to drive differentiated results and shareholder value. Now for your questions.

Speaker Change: Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Speaker Change: A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please, while we poll for your questions.

Speaker Change: Our first questions come from the line of Andrew Lazar with Barclays. Please proceed with your questions.

Great, thanks so much. Good morning everybody. Good morning.

Andrew Lazar: I guess to start off, Brendan, consumer organic sales came in almost two and a half percent, well ahead of what you know the street was anticipating, and within that volume growth of four was obviously quite strong, even despite the weakness in China.

Andrew Lazar: particularly in the context, I guess, of the broader packaged food environment. So, I guess, to what do you attribute this strength and, I guess, more importantly, how do you see this momentum continuing into fiscal 25?

Brendan Foley: Thank you, Andrew. Well, just to kind of lead off, we believe we're really well positioned to win in an evolving environment. I think you saw, obviously, some of that come through in our performance in the fourth quarter.

Brendan Foley: even leading up through up to the fourth quarter I think here today. So we've been delivering on our plans and our guidance for the year essentially you know accomplishing what we said we would do.

Brendan Foley: So, you know, specifically from a consumer perspective, just, you know, looking at it, we're really pleased with the performance of the portfolio in the fourth quarter.

Brendan Foley: The performance was pretty strong. You know, global volume growth was around 4%, but importantly, like in the Americas, we saw about 5% volume mix growth. It was strong acceleration from the third quarter to the fourth quarter, and we saw very consistent, strong performance in EMBA at about 5%.

Brendan Foley: So, you know, we're seeing volume growth in our core categories. I think a way to think about it is leading up to the fourth quarter, there are a lot of, you know, very healthy things in place which will increase investments across our business.

Brendan Foley: You know, increasing brand marketing, we've had increased innovation. You know, a lot of the new products that we're launching are meaningful to our performance. Expanded distribution.

Brendan Foley: And then we also implemented price gap management, too. So all those were things kind of in the face, kind of leading up to the fourth quarter, which were all quite positive and providing and supporting already what was, you know, emerging as really strong, healthy volume growth. I think on top of that, what was different in the fourth quarter

Brendan Foley: in which you sort of accelerated that performance. It was just a great holiday season execution. It's one of the best I've seen us execute. And, you know, we're really, really happy with the way that unfolded. We also had very successful, you know, limited time offering in these finishing sugars.

Brendan Foley: you know that shelf that was like a 90% sell through it just really flew off the shelf so we had really good performance off of that.

Brendan Foley: We are also running a brand new marketing campaign supporting broadly the umbrella of McCormick and especially in the holidays and we think that campaign is a refresh of what we have been running and it's really performing quite well.

Brendan Foley: and I would also add on top of that we're growing faster in unmeasured channels like e-commerce and it's just sort of great execution beyond just grocery and mass so

Brendan Foley: Overall, we saw that 5% increase in volume also translate to 5% consumption growth.

Brendan Foley: It was in line with shipment, so I think it was a really pretty healthy quarter.

Brendan Foley: As we look beyond the fourth quarter into 2025, I think we set an investor date, continued increase in our brand marketing investment.

Brendan Foley: We get great ROIs on that. We get great performance. We'll continue to sort of, you know, lean into, you know, more brand management investments. I continue to increase in innovation. So as we look ahead, we'll have strong performance on the items that we launch in 24, but it will also have more launching in the future.

and 25.

Brendan Foley: We'll also have continued focus on renovation. We spent some time talking about this yesterday, but we'll have the new package for our grilling line.

fully on shelf by the time the grilling season starts.

Brendan Foley: and we have the Gourmet launch sometime in the second half which is a relaunch of just you know product packaging and graphics and so that'll be exciting.

Brendan Foley: and the existing price cap management plans will remain in place. So that's part of our basis as we move forward. We'll share more details at CAGI, but we do feel reasonably pretty good about, you know, I think the performance in the fourth quarter around our consumer business globally.

Speaker Change: Thanks for that and then just briefly Marcos you know no surprise that fiscal 25 is another reinvestment year as you all highlighted at your analyst day last fall. I was hoping you could talk a bit more about where this investment is targeted and then how this all plays into your broader guidance for the year. Thanks so much.

Marcos Gabriel: Yeah, so Andrew, so we are expecting that we'll continue to make investments on technology.

Marcos Gabriel: We talked about technology being one of the levers that shifted from Q3 into Q4, and you saw that HNA was impacted in Q4 by that, but you look at HNA for the full year was at 40 basis points, and that was primarily driven by brand marketing and a little bit of technology. But that technology in Q4 will continue to be a line item into 2025.

Marcos Gabriel: implementation program, plus also the new generation of capabilities, I would say AI, things like that, and machine learning capabilities. We are building a new data analytics hub

Marcos Gabriel: across the organization. So we are stepping up, you know, the investments in technology and I believe that over time we'll continue to drive CCI and productivity savings for the company.

Thank you

Speaker Change: Thank you. Our next questions come from the line of Peter Galbo with the Bank of America. Please proceed with your questions.

Peter Galbo: Hey guys, good morning. Thanks for the question. If I could just follow up actually on Andrew's question around organic sales and the acceleration.

Peter Galbo: that you saw in the fourth quarter and was expected for 25.

Peter Galbo: Maybe just two things, Brendan. One, I think, you know, when we talked investor day, we were looking more for like a two to three on organic sales for 25 as an initial, and now the range has moved slightly below that. So just curious kind of what transpired or what's changed from an organic sales standpoint.

Peter Galbo: And the second is, you know, obviously that range would also imply a deceleration versus the fourth quarter.

who

Peter Galbo: You know, we're actually in 2024 with a strong performance and good momentum, like you called out. And it does set us up for, you know, even good, you know, stronger performance in 2025.

I think from a top line perspective

This guy reflects

Peter Galbo: the volume driven plan around our business. And it's really on algorithm, if you will, from a volume perspective. It's somewhat like we called out at Investor Day. So it does call for meaningful volume improvement year over year. And there's very little, if any, price in the aggregate. We are building off a stronger base of performance, let's say compared to 23.

Peter Galbo: And there's balanced growth between, let's say, both the consumer business and the flavor solutions business.

Peter Galbo: We also believe this guidance reflects just the context in the balding marketplace.

Peter Galbo: I think I'd kind of maybe speak to two points. When frames are arranged on the low end,

Peter Galbo: is China from a consumer perspective. We're still seeing weak consumer confidence there, and we expect...

Peter Galbo: It's sort of slight to the gradual recovery there It's also the weakness, you know, I think about flavor solutions. It's the weakness that we're seeing in QSR channels particularly an EMEA

Peter Galbo: What frames the high-end, though, is the strength in consumer volumes in the Americas and EMEA. I think overall this...

Peter Galbo: You know, our outlook is strengthening from what we said in 2024. It reflects kind of a prudent view of a changing marketplace. It's consistent with what we said at Investor Day. And nothing's really changed in our thinking since then.

Peter Galbo: Frankly, you know, quite consistent as we look at how we were thinking about 2025, you know, back then in October and how we're thinking about it today.

Andrew Lazar: That's helpful. Thanks for framing that, Brendan. And maybe just to follow up, you know, the less talked about, outside of America's consumer, just your perspectives...

Andrew Lazar: US Food Service, it seems like maybe we're setting up for a bit better year in 2025. EMEA as well, you know, you talked about the weakness on QSR, but just the EMEA consumer business has been delivering strong as well, so just how you're thinking about Europe in 2025. Thanks very much.

Andrew Lazar: I think, well we're certainly, we saw a lot of strength in 2024 out of EMEA from from a consumer business. It certainly offset what was weakness in flavor solutions. I think our view is we still see continued strength in our consumer segment. They're in the market, their plans are strong.

Andrew Lazar: Similar points to what I said in just sort of the fourth quarter, you know, those continue as we go into 25. On the flavor solution side of the business,

Andrew Lazar: We see a sort of gradual strengthening of where we are there, but we have to kind of call out right now. It is sort of weak volumes, so that's where we're seeing life today. But I think as we look towards the year, improvement overall in our performance in that part of the world from a flavor solutions perspective.

you know.

Andrew Lazar: from a CPG customer to a QSR customer, we think the strength

However, we still see improved performance versus 24.

on the flavor solution side.

Thank you.

Speaker Change: Thank you. Our next question has come from the line of Alexia Howard with Bernstein. Please proceed with your questions.

Good morning, everyone.

Thank you. Bye-bye.

So first of all, can I ask about the

Speaker Change: that you're doing in the flavor solutions segment into these new faster growth innovative customers. I know you started that maybe a year or two ago.

Speaker Change: How quickly is that happening? Are you able to share what proportion of sales those new customers represent and how that might develop over time? And then I have a follow-up.

Speaker Change: Sure, happy to provide some perspective around that. We're not going to necessarily speak to sort of, you know, how the whole portfolio breaks down.

but it

Speaker Change: despite what we're seeing in terms of just sort of overall platish you know volumes as you saw in the fourth quarter you know broadly we do see just faster performance and to give you some context just these tend to be you know as we describe them as sort of you know higher growth innovator you know sort of customers but it's happening in categories like

bars of granola, crackers,

Speaker Change: soups and broth, beverage, whether it's with alcohol or without alcohol, or even sort of performance nutrition. We continue to see strength in a number of these sort of end categories, if you will, up against those taste competencies that we called out at investor day.

Speaker Change: So, these are, you know, customers that we continue to seek and acquire and we believe that as we go to 25, we continue to really drive growth across this business, not only as volumes improve, but also as we gain share in the marketplace overall.

Speaker Change: So, if I were to think about what that added context might be, given the spirit of your question, that's probably, I think, the context of it is, think about it from an in-market category perspective, we're just seeing a little bit faster growth in these areas.

Speaker Change: So just to add, in Food Away From Home, you think about

Speaker Change: the incrementally get better. But we're gaining share and we're just driving a lot more activity with our customer base there. It's been pretty healthy growth.

Speaker Change: perfect and there's a follow-up and this is another broader based question

If we see a number of our food additives like

Red No. 3 or some of the others.

Speaker Change: eliminated from the generally recognized as safe designation and we see a round of reformulation across the broader industry. How do you position yourself to best tap into that on the flavor solution side to be part of that cycle if it plays out? Thank you and I'll pass it on.

Speaker Change: Sure, you know, we see ourselves as actively in that going on right now today.

Speaker Change: you know, the way we sort of have an opportunity to sort of, you know,

All right.

Speaker Change: play into those changes that may or may not occur, you know, as we talked about changes in food regulation or just, you know, sort of a push towards healthier eating. We actively play a part right now with the customer base that we have today in terms of, you know, working on reformulations and product improvements. I believe that, you know, this is where innovation really drives the industry. It has for

Speaker Change: Sodium reduction, just increasing in clean ingredients. These are areas that we have been working on, you know, well up and prior to 2025. So we're quite confident that we'll participate in that.

Great, thank you very much. I'll pass it on.

Speaker Change: Thank you. Our next questions come from the line of Robert Mascow with TD Cowen. Please proceed with your questions.

Hi, thanks for the question. Actually, I have a couple.

Speaker Change: I want to know if I could hone in a little bit more on the guidance range of one to three. You mentioned that the low-end factors in, you know, weakness in China.

Speaker Change: And I wanted to know, could you be more specific about your expectations?

Speaker Change: in China. Would the low end of the range, the 1%, entail China getting worse or are you not that specific on what the 1% means? And then I had a quick follow-up.

Speaker Change: I think our characterization, you know, in terms of what starts to sort of provide context around where that loan might be is

Thank you.

You're thinking about...

Speaker Change: At times, China is not in that expectation, right? We certainly saw that in 23, and then we saw it again in 24. And so I think what we're doing is we're kind of factoring that into our thinking, Rob.

Speaker Change: You know, as China, we do expect it to get sort of that slight and gradual improvement.

Speaker Change: And, in fact, Marcus and I were there actually just in the first week of January, spending time.

Speaker Change: with our leaders in that business looking over just the changes in the marketplace.

Speaker Change: as well as, you know, what are the growth plans for the year and what expectations should we have. So I think we're seeing, you know, a level of prudence from us just in terms of how to think about China. And I think that's kind of the context I would say that sort of provides that low-end context, you know, honestly.

Speaker Change: juxtaposed against, you know, what I framed is sort of what's driving the high end.

Speaker Change: Yeah, Rob, this is a dynamic environment. We want it to be balanced in our call right now, not only in terms of top line, but also in terms of from an OP perspective, and EPS, as you saw in the guide. So we want it to really be, I mean, I think it is a positive guide, but also it's balanced, given the environment that we are in.

Speaker Change: Okay, and the follow-up, in fourth quarter, you know, the flow-through to operating income wasn't quite as strong as we and I think the street had expected.

Speaker Change: And, you know, you talked about some really strong volumes in consumer. It looked really great. And my perception is that consumer is higher gross margin than flavor solutions are just higher margin.

Bye.

Rob Dickerson: No, Rob, I mean, it was pretty much in line with our expectations, I mean, how we came in in Q4. I mean, we talked about in the last call that we were going to be shifting some of the expenses

Rob Dickerson: primarily related to technology and R&D from Q3 to Q4. So that's what you've seen in the P&L for this quarter, an impact from H&A primarily.

Rob Dickerson: And that is what is kind of, you know, taking us down to a negative OP, slightly negative OP. But if you think about it from the HNA perspective, on a four-year basis,

Rob Dickerson: It's in line as well with our expectations, 40 basis points incremental year-on-year on the back of A&P, continued technology investments as I mentioned before, and this step-up in technology will continue into 2025.

Okay, great. Thank you.

Speaker Change: Thank you. Our next questions come from the line of Rob Dickerson with Jeffries. Please proceed with your questions.

Thank you.

Great, thanks so much.

Speaker Change: I guess just, you know, in terms of pricing, the commentary that, you know, you gave maybe about Q1, you know, as you continue to look to manage, you know, price gaps.

Speaker Change: I guess, you know, my question is kind of, like, how much more, I guess, do you think you need to actually manage price gaps? I think you talk about investment, but you're talking about, you know, technology investment, kind of brand building in general, a lot of different investments. If we focus just on price...

Speaker Change: you know, we're fairly strong in Q4 and I'm not sure that's, you know, Q4 specific because of some of the holiday, you know, products you had in the marketplace or if volumes continue, like, kind of, why do you need to continue to invest in price caps? Thanks.

Speaker Change: Yeah, Rob, on price, I think there's really kind of two points maybe there to address in your question.

Speaker Change: As we think about price and, you know, we called out, you know, we're still going to be overlapping the beginning of those investments in Q1.

Speaker Change: That's consistent, that level of investment is consistent with what we were doing previously like Q2, Q3.

this sort of year-to-date. So if we go into Q1,

Speaker Change: We're not seeing a step-up in that we're seeing sort of a maintenance of it if you will As we go into q1 is the way I would

Speaker Change: asked you to think about it for the balance of year is maintaining that investment in our baseline if you will.

Speaker Change: of how we think about supporting our brands and supporting the volume group that we've been driving.

Press Cap Management

Speaker Change: as we have a plan for right now, 25, is a continuation of how we applied it in

Thank you.

Speaker Change: Of course, throughout the year, we just don't sort of set those numbers and leave them and never look at them. We're constantly evaluating how they're performing.

So we have, you know, sort of surgical review of...

Speaker Change: You mentioned a little bit about sort of the performance in the fourth quarter and its strength. Let's also remember the fourth quarter is our biggest quarter of the year in terms of performance.

and I think what you saw was just

Speaker Change: Now, obviously, a really strong execution, a pickup from consumers in terms of more scratch cooking, the holiday season, that holiday season was a bit compressed, but it didn't seem to hurt us in any way.

Speaker Change: and we had really overall pretty good performance, but those are just a little other points of context I would add as you think through the profile of our performance.

Speaker Change: Okay, great. And then maybe just kind of more broadly speaking, you know, as you think of your portfolio, at least in the consumer side, you know, it does seem as if, let's say at least through the pack half of last year, right, that's kind of more meal related items.

Speaker Change: seem to be doing a little bit better, right, like perimeter of the store, whether it's chicken pasta, etc., you know, versus, you know, maybe some more incremental pressure or ongoing pressure and some more discretionary items.

Speaker Change: kind of my guess is, you know, there is still some benefit, right, from those meal-related items that some of you have been talking about for years, right? You know, consumers cooking from scratch and at home and hurt all through COVID.

Speaker Change: I'm just kind of curious kind of what the updated perspective is, you know, on some momentum, let's say on the perimeter and some of these mail related items, and then clearly how that would benefit, again, your consumer Americans business. And that's all I have. Thank you.

Speaker Change: Rob, I think there was a little bit there where you may have cut out, but I think I got your question, and that was more, so what's our outlook on sort of the consumer in 2025?

Speaker Change: I would say our outlook on the consumer environment hasn't changed significantly, but that doesn't mean it's boring. There's a lot going on right there, and I think a lot of it does really position us well to win in this environment.

Speaker Change: involved in environment. The demand for flavor is pretty strong. You know, as we've said before, you know, others compete for the calories, you know, we flavor them.

Speaker Change: And we are seeing a continuation of cooking at home and a focus on healthier eating.

Speaker Change: And we believe that obviously this positions our portfolio well to perform well in an environment like this. You know, we believe that value is going to remain important for consumers.

Thank you very much. Thank you.

Speaker Change: as you saw in some of my prepared remarks, you know, it's still that lower-income consumer still remains quite challenged overall. And they're looking for value and affordability, and not just in the United States. They're looking for it in Europe. They're looking for it in Asia. And so these are things that we believe are kind of, you know, globally consistent themes that we're seeing and influence our plans and the way we think about our portfolio.

Speaker Change: overall. So, you know, that's our context with the consumer going into 2025. I would say, you know, remaining focused on, you know, driving towards healthy eating.

Speaker Change: When we see people go to the perimeter to buy more produce, to buy more protein.

Speaker Change: We think they're doing it for two reasons. They're doing it because they're looking to obviously, you know, save money, you know, stretch their budgets, but also there's a bias towards eating healthier.

All right, super. Thank you.

Speaker Change: Thank you. Our next questions come from the line of Ken Goldman with JP Morgan. Please proceed with your questions.

Ken Goldman: Hi, thank you. I was hoping for a little bit of color on your outlook for margin expansion growth between the two segments.

Ken Goldman: You know, this past year, 2024, consumer was flattish. Obviously, Flavor Solutions, you know, had a great performance in terms of margin growth. Are you expecting, you know, maybe not the same magnitude, but sort of directional similarity, just given some of the pressure that consumer might feel from higher ad spending, maybe a little bit more promotion? Just wanted to get a sense for, you know, how you would like us to kind of think about that progression from here.

Ken Goldman: Yeah, sure, Ken. So, first of all, I mean, we're very pleased with the gross margin expansion we had in 2024. I mean, it was 90 basis points.

Ken Goldman: at a high end of our guidance range. And we have really good reasons to believe that this will continue into 2025.

Ken Goldman: So our call is for 50 to 100 basis points into 2025 as well. You know, a couple of items there I would say that is driving these expectations for us. Obviously, CCI and our productivity savings that we have in place right now is working very well for us.

Ken Goldman: I mentioned technology before, technology will also help drive more savings in the future years. The usage of global business services organization will continue to tap on that, simplifying processes and standardizing the way that we do work. All of those things will help us drive more savings going into the future years.

Ken Goldman: And then portfolio mix is a big lever, particularly within flavor solutions.

Ken Goldman: as we continue to shift our portfolio to high-margin categories such as flavors, brand and food service, those categories drive higher margins.

Ken Goldman: So, if you think about it between the two segments, I would expect...

Ken Goldman: more gross margin coming from the flavor solution segment versus the consumer segment. That is also in line with our strategy of continuing to drive profitability at the bottom line for flavor solutions. As you saw, we've, you know, improved our operating margin by 140 basis points.

Ken Goldman: in 2024, and we have a commitment to get back to 14.5% by 2028, so that was a very important progress that we made now two years in a row on flavor solutions. So that is the whole idea about our guide in terms of gross margin as well as operating margin.

Okay, thank you.

Ken Goldman: Thank you. Our next questions come from the line of Max Gumport with BNP Paribas. Please proceed with your questions.

Thanks for the question. In the U.S. specifically,

Max Gumport: Your consumer segment is posting strong volumes, but you called that your CPG customers and flavor solutions have soft volumes, which we can clearly see in Nielsen data as well. So I'm just curious for.

have food and beverage within the United States.

Max Gumport: I think we first have to start there. These categories have healthy growth and so we benefit from that, but also I believe that we jumped on execution quite early in 2024.

If you think about...

Max Gumport: Maybe my remarks back at the beginning at this time last year, I said that it was our

Max Gumport: you know, fast and really meet the consumer with where they were.

or where they are today.

Max Gumport: And that was a real intentional focus on our part, you know, from the standpoint of being competitive and executing quickly.

Max Gumport: I think we've also benefited from that. You know, in some of the categories in which we compete, you know, large ones like condiments and sauces, we're competing in what we believe are some of the faster-growing versions of condiments and sauces, like heat, as one example.

Max Gumport: But you take a category like mustard, we're grueling it because we're making mustard important to consumers. It's, by the way, a very sort of healthy profile when you think about that condiment. So I think there's a number of...

indicators here that give us a little bit of

Max Gumport: You know sort of an improved profile and it's a combination of both our execution and and our commitment to drive the volume But also we're operating in in relatively healthy categories in the consumer environment right now You know certainly as it always has continues to favors the categories we plan

[inaudible]

Speaker Change: Thanks, and then Marcos, there is the comment about cash flow in...

Speaker Change: Those in FY 25. I'll leave it there. Thanks very much

Speaker Change: Sure, I mean, the cash flow continues to be a very positive outcome for us this year, continues to drive a lot of cash, this company.

Speaker Change: $922 million in 2024. We've made some, you know, and this is business-as-usual for us, we make decisions about afford buying some of the commodities for us at times, so oftentimes we make those decisions to bring in the inventory in, you know, to protect service and to drive supply chain, you know, available for supply chain, but also to lock in some favorable cost.

Speaker Change: And so we do take those decisions oftentimes. Difficult to predict what's going to happen in 2025, but this is part of our playbook in terms of how we manage.

Speaker Change: all the input costs and components across the globe within our procurement organization. They have a very data-driven analysis and methodology that they use and we leverage a lot of that to make those decisions.

Stephen Powers: Okay, thanks very much. Thank you. Thank you. Our next questions come from the line of Stephen Powers with Deutsche Bank. Please proceed with your questions.

Stephen Powers: Great. Hey, thanks. Just one question for me, but maybe you both want to weigh in on it. Maybe the part for Marcos is just on your brand marketing plans for the year. It sounded like the rate of increase year over year was going to be pretty even throughout the year.

Stephen Powers: just wanted to play that back and validate and if that's not correct if you could give us a little sense of the cadence of increase.

Speaker Change: and then Brendan, I don't, the other part of that is just kind of the...

Speaker Change: where that money is going to go and is it, should we think about it, is it just more spending in the same directions or does the makeup of brand marketing and the focus of that marketing shift at all in 25 versus what we've seen, you know, looking backwards. Thank you.

Speaker Change: So Steve, the first part of the question is yes, I mean the answer is yes, I mean we're going to be spending similarly to 2024 levels.

Speaker Change: on A&P, high single digits, and it's going to be across all quarters. So pretty much even across all quarters, leading to the high single digits, which is the same as we saw in 2024.

Speaker Change: Steve, from a perspective of how we're spending that money, where we see obviously driving strong returns, I think it serves two perspectives on...

Speaker Change: on that. If you think about the vehicles that we go into and you think about the presentation that we shared at Investor Day.

Speaker Change: those are the vehicles in which we're going into so it's not that we see dramatic change in exactly

and on.

Speaker Change: I would also say we also look strategically across the portfolio and decide to, you know, increase spend levels on one brand versus another. If you think about this idea of, you know, driving resources and focus where we get the strongest return.

That also drives our thinking about that allocation of A&P.

Speaker Change: So, you know, as we said, for example, in the beginning of 24, we are going to add a lot more, you know, media coverage and

Speaker Change: more 12-month coverage on a brand like Frank's Red Hot and we've seen good

you know, performance off of that.

Speaker Change: And so now that's in our baseline and we'll continue to build on it. There are other brands which we are going to start to, you know, flex even more, you know, A&P spend into. So this is the mindset that we use. But I think the review that Tabetha gave, you know, as an investor there, I think is a good illustration of where we tend to spend the money. But it's also, we're sort of starting to place, you know, increased spend on certain other brands.

For more information, visit www.fatenfreiha.com

Great. Thank you very much.

Speaker Change: Thank you. Our final questions will come from the line of Tom Palmer with Citi. Please proceed with your questions.

Good morning and thanks for including me in.

Speaker Change: I wanted to I guess first ask on just the cadence of earnings relative to the annual growth ranges for organic sales growth and operating profit growth. Should we be thinking about starting off the year within these annual guidance ranges and sustaining it or is there some some builds to be thinking about? Thanks.

Speaker Change: So in terms of top line, we'll continue to drive top line momentum from 2024 into 2025. You'll see volume growth across both segments in Q1, and that should continue through Q4. So that's our expectations into this year. In terms of profit, in my prepared remarks, I mentioned a little bit of a shift.

Speaker Change: D. S. Breslin. Everyone may be informed by your questions or comments.

Speaker Change: I'm here to talk to you about the new policy for Q1, but it's going to be more than offset by the increase of OP in Q2. And then you should see the similar trend going into the back half of the year. So I'd say, you know, top line consistent across all quarters, a little bit of shift in OP between Q1 and Q2, growth margin line pretty much consistent and growing across, you know, from Q2 to Q4.

Speaker Change: Thanks for that caller. And just on the JV income, I just wanted to clarify the currency versus underlying trends. If we were to exclude the currency headwind,

Speaker Change: Would this business, in kind of how you're thinking about 2025, still be growing?

Speaker Change: Oh yes, I mean the business is still growing, the business is very robust down in Mexico.

and theiruses.

All right. Thank you.

Speaker Change: Thank you. We have reached the end of our question and answer session. I would now like to hand the call back over to Faten Freiha for closing remarks.

Faten Freiha: Thank you and thanks to all for joining today's call. If you have any further questions regarding today's information, please feel free to contact me. This concludes our call for this morning.

Thank you.

Faten Freiha: Thank you. This does conclude today's teleconference. You may disconnect at this time.

Q4 2024 McCormick & Company Inc Earnings Call

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