Q1 2025 McCormick & Company Inc Earnings Call
IR website, IR and dump Mccormack Dot com with me. This morning are Brendan Foley, Chairman, President and CEO, and Michael Gabriel Executive Vice President and CFO. 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 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 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 statements on slide two for more information I will now turn the discussion over to Brendan.
Brendan: Good morning, everyone and thank you for joining US we are pleased to start the year with solid first quarter results that are in line with our expectations. Our performance continues to demonstrate the success of our prioritized investments in the air.
Good morning, this is Faten Freiha, VP of Investor Relations.
Thank you for joining today's first quarter earnings call.
Speaker Change: To accompany this call, we've posted a set of slides on our IR website, IR.McCormick.com. With me this morning, our Brendan Foley, Chairman, President, and CEO , and Marco Gabriel, Executive Vice President and CFO .
Brendan: Areas that we believe will continue to drive the most value and sustain our momentum for the remainder of 2025 and beyond Macquarie.
Brendan: Mccormick remains a growth oriented company with robust plans that leverages the demand for flavor and the strength of our brands our.
Speaker Change: During this call, we will refer to certain non-GAAP financial measures.
Speaker Change: The nature of those non-GAAP financial measures and the related reconciliation for the gap results are included in this morning's press release and slides. [inaudible]
Brendan: Our strategies have proven to be effective by driving growth and compounding that growth over the years.
Brendan: With our strategies and best in class leadership, we are well positioned to continue on our trajectory and deliver on our near term and long term objectives with industry leading performance.
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. 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.
Brendan: This morning, I will begin my remarks, with an overview of our first quarter results focusing mostly on topline drivers next I will review, how Mccormick is positioned relative to an evolving consumer landscape.
Speaker Change: Please refer to our forward-looking statement on slide 2 for more information. I'll now turn the discussion over to Brendan.
Brendan: Then I will highlight some areas of success and in the areas. We continue to work on as well as our growth plans.
Good morning everyone, and thank you for joining us.
Brendan: Marcos will then go into more depth on the first quarter results and review, our 2025 outlook and finally before your questions I will have some closing comments.
Speaker Change: We are pleased to start the year with solid first quarter results that are in line with our expectations.
Speaker Change: Turning now to our results on slide four.
Marcos: In the first quarter total organic sales increased by 2%, primarily driven by volume and product mix growth and partially offset by pricing in line with our expectations.
Marcos: Global consumer organic sales growth was volume led demonstrating continued momentum across key markets. We delivered robust volume growth in all three regions. This sustained growth is supported by investments across our core categories, including innovative brand marketing accelerated innovation aligned with consumer.
Our strategies have proven to be effective by driving growth and compounding that growth over the years with our strategies and best in class leadership, we are well positioned to continue on our trajectory and deliver on our near term and long term objectives with industry leading performance.
Marcos: Friends expanded distribution and robust category management initiatives as.
Speaker Change: This morning, I will begin my remarks, with an overview of our first quarter results focusing mostly on topline drivers next I will review, how Mccormick is positioned relative to an evolving consumer landscape.
Marcos: As expected volume growth was partially offset by price in the Americas price declined due to price gap management plans that were implemented in the second quarter of 2024.
Speaker Change: Then I will highlight some areas of success and in the areas. We continue to work on as well as our growth plans.
Marcos: In a targeted incremental promotion related to seasonal recipe mixes.
Speaker Change: Marcos will then go into more detail on the first quarter results and review, our 2025 outlook and finally before your questions I will have some closing comments.
Marcos: In EMEA, we took selective pricing actions to cover rising commodity costs and still maintain volume momentum.
Marcos: For the year to go we expect price in our global consumer segment to be flat.
Marcos Gabriel: Turning now to our results on slide four.
Marcos Gabriel: In the first quarter total organic sales increased by 2%, primarily driven by volume and product mix growth and partially offset by pricing in line with our expectations.
Marcos: Now to the global flavor solutions segment, where organic sales growth was also volume wise, we delivered sequential volume improvement relative to the fourth quarter and are pleased with our results volume growth was driven by continued execution of our strategic priorities and flavors amid a challenging customer environment.
Marcos Gabriel: Global consumer organic sales growth was volume led demonstrating continued momentum across key markets. We delivered robust volume growth in all three regions. This sustained growth is supported by investments across our core categories, including innovative brand marketing accelerated innovation aligned with consumer.
Marcos: We're growing customers, partially offset larger CPG customers softness in.
Marcos: In addition, he was our customer performance improved in Asia Pacific and the Americas led by innovation.
Marcos: Furthermore, across Asia Pacific, including China, We delivered strong volume growth as we partnered with <unk> customers on new products and limited time offers.
Marcos Gabriel: Friends expanded distribution and robust category management initiatives.
Marcos Gabriel: As expected volume growth was partially offset by price in the Americas price declined due to price gap management plans that were implemented in the second quarter of 2024, and a targeted incremental promotion related to seasonal recipe mixes.
Marcos: <unk> with prior years, we expect flavor solutions volume growth fluctuate quarterly due to timing of customer activities.
Marcos: However, on a full year basis, we continue to expect to deliver positive volume growth.
Marcos Gabriel: In EMEA, we took selective pricing actions to cover rising commodity costs and still maintain volume momentum.
Marcos: From a profitability perspective, we delivered results in line with our expectations as.
Marcos: As the first quarter was impacted by increased investments in marketing and technology as well as the timing of stock based compensation expense that shifted relative to the prior year.
Marcos Gabriel: For the year to go we expect price in our global consumer segment to be flat.
Marcos Gabriel: Now to the global flavor solutions segment, where organic sales growth was also volume wise, we delivered sequential volume improvement relative to the fourth quarter and are pleased with our results volume growth was driven by continued execution of our strategic priorities in flavors amid a challenging customer environment.
Marcos: As we look to the year ago period, we remain confident in our operating income and earnings growth outlook on a constant currency basis.
Marcos: Moving now to the macro environment, including the current state of the consumer.
Marcos: There is increasing consumer uncertainty and concern over returning to more inflation and this has impacted consumer sentiment, particularly in the last month.
Marcos Gabriel: We're growing customers, partially offset larger CPG customers softness. In addition, he was our customer performance improved in Asia Pacific and the Americas led by innovation.
Marcos: This prolongs the consumer context of 2024, where consumers, especially lower income consumers are more cautious exhibiting more value seeking behavior and tightening their budgets as many are worried about the future job security and rising costs. We are seeing this not just in the U S, but across our key markets.
Marcos Gabriel: Furthermore, across Asia Pacific, including China, We delivered strong volume growth as we partnered with <unk> customers on new products and limited time offers.
Marcos Gabriel: Assistant with prior years, we expect flavor solutions volume growth fluctuate quarterly due to timing of customer activities.
Marcos: At the same time, we are all witnessing shifts in consumer preferences. They are becoming more health conscious and this trend has continued to gain momentum. They are cooking at home more often increasingly shopping a perimeter for protein and produce as we look at growth in edible categories unit growth is primarily driven by these perimeter categories.
Marcos Gabriel: However, on a full year basis, we continue to expect to deliver positive volume growth.
Marcos Gabriel: From a profitability perspective, we delivered results in line with our expectations as.
Marcos Gabriel: As the first quarter was impacted by increased investments in marketing and technology as well as the timing of stock based compensation expense that shifted relative to the prior year.
Marcos: Healthier and better for you trends as well as the desire to stretch budgets are fueling our continued interest in cooking from scratch reinforcing the demand for flavor and for mccormick's categories spices, and seasonings remained the top growing center store category.
Marcos Gabriel: As we look to the year ago period, we remain confident in our operating income and earnings growth outlook on a constant currency basis.
Marcos Gabriel: Moving now to the macro environment, including the current state of the consumer.
Marcos: As a result consumption trends in our business remains strong ultimately we expect the global consumer segment to continue to benefit from these secular trends and we have the plans and advantaged portfolio to capitalize on them.
Marcos Gabriel: There is increasing consumer uncertainty and concern over returning to more inflation and this has impacted consumer sentiment, particularly in the last month.
Marcos Gabriel: This prolongs the consumer context of 2024, where consumers, especially lower income consumers are more cautious exhibiting more value seeking behavior and tightening their budgets as many are worried about the future job security and rising costs. We are seeing this not just in the U S, but across our key markets.
Marcos: And in our flavor solutions segment, we continue to partner with customers to launch new products will reformulate existing ones to fit healthier lifestyles.
Marcos: The more our exposure to faster growing customers allows us to win in several high growth categories, many of which are benefiting from the trends towards healthier eating.
Marcos Gabriel: At the same time, we are all witnessing shifts in consumer preferences. They are becoming more health conscious and this trend has continued to gain momentum. They are cooking at home more often increasingly shopping the perimeter for protein and produce as we look at growth in edible categories unit growth is primarily driven by these perimeter categories.
Marcos: In the context of this environment Mccormick's trends remained strong our volume driven first quarter results and continued strengthening consumption trends demonstrate our ability to continue to successfully meet our objectives for the year.
Marcos: We continue to monitor consumer trends, our focus remains on meeting consumers and customers, where they are delivering value expanding our presence in growing channels, including mass club and e-commerce, and aligning them with flavor as well as helping customers innovate to meet consumers' changing dietary needs we.
Healthier and better for you trends as well as the desire to stretch budgets are fueling our continued interest in cooking from scratch reinforcing the demand for flavor and for mccormick's categories spices, and seasonings remained the top growing center store category.
Marcos: We believe we have the right plans in place and we remained well positioned to capitalize on secular trends and continue to drive differentiated long term growth across both of our segments.
Marcos Gabriel: As a result consumption trends in our business remained strong ultimately we expect the global consumer segment to continue to benefit from these secular trends and we have the.
Marcos: Let's move to slide five and let me highlight for the quarter some of the key areas of success.
Marcos Gabriel: Plans, an advantaged portfolio to capitalize on them.
Marcos: Across our global consumer segment, we successfully executed on our plans with increased investment and competitive focus towards driving growth, we improved unit and volume share gains across our core categories in key markets.
Marcos Gabriel: And in our flavor solutions segment, we continue to partner with customers to launch new products will reformulate existing ones to fit healthier lifestyles.
Marcos Gabriel: The more our exposure to faster growing customers allows us to win in several high growth categories, many of which are benefiting from the trends towards healthier eating.
Marcos: In the U S. The vast majority of our categories are growing unit share let me provide some color on the categories globally.
Marcos Gabriel: In the context of this environment Mccormick's trends remained strong our volume driven first quarter results and continued strengthening consumption trends demonstrate our ability to continue to successfully meet our objectives for the year.
Marcos: Starting with spices, and seasonings in Americas, EMEA, and Asia Pacific, including China, We delivered strong volume growth.
Marcos: In the U S. We drove unit volume share growth outpacing private label for the third consecutive quarter.
Marcos Gabriel: We continue to monitor consumer trends, our focus remains on meeting consumers and customers, where they are delivering value expanding our presence in growing channels, including mass club and e-commerce, and aligning them with flavor as well as helping customers innovate to meet consumers' changing dietary needs.
Marcos: In addition, we drove market share gains in Canada and China.
Marcos: And recipe mixes we continued to strengthen consumption trends in the Americas and drove unit and volume share gains in the first quarter.
Marcos: In the U S Mccormick gravy and chili recipe mixes, where a significant growth driver as they deliver on the value and convenience consumers are seeking.
Marcos Gabriel: We believe we have the right plans in place and we remained well positioned to capitalize on secular trends and continue to drive differentiated long term growth across both of our segments.
Marcos: In addition, we are outpacing the total category in total new buyers as well as dollars per buyer in Canada, We drove dollar unit and volume share gains.
Marcos Gabriel: Let's move to slide five and let me highlight for the quarter some of the key areas of success.
Marcos: And mustard, we've made great progress globally over the last four quarters and are pleased to see that our plans are driving great results.
Marcos Gabriel: Across our global consumer segment, we successfully executed on our plans with increased investment and competitive focus towards driving growth, we improved unit volume share gains across our core categories in key markets.
Marcos: In the first quarter, we drove dollar unit and volume share gains in the Americas in Poland. One of the top mustard consuming countries. Our muster consumption continues to grow and we are also realizing dollar share gains. In addition, we are gaining dollar share in the U K.
Marcos Gabriel: In the U S. The vast majority of our categories are growing unit share let me provide some color on the categories globally.
Marcos Gabriel: Starting with spices, and seasonings in Americas, EMEA, and Asia Pacific, including China, We delivered strong volume growth in the U S. We drove unit volume share growth outpacing private label for the third consecutive quarter. In addition, we drove market share gains in Canada and China.
Marcos: In hot sauce, our plans continued to yield great results in the U S. We drove positive unit share gains, reflecting significant progress distribution gains as well as investments in differentiated brand marketing, including a strong Super Bowl activation and innovation continue to fuel our performance outside of the U.
Marcos Gabriel: In recipe mixes we continued to strengthen consumption trends in the Americas and drove unit and volume share gains in the first quarter and.
Marcos: U S. We are gaining market share in France, the UK and Australia.
Marcos Gabriel: In the U S Mccormick, Grady and chili recipe mixes where significant growth driver as they deliver on the value and convenience consumers who are seeking.
Marcos: Additionally, we continue to make progress on total distribution points in the Americas, we significantly expanded tdp's across spices, and seasonings recipe mixes and hot sauce in the Americas and EMEA, we are seeing broad based distribution gains in spices, and seasonings and hot sauce.
Marcos Gabriel: In addition, we are outpacing the total category in total new buyers as well as dollars per buyer in Canada, We drove dollar unit and volume share gains.
Marcos Gabriel: In mustard, we've made great progress globally over the last four quarters and are pleased to see that our plans are driving great results.
Marcos: We're also gaining distribution in high growth channels like discounters and E Commerce.
Marcos: In Asia Pacific our business in China is recovering gradually relative to the prior year as expected.
Marcos Gabriel: In the first quarter, we drove dollar unit and volume share gains in the Americas in Poland. One of the top mustard consuming countries. Our muster consumption continues to grow and we are also realizing dollar share gains. In addition, we are gaining dollar share in the U K.
Marcos: We delivered strong performance amid and continually challenged environment growth in our categories, including spices, and seasonings and condiments outpaced the market, which included the Chinese new year holiday.
Marcos Gabriel: In hot sauce, our plans continued to yield great results in the U S. We drove positive unit share gains, reflecting significant progress distribution gains as well as investments in differentiated brand marketing, including a strong Super Bowl activation and innovation continue to fuel our performance outside of the U.
Marcos: Moving to flavor solutions, we saw strengthen our technically insulated high margin product category flavors.
Marcos: In flavors in the Americas, we remain focused on being the partner of choice across our four taste competencies savory keep naturally suite and citrus improve.
Marcos: As a result of this continued focus we are winning new customers and gaining share.
Marcos Gabriel: U S. We are gaining market share in France, the UK and Australia.
Marcos: We outperformed the industry across many end categories, including alcoholic and non alcoholic beverages as well as snacking bars.
Marcos Gabriel: Additionally, we continue to make progress on total distribution points in the Americas, we significantly expanded tdp's across spices, and seasonings recipe mixes and hot sauce in the Americas and EMEA, we're seeing broad based distribution gains in spices, and seasonings and hot sauce.
Marcos: Offsetting this is the softness we continue to see in larger CPG customer volumes.
Marcos: He was our trends improved in the Americas and in Asia Pacific and the Americas, We are continuing to drive innovation with our customers driving volume growth amid soft foot traffic in.
Marcos Gabriel: We're also gaining distribution in high growth channels like discounters and E Commerce.
Marcos Gabriel: In Asia Pacific our business in China is recovering gradually relative to the prior year as expected.
Marcos: In China, and Australia, our customers new products and promotions are driving strong volume growth in southeast Asia volume growth benefited from our customers lapping the impact of geopolitical boycotts and the prior year.
Marcos Gabriel: We delivered strong performance amid and continually challenged environment growth in our categories, including spices, and seasonings and condiments outpaced the market, which included the Chinese new year holiday.
Marcos: Let me now touch on some areas, where we are seeing some pressure.
Marcos: The areas of pressure are primarily in our flavor solutions business in the Americas and in EMEA. Some of our CPG customers continue to experience softness in volumes within their own businesses. We continue to work on offsetting these trends through innovation and collaboration with customers and by winning new customers.
Marcos Gabriel: Moving to flavor solutions, we saw strength in our technically insulated high margin product category flavors.
Marcos Gabriel: In flavors in the Americas, we remain focused on being the partner of choice across our four taste competencies savory keep naturally suite and citrus improve.
Marcos: The foodservice environment remains challenged.
Marcos Gabriel: As a result of this continued focus we are winning new customers and gaining share.
Marcos: Our food away from home performance continues to outpace the industry, we are seeing flat performance in branded foodservice and the Americas.
Marcos Gabriel: We outperformed the industry across many end categories, including alcoholic and non alcoholic beverages as well as snacking bars.
Marcos: As well as some of our customers are seeing softness in their volumes due to a slowdown in foot traffic.
Marcos Gabriel: Firstly offsetting this is the softness we continue to see in larger CPG customer volumes.
Marcos: Costar traffic remained soft in EMEA, we have seen this pressure impact our results for several quarters, it's difficult to predict USR traffic. However, we are collaborating with our customers as they focus on improving their volumes through innovation and value in line with consumer trends.
Marcos Gabriel: He was our trends improved in the Americas and in Asia Pacific and the Americas, We are continuing to drive innovation with our customers driving volume growth amid soft foot traffic in.
Marcos Gabriel: In China, and Australia, our customers new products and promotions are driving strong volume growth in southeast Asia volume growth benefited from our customers lapping the impact of geopolitical boycotts in the prior year.
As outlined on slide six our growth plans remain consistent to drive growth through category management brand marketing new products, our proprietary technologies and our differentiated customer engagement.
Marcos Gabriel: Let me now touch on some areas, where we are seeing some pressure.
Marcos: Our growth levers are supported and enhanced through data and analytics as we continue to accelerate our digital transformation. 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.
Marcos Gabriel: The areas of pressure are primarily in our flavor solutions business in the Americas and in EMEA. Some of our CPG customers continue to experience softness in volumes within their own businesses. We continue to work on offsetting these trends through innovation and collaboration with customers and by winning new customers.
Marcos: Let me focus on brand marketing as our plans across all categories are supported by our global brand marketing initiatives. We are prioritizing investments to connect with consumers and fuel growth. Our differentiated brand marketing is driven by a combination of factors. In addition to maintaining a high share of voice, we are committed to having the best content in there.
Marcos Gabriel: The foodservice environment remains challenged.
Marcos Gabriel: Our food away from home performance continues to outpace the industry. We are seeing flat performance in branded foodservice in the Americas.
Marcos Gabriel: As well as some of our customers are seeing softness in their volumes due to a slowdown in foot traffic.
Marcos Gabriel: He was store traffic remained soft in EMEA, we have seen this pressure impact our results for several quarters, it's difficult to predict USR traffic. However, we are collaborating with our customers as they focus on improving their volumes through innovation and value in line with consumer trends.
Marcos: Our categories content that inspires and educates consumers and reaches them at the right points on their path to purchase and on their flavor or diet journey.
Marcos: From flavor exploration to menu planning to shopping and cooking and even to eating and sharing the experience online.
Marcos Gabriel: As outlined on slide six our growth plans remain consistent to drive growth through category management brand marketing new products, our proprietary technologies and our differentiated customer engagement.
Marcos: In the first quarter brand marketing spend increased against the high spend in the prior year as expected. This increase was broad based and a key driver in supporting volume growth for this quarter as well as for maintaining our volume momentum for 2025.
Marcos Gabriel: Our growth levers are supported and enhanced through data and analytics as we continue to accelerate our digital transformation. 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.
Marcos: Through our efforts across multiple channels and by leveraging our digital capabilities we have.
Marcos: Driving further household penetration and increasing by rates across our core categories, our holiday campaigns across our region proved successful our.
Marcos Gabriel: Let me focus on brand marketing as our plans across all categories are supported by our global brand marketing initiatives. We are prioritizing investments to connect with consumers and fuel growth. Our differentiated brand marketing is driven by a combination of factors. In addition to maintaining a high share of voice, we are committed to having the best <unk>.
Marcos: Our marketing campaigns in the Americas highlight our everyday value innovation and point of difference to consumers and are supporting our volume growth and driving share gains.
Our Frank Super Bowl activation campaign with Paris Hilton was very successful, we gained new buyers and media and consumer sentiment was incredibly positive.
Marcos Gabriel: And our categories content that inspires and educates consumers and reaches them at the right points on their path to purchase and on their flavor or client journey.
Marcos: To wrap up our growth plans, although we are navigating in a difficult environment. We remain confident in the long term health of our business and in our fundamentals and in delivering our 2025 financial outlook.
Marcos Gabriel: From flavor exploration to menu planning to shopping and cooking and even to eating and sharing the experience online.
Marcos: Both near term and long term objectives, we remain focused on investing behind our growth levers to continue to drive differentiated performance.
Marcos Gabriel: In the first quarter brand marketing spend increased against the high spend in the prior year as expected. This increase was broad based and a key driver in supporting volume growth for this quarter as well as for maintaining our volume momentum for 2025.
Marcos: Now over to Marcos.
Marcos: Thank you Brendan and good morning, everyone.
Speaker Change: Starting on slide eight our total organic sales grew 2% for the quarter.
Speaker Change: This increase was volume led with more than 2% volume and product mix growth, partially offset by pricing.
Marcos Gabriel: Through our efforts across multiple channels and by leveraging our digital capabilities we have.
Speaker Change: Moving to our consumer segment on slide nine organic sales increased 1% as volume growth of 3% was partially offset by a 2% impact of price investments.
Marcos Gabriel: Driving further household penetration and increasing by rates across our core categories. Our holiday campaigns across our regions proved successful marketing campaigns in the Americas highlight our everyday value innovation and point of difference to consumers and are supporting our volume growth and driving share gains.
Speaker Change: <unk> organic sales in Americas was flat, 2% volume growth was offset by price investments volume.
Speaker Change: Volume growth was strong across our core categories and was driven by our investments in brand marketing innovation and category management.
Marcos Gabriel: Frank Super Bowl activation campaign with Paris Hilton was very successful, we gained new buyers and media and consumer sentiment was incredibly positive.
Speaker Change: In terms of pricing the decline primarily reflects the price gap management investments that were mostly in place in the second quarter of 2024, as well as incremental and targeted promotional activity.
Marcos Gabriel: To wrap up our growth plans, although we are navigating in a difficult environment. We remain confident in the long term health of our business and in our fundamentals and in delivering our 2025 financial outlook, both near term and long term objectives. We remain focused on investing behind our growth levers to continue to drive differentiated performance.
Speaker Change: In EMEA, we grew consumer organic sales 4%.
Speaker Change: Driven by a 2% increase in volume and 2% increase in price.
Speaker Change: Volume growth was broad based across product categories in our major markets.
Speaker Change: We're pleased with the strong sustained volume growth in EMEA.
Marcos Gabriel: Now over to Marcos.
Marcos Gabriel: Thank you Brendan and good morning, everyone starting on slide eight our total organic sales grew 2% for the quarter. This.
Speaker Change: Brendan mentioned, we took selective pricing actions in EMEA to offset commodity costs.
Speaker Change: Consumer organic sales in the Asia Pacific region increased 3% driven by a 2% increase in volume and a 1% contribution from price. This.
Marcos Gabriel: This increase was volume led with more than 2% volume and product mix growth, partially offset by pricing.
Marcos Gabriel: Moving to our consumer segment on slide nine organic sales increased 1% as volume growth of 3% was partially offset by a 2% impact of price investments.
Speaker Change: This growth reflects the gradual recovery, we expected in China.
Speaker Change: Pleased with our performance and expect these trends to continue through 2025.
Speaker Change: Turning to our flavor solutions segment on slide 10, first quarter organic sales increased 3% driven by volume growth of 2% and a 1% contribution from price.
Marcos Gabriel: Consumer organic sales in Americas was flat.
Marcos Gabriel: <unk> volume growth was offset by price investments.
Marcos Gabriel: Growth was strong across our core categories and was driven by our investment in brand marketing innovation and category management.
Speaker Change: In the Americas flavor solutions organic sales increased 4%, reflecting 3% price contribution and 1% volume growth.
Marcos Gabriel: In terms of pricing the decline primarily reflects the price gap management investments that were mostly in place in the second quarter of 2024, as well as incremental and targeted promotional activity.
Speaker Change: Results reflect strong performance with faster growing flavor customers any book too it's hard though.
These were partially offset by sub CPG customer volumes.
Marcos Gabriel: In EMEA, we grew consumer organic sales, 4% driven.
Speaker Change: The price contribution is primarily related to currency in Latin America.
Marcos Gabriel: Driven by a 2% increase in volume and 2% increase in price.
Speaker Change: In EMEA organic sales decreased by 4%.
Marcos Gabriel: Volume growth was broad based across product categories in our major markets.
Speaker Change: A 2% decline from price and a 2% impact of lower volume and product mix, reflecting the impact of soft CPG and kyocera customer's volume.
Marcos Gabriel: We're pleased with the strong sustained volume growth in EMEA as.
Marcos Gabriel: As Brendan mentioned, we took selective pricing actions in EMEA to offset commodity costs.
Speaker Change: In the Asia Pacific region flavor solutions organic sales increased 15% with volume growth of 16% driven by Kyocera customer promotions limited time offers as well as new products.
Marcos Gabriel: Consumer organic sales in the Asia Pacific region increased 3% driven by a 2% increase in volume and a 1% contribution from price.
Marcos Gabriel: This growth reflects the gradual recovery, we expected in China.
Speaker Change: Partially offset by pricing.
Speaker Change: Moving to slide 11, as expected gross profit margin expanded by 20 basis points in the first quarter versus a year ago period, driven primarily by the benefit from our comprehensive continuous improvement program or CCI.
Marcos Gabriel: We're pleased with our performance and expect these trends to continue through 2025.
Marcos Gabriel: Turning to our flavor solutions segment on slide 10, first quarter organic sales increased 3% driven by volume growth of 2% and a 1% contribution from price in.
Speaker Change: Selling general and administrative expenses or SG&A increased relative to the first quarter of last year, driven primarily by a shift in timing of our stock based compensation expense from the second quarter into the first quarter as well as increased investments in technology and brand marketing as expected.
Marcos Gabriel: In the Americas flavor solutions organic sales increased 4%, reflecting 3% price contribution and 1% volume growth.
Marcos Gabriel: Our results reflect strong performance with faster growing flavor customers any book too it's hard though.
Marcos Gabriel: So were partially offset by sub CPG customer volumes.
Marcos Gabriel: The price contribution is primarily related to currency in Latin America.
Speaker Change: For the quarter.
Speaker Change: Adjusted operating income declined by 5% excluding.
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 kyocera customer's volume.
Speaker Change: Excluding the impact of currency adjusted operating income decreased by 3%. This.
Speaker Change: This decline was driven by the increased SG&A expenses I just mentioned.
Speaker Change: Our first quarter adjusted effective tax rate was 22%.
Marcos Gabriel: In the Asia Pacific region flavor solutions organic sales increased 15%.
Speaker Change: Compared to 26% in the year ago period.
Our tax rate.
Marcos Gabriel: With volume growth of 16% driven by kyocera customer promotions.
Speaker Change: Last quarter benefited from discrete tax items.
Speaker Change: Our income from unconsolidated operations in the first quarter declined 18%, primarily due to the strengthening of the US dollar against the Mexican peso.
Marcos Gabriel: Limited time offers as well as new products.
Marcos Gabriel: Actually offset by pricing.
Marcos Gabriel: Moving to slide 11, as expected gross profit margin expanded by 20 basis points in the first quarter versus a year ago period, driven primarily by the benefit from our comprehensive continuous improvement program or CCI.
Turning to our segment operational results on slide 12.
Speaker Change: Adjusted operating income in the consumer segment decreased 17% or 16% in constant currency.
Marcos Gabriel: Selling general and administrative expenses or SG&A.
Speaker Change: The decrease was primarily due to pricing and increased SG&A costs, including brand marketing and technology investments, partially offset by cost savings generated by our CCI program.
Marcos Gabriel: Chris relative to the first quarter of last year, driven primarily by a shift in timing of our stock based compensation expense from the second quarter into the first quarter as well as increased investments in technology and brand marketing as expected.
Speaker Change: Looking ahead, we expect consumer adjusted operating income margin expansion to normalized in the year to go period.
Marcos Gabriel: For the quarter.
Speaker Change: The flavor solutions, adjusted operating income increased 28% or 33% in constant currency driven by product mix pricing and CCI led cost savings, partially offset by increased SG&A costs.
Marcos Gabriel: Adjusted operating income declined by 5% excluding.
Marcos Gabriel: Excluding impact of currency adjusted operating income decreased by 3%.
Marcos Gabriel: This decline was driven by the increased SG&A expenses I just mentioned.
Marcos Gabriel: Our first quarter adjusted effective tax rate was 22%.
We continue to make progress in expanding operating margins in line with our objectives.
Marcos Gabriel: Compared to 26% in the year ago period.
Speaker Change: The bottom line as shown on slide 13 first quarter 2025 of adjusted earnings per share of <unk> 60.
Marcos Gabriel: Our tax rate.
Marcos Gabriel: Last quarter benefited from discrete tax items.
Marcos Gabriel: Our income from unconsolidated operations in the first quarter declined 18%, primarily due to the strengthening of the US dollar against the Mexican peso.
Speaker Change: As compared to 63 for the year ago period.
Speaker Change: This decrease was primarily due to the SG&A increase I mentioned earlier as well as increased impact of currency on our operating profit and consolidated results.
Marcos Gabriel: Turning to our segment operational results on slide 12.
Partially offset by a more favorable tax rate.
Marcos Gabriel: Adjusted operating income in the consumer segment decreased 17% or 16% in constant currency.
Speaker Change: The impact of currency on adjusted earnings per share is about <unk> <unk> per share.
Marcos Gabriel: The decrease was primarily due to pricing and increased SG&A costs, including brand marketing and technology investments, partially offset by cost savings generated by our CPI program.
Speaker Change: On slide 14, we've summarized highlights for cash flow and balance sheet.
Speaker Change: Our cash flow from operations for the first quarter of 2025 was $116 million compared to $138 million.
Marcos Gabriel: Looking ahead, we expect consumer adjusted operating income margin expansion to normalized EBIT year to go period.
Speaker Change: 24.
Speaker Change: The decrease was driven primarily by higher cash used for working capital, partially offset by lower incentive compensation.
Marcos Gabriel: The flavor solutions, adjusted operating income increased 28% or 33% in constant currency driven by product mix pricing and CCI led cost savings, partially offset by increased SG&A costs.
Speaker Change: We returned $121 million of cash to shareholders through dividends and used $37 million for capital expenditures.
Speaker Change: Note that the timing of capital expenditures would fluctuate on a quarterly basis, depending on the phasing of initiatives, including projects to increase capacity and capabilities to meet growing demand.
Marcos Gabriel: We continue to make progress in expanding operating margins in line with our objectives.
Marcos Gabriel: The bottom line as shown on slide 13 first quarter 2025 of adjusted earnings per share were <unk> 60.
Speaker Change: For digital transformation and optimize our cost structure.
Marcos Gabriel: As compared to 63% for the year ago period.
Speaker Change: Our priority remains to have a balanced use of cash.
Marcos Gabriel: This decrease was primarily due to the SG&A increase I mentioned earlier as well as the increased impact of currency on our operating profit and consolidated results.
Speaker Change: <unk> funding investments to drive growth.
Speaker Change: Return a significant portion of cash to shareholders through dividend.
Speaker Change: Maintaining a strong balance sheet.
Marcos Gabriel: Partially offset by a more favorable tax rate.
Speaker Change: We remain committed to a strong investment grade rating and expect to continue to deliver strong cash flow in 2025, driven by profit and working capital initiatives.
Marcos Gabriel: The impact of currency on adjusted earnings per share is about <unk> <unk> per share.
Marcos Gabriel: On slide 14, we've summarized highlights for cash flow and balance sheet.
Speaker Change: Now turning to our 2025 financial outlook on slide 15.
Marcos Gabriel: Our cash flow from operations for the first quarter of 2025 was $116 million compared to $138 million.
Speaker Change: We are maintaining our guidance for the year.
Speaker Change: Our outlook continues to reflect our prioritize investments in key categories to strengthen volume trends and drive long term profitable growth, while appreciating the current level of uncertainty in the consumer and macro environment.
Marcos Gabriel: 24.
Marcos Gabriel: The decrease was driven primarily by higher cash used for working capital, partially offset by lower incentive compensation.
Marcos Gabriel: We returned $121 million of cash to shareholders through dividends and used $37 million for capital expenditures.
Speaker Change: First let me address tariffs.
Speaker Change: As you know the situation remains fluid.
Speaker Change: At this time, we plan to offset costs related to U S import tariffs on China, with our CCI savings and some very targeted price adjustments.
Marcos Gabriel: Note that the timing of capital expenditures would fluctuate on a quarterly basis, depending on the phasing of initiatives, including projects to increase capacity and capabilities to meet growing demand.
Speaker Change: Our focus remains on safeguarding the health and competitiveness of our brands sustaining the growth momentum of our business and maintaining transparency with our customers.
Marcos Gabriel: For digital transformation and optimize our cost structure.
Speaker Change: So I don't believe our current plant actions will be material to the total business.
Marcos Gabriel: Our priority remains to have a balanced use of cash.
Speaker Change: We will have a significant impact on our volume mix outlook for the year.
Marcos Gabriel: Funding investments to drive growth.
Marcos Gabriel: We don't have significant portion of cash to shareholders through dividends.
Speaker Change: That said due to continued uncertainty on this topic.
Marcos Gabriel: Maintaining a strong balance sheet.
Speaker Change: Outlook does not include any additional impact from tariffs that could potentially be implemented this year.
Marcos Gabriel: We remain committed to a strong investment grade rating and expect to continue to deliver strong cash flow in 2025, driven by profit and working capital initiatives.
Speaker Change: As things evolve, we will provide update on our outlook within our typical reporting cadence.
Speaker Change: Turning now to the details of our outlook.
Marcos Gabriel: Now turning to our 2025 financial outlook on slide 15.
Speaker Change: Those rates are still 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: We are maintaining our guidance for the year.
Our outlook continues to reflect our prioritize investments in key categories to strengthen volume trends and drive long term profitable growth, while appreciating the current level of uncertainty in the consumer and macro environment.
Speaker Change: At the top line, we continue to expect organic net sales growth to range between one and 3%.
Speaker Change: For those to be volume late in.
Marcos Gabriel: First let me address tariffs.
Speaker Change: In the years ago, we expect to deliver total volume growth across both segments and for total pricing to be flat to slightly positive primarily driven by flavor solutions.
As you know the situation remains fluid.
Marcos Gabriel: At this time, we plan to offset costs related to U S import tariffs on China, with our CCI savings and some very targeted price adjustments.
Speaker Change: For China, our outlook assumes a gradual recovery and we expect China consumer sales to improve slightly year over year.
Marcos Gabriel: Our focus remains on safeguarding the health and competitiveness of our brands sustaining the growth momentum of our business and maintaining transparency with our customers.
Speaker Change: We saw this come through this past quarter and we expect it to continue for the rest of the year.
Marcos Gabriel: I don't believe our current plan actions will be material to the total business.
Speaker Change: Our 2025 gross margin is still projected to range between 50 to 100 basis points higher than 2024.
Marcos Gabriel: We will have a significant impact on our volume mix outlook for the year.
Marcos Gabriel: That said due to continued uncertainty on this topic.
Speaker Change: This gross margin expansion reflects favorable impact from product mix and cost savings from our CCI program.
Marcos Gabriel: Outlook does not include any additional impact from tariffs that could potentially be implemented this year.
Speaker Change: Actually offset by the anticipated impact of a low single digit increase in cost inflation.
Marcos Gabriel: As things evolve, we will provide update on our outlook within our typical reporting cadence.
Speaker Change: Consistent with historical trends, we expect our gross margin expansion to build throughout the year.
Marcos Gabriel: Turning now to the details of our outlook.
Marcos Gabriel: Currency rates are still expected to have a one point negative impact on both net sales and adjusted operating income and two points on adjusted earnings per share.
Speaker Change: In addition, gross margin expansion, we expect SG&A benefits from cost savings to be partially offset by investments in technology as well as brand marketing to drive volume growth.
Marcos Gabriel: At the top line, we continue to expect organic net sales growth to range between one and 3% for those to be volume led.
Speaker Change: For the year, we expect our brand marketing spend to increase in the high single digits, reflecting double digit increase partially offset by anticipated CCI savings.
Marcos Gabriel: In the years ago, we expect to deliver total volume growth across both segments and for total pricing to be flat to slightly positive primarily driven by flavor solutions.
Speaker Change: As a result, our adjusted operating income is expected to grow 4% to 6% in constant currency.
Marcos Gabriel: For China, our outlook assumes a gradual recovery and we expect China consumer sales to improve slightly year over year.
Speaker Change: Similar to our gross margin trends, we expect growth in our operating income to build throughout the year.
Marcos Gabriel: We saw this come through this past quarter and we expected it to continue for the rest of the year.
Speaker Change: This remains a balanced outlook that gave us the flexibility to continue to invest in the business, while expanding margins in line with our 2028 objectives.
Marcos Gabriel: Our 2025 gross margin is still projected to range between 50 to 100 basis points higher than 2024.
Speaker Change: In terms of tax we expect our tax rate to be approximately 22% for the year compared to 25% in 2024, where we benefited from a number of discrete tax items that are not expected to repeat in 2025.
Marcos Gabriel: This gross margin expansion reflects a favorable impact 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.
Speaker Change: We expect our income from unconsolidated operations to decline in the mid teens range in 2025, reflecting the strengthening of the US dollar against the Mexican peso, which is impacting the results of our largest joint venture Mccormick de Mexico.
Marcos Gabriel: Consistent with historical trends, we expect our gross margin expansion to build throughout the year.
Marcos Gabriel: In addition, gross margin expansion, we expect SG&A benefits from cost savings to be partially offset by investments in technology as well as brand marketing to drive volume growth.
Speaker Change: To summarize our 2025 adjusted earnings per share projection of $3 <unk>.
Marcos Gabriel: For the year, we expect our brand marketing spend to increase in the high single digits, reflecting double digit increase partially offset by anticipated CCI savings.
Speaker Change: The $3 eight on a reported dollar basis reflect currency headwinds and the impact of increased tax rate relative to the prior year.
Marcos Gabriel: As a result, our adjusted operating income is expected to grow 4% to 6% in constant currency.
Speaker Change: On a constant currency basis, adjusted EPS is expected to grow between five and 7%.
Speaker Change: To wrap up our continued volume growth underscores that our plants are yielding results and sustaining this differentiated performance looking.
Marcos Gabriel: Similar to our gross margin trends, we expect growth in our operating income to build throughout the year.
Marcos Gabriel: This remains a balanced outlook that gives us the flexibility to continue to invest in the business, while expanding margins in line with our 2028 objectives.
Speaker Change: Looking ahead, our cost savings programs will continue to fuel our investments and drive margin expansion and we remain confident in the underlying fundamentals of our business and in delivering on our 2025 financial outlook near term and long term objectives.
Marcos Gabriel: In terms of tax we expect our tax rate to be approximately 22% for the year compared to 25% in 2024, where we benefited from a number of discrete tax items that are not expected to repeat in 2025.
Marcos: Thank you Marcos.
Marcos: Before moving to Q&A I would like to close with our key takeaways on slide 16.
Marcos: While the environment has gotten more challenging consumer sentiment has been impacted we have managed through these environments in the past and we expect to navigate through this successfully as we continue to refine and align our plans.
Marcos Gabriel: We expect our income from unconsolidated operations to decline in the mid teens range in 2025, reflecting the strengthening of the US dollar against the Mexican peso, which is impacting the results of our largest joint venture Mccormick de Mexico.
Marcos: The long term trends that fuel our categories.
Marcos Gabriel: To summarize our 2025 of adjusted earnings per share projection of $3 <unk> to $3 <unk> on a reported dollar basis reflect currency headwinds and the impact of increased tax rate relative to the prior year.
Marcos: Interest in healthy flavorful cooking key flavor exploration and trusted brands continue to be strong and importantly, consumer interest in cooking is growing.
Marcos: We continue to execute on our strategic roadmap with speed and agility and in alignment with consumer trends.
Marcos Gabriel: On a constant currency basis, adjusted EPS is expected to grow between five and 7%.
Marcos: Further capitalizing on our attractive categories across segments and driving category leadership.
Marcos Gabriel: To wrap up our continued volume growth underscores that our plants are yielding results and sustaining this differentiated performance.
Marcos: Our results demonstrate that we are investing in the areas that drive the most value and we expect to maintain this momentum.
Marcos Gabriel: Had our cost savings programs will continue to fuel our investments and drive margin expansion and we remain confident in the underlying fundamentals of our business and in delivering on our 2025 financial outlook near term and long term objectives.
Marcos: We also expect to continue to expand margins and manage our cost as we are investing in the business. These improvements are led by a favorable product mix and cost savings programs.
Marcos: Performance historically and over the last few quarters, coupled with our growth plans give us confidence in achieving our near and long term objectives.
Speaker Change: Thank you Marcos before moving to Q&A I would like to close with our key takeaways on slide 16.
Marcos: Ultimately, we believe the execution of our growth plans will be a win for consumers customers or categories, and Mccormick, which will continue to differentiate and strengthen our leadership.
Speaker Change: While the environment has gotten more challenging consumer sentiment has been impacted we have managed through these environments in the past and we expect to navigate through this successfully as we continue to refine and align our plans.
Marcos: Finally, I want to recognize all Mccormick employees for their dedication and contributions and reiterate my confidence that together, we will continue to drive differentiated results and shareholder value.
Speaker Change: The long term trends that fuel our categories consumer interest in healthy flavorful cooking key flavor exploration and trusted brands continued to be strong and importantly, consumer interest in cooking is growing.
Marcos: Now for your questions.
Marcos: Thank you.
Marcos: Now be conducting a question and answer session.
Speaker Change: We continue to execute on our strategic roadmap with speed and agility and in alignment with consumer trends.
Speaker Change: Jack asks a question you May press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.
Speaker Change: Further capitalizing on our attractive categories across segments and driving category leadership.
Marcos: You May press Star two Shiite maturing a question from the queue.
Marcos: A tradition participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Our results demonstrate that we are investing in the areas that drive the most value and we expect to maintain this momentum.
Marcos: DSO for the first question.
Speaker Change: We also expect to continue to expand margins and manage our cost as we are investing in the business. These improvements are led by a favorable product mix and cost savings programs.
DSO: Thank you our first question will be coming from the line of Andrew Lazar with Barclays.
Marcos: With your question.
Speaker Change: Great. Thanks, so much good morning, everybody.
Speaker Change: Our performance historically and over the last few quarters, coupled with our growth plans give us confidence in achieving our near and long term objectives. Ultimately we believe the execution of our growth plans will be a win for consumers customers or categories, and Mccormick, which will continue to differentiate and strengthen our leadership.
Marcos: Good morning, Good morning, Andrew.
Speaker Change: I think on last quarter's call you had guided to operating profit in fiscal <unk> should be sort of flat to slightly down and as you mentioned operating profit fell about 5% in the quarter decline was heavily weighted obviously to the consumer segment. I think you mentioned pricing stock based comp and Brandon mesh investments I think a lot of which.
Speaker Change: Finally, I want to recognize all Mccormick employees for their dedication and contributions and reiterate my confidence that together, we will continue to drive differentiated results and shareholder value now.
Speaker Change: Were anticipated previously so I'm, just trying to get a better sense for what drove maybe the stronger than forecast operating profit decline, particularly in consumer.
Speaker Change: Now for your questions.
Speaker Change: Was there a timing shift relative to initial expectations or sort of what drove that and then more importantly, I guess what gives you the confidence in sort of reaffirming the full year. Thanks, so much okay.
Speaker Change: Thank you.
Speaker Change: I'll now be conducting a question and answer session.
Speaker Change: Thank you Eric asked the question you May press Star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.
Andrew Let me kick it off and I'll have mark plus handle maybe more directly to the question on operating profit at a high level Q1 was roughly in line with what our expectations were and in fact, we had planned for Q1 to be sort of a different quarter than what the rest of the year will look like.
Speaker Change: You May press Star two Shiite withdrawing a question from the queue.
Speaker Change: Of tradition participants using speaker equipment.
Speaker Change: Necessary to pick up your handset before pressing psyches.
Speaker Change: For the first question.
Speaker Change: And I think you can kind of see that play out in a lot of our prepared comments, but there are timing elements that we've called out before like you mentioned that certainly impact that but did you remain confident in the year to go period, and it's really supported by strong sales performance.
Speaker Change: Our first question will be coming from the line of Andrew Lazar with Barclays. Please proceed with your question.
Andrew Lazar: Great. Thanks, so much good morning, everybody.
Speaker Change: Good morning, and good morning, Andrew.
Andrew Lazar: I think on last quarter's call you had guided to operating profit in fiscal <unk> should be sort of flat to slightly down.
Speaker Change: Mark was units, yes, sure so Andrew on the operating profit I mean, you mentioned minus minus 5% decline in July adjusted for currency was minus 3%.
Speaker Change: As you mentioned operating profit fell about 5% in the quarter decline was heavily weighted obviously to the consumer segment. I think you mentioned pricing stock based comp and Brandon mesh investments I think a lot of which were anticipated previously so I'm just trying to get a better sense for what drove maybe the stronger than forecast operating profit decline, particularly in consumer.
Speaker Change: So on a constant currency basis III.
Speaker Change: A couple of timing related items as we mentioned on the call. One is the shift of the stock based compensation from Q2 into Q1 and ico normalize for that in <unk> would be essentially flat for Q1.
Speaker Change: Was it a timing shift relative to initial expectations or sort of what drove that and then more importantly, I guess what gives you the confidence in sort of reaffirming the full year. Thanks, so much okay.
Speaker Change: So we had some timing in terms of brand marketing and technology investments hitting in Q1, we're going to continue to have some of those investments on the back.
Speaker Change: In future quarters of the year.
Speaker Change: Andrew Let me kick it off and I'll have mark close handle maybe more directly to your question on operating profit at a high level Q1 was roughly in line with what our expectations were.
Speaker Change: But a little bit of timing between Q1 and Q2, there as well.
Speaker Change: Consumer space specifically.
Speaker Change: We had to lap the price gap management investments that we put in place in 2024, so that was a headwind thats going to go away. If you think about the consumer operating profit decline of 16% I mean, two thirds of it will go away in <unk>.
Speaker Change: We had planned for Q1 to be sort of a different quarter than what the rest of the year will look like.
Speaker Change: And I think you'd kind of see that play out in a lot of our prepared comments, but there are timing elements that were called out before like you mentioned that certainly impact that but did you remain confident in the year to go period, and it's really supported by strong sales performance.
Speaker Change: In the next quarter, which is the pricing and the stock Matt stock comp shift.
Speaker Change: And FX.
Speaker Change: Effects was a bigger headwind I mean, it was trying to focus on the things that we can't control.
Speaker Change: Mark was unit, yes, sure so Andrew on the operating profit I mean, you mentioned minus 5% decline in July adjusted for currency was minus 3%.
Speaker Change: It was a bigger headwind now we're seeing FX moderating a little bit going forward. So that's where we're keeping the guidance as it is.
Speaker Change: So on a constant currency basis III.
Speaker Change: Then in terms of the guidance question, Yes, we do have a lot of confidence in the guidance that we put out there I mean top line is coming as we expected we will continue to see.
Speaker Change: A couple of timing related items as we mentioned on the call. One is the shift of the stock based compensation from Q2 into Q1 and ico normalize for that in our RFP would be essentially flat for Q1.
Speaker Change: Growth in both segments consumer and flavor solutions for.
Speaker Change: For the full year and the consumer.
Speaker Change: Also we had some timing in terms of brand marketing and technology investments hitting in Q1, we're going to continue to have some of those investments on the back.
Speaker Change: C growth all quarters and across all regions for the balance of the year.
Speaker Change: I'm pleased with the flavor solutions performance this quarter driving not only top line, but also our profitability as you saw profitability was up 240 basis points.
Speaker Change: In the future quarters of the year, but a little bit of timing between Q1 and Q2, there as well in the consumer space specifically.
Speaker Change: On the back of CCI product mix and as well as.
Speaker Change: We had to lap the price gap management investments that we've put in place in 2024. So that was a headwind that's going to go away. If you think about the on the consumer operating profit decline of 16% I mean, two thirds of it will go away in <unk>.
Speaker Change: The top line that drives leverage through the P&L, So happy there as well.
Speaker Change: Gross margins will build throughout the year as I said on the call 50 to 100 basis points on a full year basis.
Speaker Change: On the back of the CCI program, we want to invest back into business as we said before in terms of SG&A, particularly brand marketing and we feel confident about expanding margins for the full year.
Speaker Change: The next quarter, which is the pricing and the stock Matt stock comp shift.
Speaker Change: <unk>.
Speaker Change: FX was a bigger headwind I mean, it was trying to focus on the things that we can control.
Speaker Change: Five.
Speaker Change: It was a bigger headwind now we're seeing FX moderating a little bit going forward. So that's where we're keeping the guidance as it is.
Speaker Change: Between 4% to 6% operating profit growth for the full year.
Speaker Change: Primarily driven by the flavor solutions segment.
Speaker Change: Then in terms of the guidance question, Yes, we do have a lot of confidence in the guidance that we put out there on the topline is coming as we expected we will continue to see.
Speaker Change: Thanks, so much I appreciate the color.
Speaker Change: Sure.
Speaker Change: Our next question is from the line of Peter Galbo with Bank of America. Please proceed with your question.
Speaker Change: Growth in both segments consumer and flavor solutions for.
Peter Galbo: Hi, good morning, guys.
Speaker Change: For the full year and the consumer.
Speaker Change: Good morning.
Speaker Change: C growth all quarters and across all regions for the balance of the year.
Speaker Change: Two questions on the Americas consumer business, and Brendan I'll I'll toss the first one to you.
Speaker Change: I'm pleased with the flavor solutions performance this quarter driving not only top line, but also our profitability as you saw profitability was up 240 basis points.
Speaker Change: I think you mentioned.
Speaker Change: The price gap management, the incremental price gap management in the first quarter was maybe seasonal or tied to a seasonal business.
Speaker Change: On the back of CCI product mix and as well as.
Speaker Change: And the expectation is that the consumer price will be flat going forward.
Speaker Change: The top line that drives leverage through the P&L, So happy there as well.
Speaker Change: I'm just wondering if on an underlying basis.
Speaker Change: Gross margin will build throughout the year as I said on the call 50 to 100 basis points on a full year basis.
Speaker Change: Within Americas, if that pricing.
Speaker Change: You'll have an opportunity to be negative given some incremental investment and maybe that you saw good returns on the promo around the holidays and so youll look at that as we get into grilling season.
Speaker Change: On the back of the CCI program, we want to invest back in the business as we said before in terms of SG&A, particularly brand marketing and we feel confident about expanding margins for the full year.
Speaker Change: Yeah.
Speaker Change: And then you're offsetting that possibly with them, but I just wanted to understand kind of the.
Speaker Change: <unk>.
Speaker Change: Between 4% to 6% operating profit growth for the full year.
Speaker Change: Pieces underneath the flat price for consumer comment at a total company level relative maybe to the geography.
Speaker Change: Primarily driven by the flavor solutions segment.
Speaker Change: Thanks, so much I appreciate the color.
Speaker Change: Okay. So thanks, Peter first of all let me just kick off with.
Speaker Change: Sure.
Speaker Change: Our next questions are from the line of Peter Galbo with Bank of America. Please proceed with your question.
Speaker Change: Overall, we had very really strong sales performance throughout the company both in both segments, specifically, though thinking about consumer that's where most of your question focused on it.
Peter Galbo: Hi, good morning, guys.
Speaker Change: Alright.
Speaker Change: Two questions on the Americas consumer business, and Brendan I'll I'll toss the first one to you.
Speaker Change: We delivered really strong volume growth.
Speaker Change: Across the business across all regions up two 6%. So we really think that that was.
Speaker Change: I think you mentioned.
Speaker Change: Indicative of the type of strength of visa, we have been communicating on.
Speaker Change: The price gap management, the incremental price gap management in the first quarter was maybe seasonal or tied to a seasonal business.
Speaker Change: Quarters.
Speaker Change: There was a price on that obviously as you called out specifically in Americas.
Speaker Change: And the expectation is that the consumer price will be flat going forward.
Speaker Change: In Q1, and a lot of it had to deal with we did target and incremental promotion on a recipe mix business.
Speaker Change: I'm just wondering if on an underlying basis.
Speaker Change: Within Americas, if that pricing.
Speaker Change: You'll have an opportunity to be negative given some incremental investments and maybe that you saw good returns on the promo around the holidays and so youll look at that as we get into grilling season.
Speaker Change: Sure.
Speaker Change: If everyone felt the cold weather that most of the country felt but that's really good for Chile volume and gravy and so we saw an opportunity really a great opportunity to just continue to drive that business even harder during the first quarter because it is a great time of the year for those specific products.
Speaker Change: And then you're offsetting that possibly with them, but I just wanted to understand kind of the.
Speaker Change: Pieces underneath the flat price for consumer comment at a total company level relative maybe to the geographies.
Speaker Change: See it actually in a lot of our volume and share performance in that segment of our business. So that's what really drove a lot of it was.
Peter Galbo: Okay. So thanks, Peter first of all let me just kick off with.
One of those and reserve the flexibility to be able to spend across the business, where we feel like we need to and that might have been sort of the one element that was if you could say incremental to what the price gap management plans and programs.
Overall, we had very really strong sales performance throughout the company both in both segments, specifically I'm thinking about consumer that's where most of your question focused on it.
Peter Galbo: We delivered really strong volume growth.
Speaker Change: As expected as we look to the rest of the year, we don't really see price having much contribution.
Peter Galbo: Across the business across all regions up two 6%. So we really think that that was.
Speaker Change: And in terms of it being super positive for Super negative.
Peter Galbo: Indicative of the type of strength that we have been communicating.
Speaker Change: Across the portfolio globally, but I would say.
Peter Galbo: Quarters.
There was a price element, obviously as you called out specifically in Americas.
Speaker Change: That's definitely going to be the case in the Americas.
Speaker Change: Will it be maintaining the price investments from the prior year.
Peter Galbo: In Q1, and a lot of it had to deal with we did target and incremental promotion on a recipe mix business.
Speaker Change: There is a little bit of pricing, that's going to come through in EMEA to deal with some commodity pressures that they're feeling so you will see a little bit of that but they will be growing volume.
Peter Galbo: Sure.
Peter Galbo: If everyone felt the cold weather that most of the country felt but that's really good for Chile volume as gravy and so we saw an opportunity really a great opportunity to just continue to drive that business even harder during the first quarter because it is a great time of the year for those specific products.
Speaker Change: And so that's kind of one perspective, I think on how to think about the first quarter and then what do you expect the rest of the year volume growth in the Americas is really the fundamental driver I think you saw that strengthen our consumption Youre also seeing it in the actual sales results, where my open a little bit of a gap from a standpoint of our consumption and our sales but.
Peter Galbo: See it actually in a lot of our volume and share performance in that segment of our business. So that's what really drove a lot of it was.
Speaker Change: Thats really typical dynamics for us in the first quarter as we would typically see that after obviously, a very strong holiday period that we have.
Peter Galbo: One of those the reserve the flexibility to be able to spend across the business, where we feel like we need to and that might have been sort of the one element that was if you could say incremental to what the price gap management plans and programs.
Speaker Change: No.
Speaker Change: I'll stop there to see if I've addressed your question, but happy to take on more.
Speaker Change: Thanks, Brennan I think thats very helpful.
Peter Galbo: As expected as we look to the rest of the year.
Speaker Change: <unk> contact.
Speaker Change: And maybe just as a follow up I think we've gotten a few questions. This morning.
Peter Galbo: Don't really see price having much contribution.
Peter Galbo: In terms of it being super positive or negative.
Speaker Change: Just around again in Americas, consumer kind of shipment versus consumption.
Peter Galbo: Across the portfolio globally, but I would say.
Speaker Change: And just whether there were any dynamics you saw from a carryover perspective on inventories out of Thanksgiving or any timing shifts related to Easter just that you're.
Peter Galbo: That's definitely going to be the case in the Americas.
Peter Galbo: Will it be maintaining the price investments from the prior year.
Peter Galbo: There is a little bit of pricing, that's going to come through in EMEA to deal with some commodity pressures that they're feeling so you will see a little bit of that but they will be growing volume.
Speaker Change: That youre thinking about it again as we contemplate drilling.
Speaker Change: Thanks.
Speaker Change: Yes, let me go we may add some more context on shipments to consumption. We have very few concerns about a shipment versus consumption profile just to give you some more context.
Peter Galbo: And so that's kind of one perspective, I think on how to think about the first quarter and then what do you expect the rest of the year volume growth in the Americas is really the fundamental driver I think you saw that strengthen our consumption Youre also seeing it in the actual sales results, where my open a little bit of a gap from the standpoint of our consumption and our sales but.
Speaker Change: First of all we had a really great holiday program resulted in a really strong consumption not only in Q4, but so in Q1. So we have a really strong consumption profile kind of underpinning really our sales growth over the past two quarters.
Speaker Change: Consumption.
Peter Galbo: Thats really typical dynamics for us in the first quarter as we would typically see that after obviously, a very strong holiday period that we had.
Speaker Change: And the outpacing in Q1 of sales as a typical dynamic that we see on inventory patterns across our business over.
Peter Galbo: No.
Peter Galbo: I'll stop there to see if I've addressed your question, but happy to take on more.
Speaker Change: Last decade, or so I mean, that's just something that we typically expect there's probably two other variables that I think one can say is a little bit incremental or new in this quarter and the first one is we're not really seeing any early Easter shipments like we did last year because Easter is falling later in April.
Speaker Change: Thanks, Brendan I think thats very helpful.
Peter Galbo: Context.
Peter Galbo: And maybe just as a follow up.
Peter Galbo: We've gotten a few questions. This morning.
Peter Galbo: Just around again in Americas, consumer kind of shipment versus consumption and just whether there were any dynamics you saw from a carryover perspective on inventories out of Thanksgiving or any timing shifts related to Easter just that you're.
Speaker Change: So its just there isn't really anything happening in Q1 regard to Easter with regard to Easter like it might have the year before.
Speaker Change: And then we do have strong innovation plans for the year, we got an early kickoff on that this year, which means a little bit more slotting spend.
Peter Galbo: That youre thinking about it again as we contemplate drilling.
Peter Galbo: Thanks.
Peter Galbo: Yes, let me go we may add some more context on shipments to consumption. We have very few concerns about our shipment versus consumption profile just to give you some more context.
Speaker Change: Whatever increases we hadn't slotting comes into the first quarter because it matches with the shipments of the item. So.
Speaker Change: Yes, that's one indication that obviously, we're off to a good start on innovation, but some of that spend comes into the first quarter and that was a little bit heavier than it was the prior year, but I don't look at those two things as structural problems. Those are just cycles that we go through its really quite normal I think it looks the profile of what we would expect if you.
Peter Galbo: First of all we had a really great holiday program resulted in a really strong consumption not only in Q4, but so in Q1, so we have a.
Peter Galbo: Really strong consumption profile kind of underpinning really our sales growth over the past two quarters.
Peter Galbo: <unk>.
Peter Galbo: And the outpacing in Q1 of sales as a typical dynamic that we see on inventory patterns across our business over the last decade, or so I mean, that's just something that we typically expect there's probably two other variables that I think one can say is a little bit incremental or new in this quarter and the first one.
Speaker Change: <unk> Q4, and Q1 together into one number.
Speaker Change: Exactly where we'd want to be.
Speaker Change: Great. Thanks, so much.
Speaker Change: Okay.
Speaker Change: Our next questions are from the line of Alexia Howard with Bernstein. Please proceed with your question.
Alexia Howard: Good morning, everyone.
Speaker Change: Good morning, Alex.
Alexia Howard: By that.
Peter Galbo: We're not really seeing any early Easter shipments like we did last year because Easter is falling later in April and so its just there isn't really anything happening in Q1 regard to eastern with regard to Easter like it might have the year before.
Alexia Howard: Can I focus on the growth.
Alexia Howard: In flavor solutions.
Speaker Change: Im wondering if you can quantify or at least comment on how much new these new high growth customers, adding to your sales volumes in that segment.
Peter Galbo: And then we do have strong innovation plans for the year, we got the early kick off on that this year, which means a little bit more slotting spend.
Speaker Change: And then by contrast, how much the <unk> benefits.
Also in Nash and then offsetting that you had the CPG customer weakness, how big was that compared to some of the other dynamics and then I have a follow up.
Peter Galbo: Whatever increases we hadn't slotting comes into the first quarter because it matches with the shipments of the item. So.
Peter Galbo: That's one indication that obviously, we're off to a good start on innovation, but some of that spend comes into the first quarter and that was a little bit heavier than it was the prior year, but I don't look at those two things as structural problems Moshe just cycles that we go through its really quite normal I think it looks the profile of what we would expect.
Alexia Howard: Thanks for the question Alexia, we did have a good quarter on flavor solutions overall in fact, I would say in two out of our three regions volume growth, mostly in the Americas and Asia Pacific just to give you a little bit more context in detail.
Peter Galbo: If you combine Q4 and Q1 together into one number is exactly what we wanted to be.
Alexia Howard: I'm not going to be able to sort of quantify each individual segment within <unk>.
Speaker Change: Great. Thanks, so much.
Alexia Howard: Org.
Alexia Howard: Kind of categorize each volume and give it a framing on numbers, but I'll give you some context in terms of what we saw.
Peter Galbo: Yeah.
Speaker Change: Our next questions are from the line of Alexia Howard Bernstein. Please proceed with your question.
Alexia Howard: In the quarter.
Speaker Change: Good morning, everyone.
Alexia Howard: We did very well for us high growth sort of.
Speaker Change: Good morning, Alex.
Peter Galbo: By that.
Alexia Howard: Innovator customers that are a lot of emerging segments, many of them attached to health and wellness and so we've continued to see strong growth from them.
Peter Galbo: Can I focus on the growth.
Peter Galbo: In flavor solutions.
Peter Galbo: I'm wondering if you can quantify or at least comment on how much new these new high growth customers, adding to your sales volumes in that segment.
Alexia Howard: Also continue to acquire new customers there so it's.
Alexia Howard: It's not only volume, but it's also gaining share.
Alexia Howard: That's helping us there and it allows us to diversify our sales mix in our portfolio.
Peter Galbo: And then by contrast, how much the <unk> benefits it.
Alexia Howard: But we also saw strengthening <unk> business, even if there is weak traffic in the industry and what was driving that is we had some innovation wins.
Peter Galbo: Also in there.
Peter Galbo: And then offsetting that you had the CPG customer weakness, how big was that compared to some of the other dynamics.
Alexia Howard: Execute in the quarter.
Peter Galbo: And then I have a follow up.
Also won some new customers there too so in the Americas region.
Peter Galbo: Yes.
Marcos Gabriel: Thanks for the question Alexia, we did have a good quarter on flavor solutions overall in fact, I would say in two out of our three regions.
Alexia Howard: It was the <unk> customer base in that.
Alexia Howard: Small high innovator customers that we have in flavor that were really driving an offsetting.
Marcos Gabriel: Volume growth, mostly in the Americas, and Asia Pacific just to give you a little bit more context in detail.
Alexia Howard: Any of the weakness that we saw with larger Cpg's in Asia Pacific. It was a lot of <unk> performance that drove that business increased customer promotions and limited time offers.
Marcos Gabriel: I'm not going to be able to sort of quantify each individual segment within <unk>.
Marcos Gabriel: <unk>.
Marcos Gabriel: Kind of categorize each volume and give it a framing on numbers, but I'll give you some context in terms of what we saw.
Alexia Howard: Certainly contributed to some strong numbers, but also we were lapping the <unk>.
Alexia Howard: Geopolitical boy constantly year ago. So that also improved volume performance in Asia Pacific.
Marcos Gabriel: In the quarter.
Marcos Gabriel: We did very well at those high growth sort of.
Marcos Gabriel: Innovator customers that are a lot of emerging segments, many of them attached to health and wellness and so we continue to see strong growth from them and we.
Alexia Howard: EMEA on the other hand definitely saw continued weakness, although we see sequential improvement quarter to quarter. It still is soft in terms of traffic with <unk> and so that one was.
Marcos Gabriel: Also continue to acquire new customers there. So it's not only volume, but it's also gaining share.
Alexia Howard: That region was down but underlying all of this there is a there is a softness with larger CPG companies I would say not just within the Americas, but also we're seeing that in Europe too and.
Marcos Gabriel: It is helping us there and it allows us to diversify our sales mix in our portfolio, but we also saw strengthening <unk> business. Even if there is weak traffic in the industry and what was driving that is we had some innovation wins.
Alexia Howard: That's consistent with what Youre hearing I think from other <unk>.
Alexia Howard: Anthony Sports and so we're seeing a little bit of that.
Marcos Gabriel: Executing the quarter.
Marcos Gabriel: We also won some new customers there too so the Americas region.
Alexia Howard: In our performance I would say, though when we look at it category to category, we tend to still outperform what's going on in the broader market, but nonetheless, the volumes are weaker.
Marcos Gabriel: It was the <unk> customer base and that small.
Marcos Gabriel: Small high innovator customers that we have in flavor that were really driving an offsetting any of the weakness that we saw with larger Cpg's and Asia Pacific. It was a lot of <unk> performance that drove that business increased customer promotions and limited time offers.
Alexia Howard: Great and then quick follow up.
Alexia Howard: Probably too early to see anything, but RFK juniors seems to be pursuing an agenda of driving an artificial additives across packaged paid in probably in the restaurant sector as well as I say, it's probably too early to tell because he's just catch up on the screen, but are you seeing any uptick in reformulation effort on the part of your CPG.
Marcos Gabriel: Certainly contributed to some strong numbers, but also we were lapping the geopolitical boy Consequently year ago. So that also improved volume performance in Asia Pacific EMEA on the other hand definitely saw continued weakness, although we see sequential improvement quarter over quarter. It's still is soft in terms of traffic with.
Alexia Howard: Our restaurant customers in the U S.
Alexia Howard: Yes with regard to colors, just let me first provide some context on the Mccormick portfolio, our consumer portfolio, we don't really have a lot of.
Marcos Gabriel: <unk> and so that one.
Alexia Howard: Usage of color in our products as you might expect.
Marcos Gabriel: That region was down but underlying all of this there is a there is a softness with larger CPG companies I would say not just within the Americas, but also we're seeing that in Europe too and that's.
Alexia Howard: At least very very few.
Overall now with respect to formulations, we are seeing more activity on that.
Alexia Howard: Definitely know reformulation activity has always been a part of the work that we do with our customer base.
Marcos Gabriel: That's consistent with what Youre hearing I think from other.
Marcos Gabriel: And sports and so we're seeing a little bit of that.
Alexia Howard: And we've been doing that for quite some time, but we are seeing a tick up in re formulation activity.
Marcos Gabriel: In our performance I would say, though when we look at it category to category, we tend to still outperform what's going on in the broader market, but nonetheless, the volumes are weaker.
Speaker Change: And that would that would align with what youre seeing in being written out and the news media regarding.
Speaker Change: With what we're hearing from the new administration, but it isn't just colors. It's also sodium <unk> always been working on sodium.
Speaker Change: Great and then quick follow up.
Speaker Change: Probably too early to see anything, but RFK juniors seems to be pursuing an agenda of driving an artificial additives across packaged paid in probably in the restaurant sector as well as I say, it's probably too early to tell because he's just catch up on the screen, but are you seeing any uptick in reformulation effort on the part of your CPG.
Speaker Change: It's also about just working on trends that are served.
Speaker Change: Certainly positive like hydration functional foods high protein, we're seeing re formulation activity across our customer base, but also a lot of new product activity too.
Speaker Change: Great. Thank you very much I'll pass it on.
Speaker Change: Yes.
Speaker Change: Our restaurant customers in the U S.
Speaker Change: Thank you. The next question is from the line of Ken Goldman with Jpmorgan. Please proceed with your question.
Speaker Change: Yes with regard to colors, just let me first provide some context on the Mccormick portfolio, our consumer portfolio, we don't really have a lot of.
Ken Goldman: Hi, Thank you.
Speaker Change: Understanding the situation changes daily or sometimes hourly.
Speaker Change: Usage of color in our products as you might expect.
Speaker Change: What should investors be looking for in terms of key tariff risks ahead.
Speaker Change: At least very very few.
Speaker Change: Overall now with respect to formulations, we are seeing more activity on that.
Speaker Change: Well as I guess related headwinds.
Speaker Change: Actions that the company will take in response and I know these are myriad in nature, but anything youre really keeping an eye on that we should also be following I think would be helpful.
Speaker Change: Definitely know reformulation activity has always been a part of the work that we do with our customer base.
Speaker Change: And we've been doing that for quite some time, but we are seeing a tick up in re formulation activity.
Speaker Change: Thank you.
Speaker Change: Well.
Speaker Change: And that would that would align with what youre seeing in being written out and the news media regarding.
Speaker Change: Just in case.
Speaker Change: It might have been missed.
Speaker Change: There are no tariffs already that we have accounted for in our in our forecast and our guidance for the year. Those are specific to the ones that were levied on China. So those are already factored into our thinking right now.
Speaker Change: With what we're hearing from the new administration, but it isn't just colors. It's also sodium that we've always been working on sodium.
Speaker Change: It's also about just working on trends that are served.
Speaker Change: Certainly positive like hydration functional foods high protein, we're seeing re formulation activity across our customer base, but also a lot of new product activity too.
Speaker Change: Overall, Ken as it relates to anything moving forward. It is it is.
Speaker Change: Difficult to say.
Speaker Change: Great. Thank you very much I'll pass it on.
Speaker Change: Sort of project out what what will be the areas that we have to focus on because we're not exactly sure how exactly these might come through so.
Speaker Change: Okay.
Speaker Change: Thank you. The next question is from the line of Ken Goldman with Jpmorgan. Please proceed with your questions.
Speaker Change: Like you just said, we're staying very close to what the latest news and the latest potential plans might be.
Ken Goldman: Hi, Thank you.
Speaker Change: Understanding the situation changes daily or sometimes hourly.
Speaker Change: We're thinking through a number of scenarios there.
Speaker Change: In terms of how that might get applied there's obviously a lot of variability on how one might think through these tariffs just based on what might be.
Speaker Change: What should investors be looking for in terms of key tariff risks ahead.
Speaker Change: Well as I guess related headwinds.
Speaker Change: Actions that the company will take in response and I know these are myriad in nature, but anything youre really keeping an eye on that we should also be following I think would be helpful.
Speaker Change: It reports, but we're staying close to.
Speaker Change: Whatever analysis learning too I think from a from a broader standpoint, I would just say.
Speaker Change: These are situations that we dealt with in the past and we expect to be able to deal with them successfully moving forward too.
Speaker Change: Yes.
Speaker Change: Well.
Speaker Change: Just in case.
Speaker Change: It might have been missed there are no tariffs already that we have accounted for in our in our forecast and our guidance for the year. Those are specific to the ones that were levied on China. So those are already factored into our thinking right now.
Speaker Change: Depending on where the tariff might be in terms of country or.
Speaker Change: Type of sort of raw ingredient or finished goods.
Speaker Change: This is quite varied I would say and as you might expect complex but.
Speaker Change: Overall, Ken as it relates to anything moving forward. It is it is.
Speaker Change: We're prepared to work through it when we know exactly what will happen.
Speaker Change: Okay. Thank you and then a quick follow up.
Speaker Change: Difficult to know.
Speaker Change: Sort of project what.
Speaker Change: Recognize that.
Speaker Change: Giving quarterly guidance isn't always your practice, but just in light of some of the moving pieces in the first half and some of the.
Speaker Change: What will be the areas that we have to focus on because we're not exactly sure how exactly these might come through so.
Speaker Change: The conversation about pricing and SBC SBC shifts excuse me how would you like us to sort of think about directionally EBIT and EPS in <unk>.
Speaker Change: Like you just said, we're staying very close to what the latest news and the latest potential plans might be.
Speaker Change: We're thinking through a number of scenarios there.
Speaker Change: In terms of how that might get applied there's obviously a lot of variability on how one might think through these tariffs just based on what might be.
Speaker Change: Either relative to <unk> or versus a year ago. Just I think any help you can get in or we can getting toward a sort of narrowing that would be would be useful. Thank you.
Speaker Change: Reports, but we're staying close to.
Speaker Change: Yes.
Speaker Change: Ill kick it off and then ask Markus to add more.
Speaker Change: What everyone else's learning too I think from a from a broader standpoint, I would just say.
Speaker Change: Context to this but kind of back to my opening remark, we always saw Q1 as being a very different quarter than the rest of the year and so I think that would be the picture that we continue to paint we felt like we've made that.
Speaker Change: These are situations that we dealt with in the past and we expect to be able to deal with them successfully moving forward too.
Speaker Change: Depending on where the tariff might be in terms of country or type of sort of raw ingredient or finished goods.
Speaker Change: Kind of clear it will be close to the fiscal year 'twenty four.
Speaker Change: This is quite varied I would say and as you might expect complex.
Mark: But mark do you want to.
Speaker Change: Yes, Ken so yes, Ken so it's difficult to give quarterly guidance as you can imagine, especially in this dynamic environment that we're in these days you should see a continued momentum in terms of.
Speaker Change: But we're prepared to work through it when we know exactly what will happen.
Speaker Change: Okay. Thank you and then a quick follow up I recognize that.
Speaker Change: Top line growth will continue as I mentioning between Q3, Q2 and Q over Q4.
Speaker Change: Giving quarterly guidance isn't always your practice, but just in light of some of the moving pieces in the first half and some of the.
Speaker Change: The margin gross margin will build.
Speaker Change: The conversation about pricing and SPC SBC shifts excuse me how would you like us to sort of think about directionally EBIT and EPS in <unk>.
Speaker Change: Progressively you'll.
Speaker Change: You'll see.
Speaker Change: The bulk of our profitability comes in the second half of the year, which is in our second half is bigger than our first half. So you should see more of the gross margin impacting.
Speaker Change: Either relative to <unk> or versus a year ago. I think any help you can get in or we can getting toward a sort of narrowing that would be would be useful. Thank you.
Speaker Change: The second in a positive way impacting the second half versus the first half and that will flow through the P&L to operating profit as well continue to investing in SG&A.
Speaker Change: Yes.
Speaker Change: Let me kick it off and then ask Markus to add more.
Speaker Change: Every quarter.
Speaker Change: And that is proving to be.
Speaker Change: Context to this but kind of back to my opening remark, we always saw Q1 as being a very different quarter than the rest of the year and so I think that would be the picture that we continue to paint we felt like we've made that.
Speaker Change: Positive in terms of the volume that we're getting out of those investments that we're making.
Speaker Change: And then our profitability will continue to build as well in line with that with the gross margin build.
Speaker Change: So you should see some of the slipped and timing related items that impacted in Q1 as a tailwind into Q2.
Speaker Change: Yeah.
Speaker Change: Kind of clear it will be close to the fiscal year 'twenty four.
Mark Close: But mark do you want to.
Mark Close: Yes, Ken so yes, Ken so it's difficult to give quarterly guidance as you can imagine, especially in this dynamic environment that we're in these days you should see a continued momentum in terms of.
Speaker Change: But then continue to build gross margin and operating margin through the balance of the year.
Speaker Change: Thank you.
Speaker Change: Our next question is from the line of Robert Moskow with TV Cowen. Please proceed with your question.
Mark Close: Top line growth will continue as I mentioning between Q3, Q2 and killed queue for the <unk>.
Speaker Change: Hi, there.
Speaker Change: Thanks for the question.
Speaker Change: Brendan.
Mark Close: Margin gross margin will build.
Speaker Change: I wanted to follow up to Andrew's question at the top of the call.
Progressive Lee.
Mark Close: You'll see.
Speaker Change: Scrubbed the results is roughly in line with your expectations.
Mark Close: The bulk of our profitability comes in the second half of the year, which is in our second half is bigger than our first half. So you should see more of the gross margin impacting.
Speaker Change: And I'm just trying to.
Speaker Change: Drill down a little bit more into that.
Speaker Change: Organic growth for consumer versus organic growth for flavor solutions.
Mark Close: The second on a positive way impacting the second half versus the first half and that will flow through the P&L to operating profit as well continue to invest in SG&A.
Speaker Change: Based on hone heading into the results I would've thought that that flavor solutions would be a little weaker consumer would be stronger given everything you said about the shift to scratch cooking.
Speaker Change: Every quarter.
Mark Close: And that is proving to be.
Mark Close: Positive in terms of the volume that we're getting out of those investments that we're making.
Speaker Change: Higher for more.
Speaker Change: Fresher foods and the flavors that are used to prepare them.
Mark Close: Then profitability, we will continue to build as well in line with the gross margin build.
Speaker Change: This is kind of the reverse in the first quarter and I wanted to know if that was also in line with your expectations or not and then more specifically on the Chile promotion.
Mark Close: You should see some of that slipped and timing related items that impacted in Q1 as a tailwind into Q2.
Speaker Change: Is that a profitable promotion it obviously drove a lot of volume you said it was incremental.
Mark Close: But then continue to build gross margin and operating margin through the balance of the year.
Speaker Change: Yes.
Speaker Change: Did it grow profit.
Speaker Change: Sure. Thank you.
Speaker Change: Rob.
Speaker Change: Thank you.
Speaker Change: Let me go to talk to your question in terms of expectations overall.
Speaker Change: Our next question is from the line of Robert Moskow with TD count.
Speaker Change: And for your questions.
Speaker Change: I do think that our fleet solutions, a little bit stronger than what we would've expected I think it really came through more in the <unk> performance.
Speaker Change: Hi, there.
Speaker Change: Thanks for the question Brent.
Speaker Change: Brendan.
Speaker Change: I wanted to follow up to Andrew's question at the top of the call. You described the results as roughly in line with your expectations and I'm just trying to.
Speaker Change: <unk>. So so I think that was one part of your question for Tim from a consumer standpoint.
Speaker Change: Drill down a little bit more into the org.
Speaker Change: Boy I'm looking at volume and <unk>.
Speaker Change: Organic growth for our consumer versus organic growth for flavor solutions.
Speaker Change: It was really really quite good.
Speaker Change: Based on hone heading into the results I would've thought that flavor solutions would be a little weaker consumer would be stronger given everything you said about the shift to scratch cooking.
Speaker Change: The Americas.
Two 9%.
Speaker Change: We talked about ship to consumption, obviously as being a dynamic there that we typically expect.
Speaker Change: But overall, we felt like and as you see the consumption.
Speaker Change: The desire for more.
Speaker Change: We think it was quite strong overall, so and in fact, a nice continuation from what we saw in Q4 and how the holiday season, obviously has a lot more demand going on in it but we see a continuation of the strength that we have.
Speaker Change: Fresher foods and the flavors that are used to prepare them.
Speaker Change: So this is kind of the reverse in the first quarter and I wanted to know if that was also in line with your expectations or not and then more specifically on the Chile promotion.
Speaker Change: China.
Speaker Change: I would say we were looking for gradual improvement and we were plus we're pleased with the performance of China in.
Speaker Change: Is that a profitable promotion.
Speaker Change: Obviously drove a lot of volume you said it was incremental.
Speaker Change: In the first quarter as we look at our performance versus the Chinese new year and the market. We believe that we slightly outperformed there so that was.
Speaker Change: Did it did it grow profit.
Speaker Change: Okay.
Speaker Change: Sure. Thank you.
Speaker Change: Rob.
Speaker Change: Let me go to talk to your question in terms of expectations overall.
Speaker Change: We plan on growth.
Speaker Change: The slight growth I would say.
Speaker Change: I do think that our fleet solutions, a little bit stronger than what we would've expected I think it really came through more in the <unk> performance.
Speaker Change: That 3% that you saw was pretty good in terms of.
The challenges in the marketplace that is where consumer sentiment is at that point in time. So just to give you context on the consumer side.
Speaker Change: <unk>. So so I think that was one part of your question for Tim from a consumer standpoint.
Speaker Change: Quite pleased with performance of volume in the Americas and <unk>.
Speaker Change: As well as in China, EMEA also performed well too now receivables more pricing coming through in EMEA as a result of some commodity pressure that they're feeling but we're still growing volume in the context of having a little bit more pricing.
Speaker Change: Boy I am looking at volume and <unk>.
Speaker Change: It was really really quite good.
Speaker Change: The Americas.
The two 9%.
Speaker Change: We talked about ship to consumption, obviously as being a dynamic there that we typically expect.
Speaker Change: And so that's the profile there now with respect to the <unk>.
Speaker Change: But overall, we felt like and as you see the consumption.
Speaker Change: Incremental promotional rescue mix.
Speaker Change: When we look at price.
Speaker Change: We think it was quite strong overall, so and in fact, a nice continuation from what we saw in Q4 and how the holiday season, obviously has a lot more demand going on in it but we see a continuation of the strength that we have.
Speaker Change: Overall revenue management price gap management all of those things, we certainly take a very hard look at.
Speaker Change: Whether or not Theyre smart from a from a profit perspective. So I can tell you that our team when they execute these programs they're doing because they know that they are strategically good for the business.
Speaker Change: China.
Speaker Change: I would say we were looking for gradual improvement and we were plus we're pleased with the performance of China in.
Speaker Change: Build loyalty and Theyre also financially smart and so we're we're pretty pleased with the performance. So I think overall in the first quarter and.
Speaker Change: In the first quarter as we look at our performance versus the Chinese new year and the market. We believe that we slightly outperformed there so that was.
Speaker Change: Just to kind of help bridge if there was any slight disappointment the consumer number I would just say.
Speaker Change: We felt like that number was pretty strong.
Speaker Change: We planned on growth as we call it slight growth I would say.
Speaker Change: Great. That's helpful. Thank you.
Speaker Change: That 3% that you saw was pretty good in terms of.
Speaker Change: Yes.
Speaker Change: Want to make sure our costs caused those points of your question Okay great.
Speaker Change: The challenges in the marketplace that is where consumer sentiment is at that point in time. So just to give you context on the consumer side I was quite pleased with the performance of volume in the Americas and.
Speaker Change: Our next question is from the line of Max comfort with BNP Paribas. Please proceed with your question.
Speaker Change: Hey, Thanks for the question recently packaged food players, particularly those with exposure to stacking some of whom are your key customers in flavor solutions have been observing prolonged softness in attributing it to the consumer feeling financial pressure it sounds like you've acknowledged some of those pressures, but you also.
Speaker Change: As well as in China, EMEA also performed well too now receivables more pricing coming through in EMEA as a result of some commodity pressure that they're feeling but we're still growing volume in the context of having a little bit more pricing.
Speaker Change: And so that's the profile there now with respect to the <unk> Inc.
Speaker Change: Incremental promotional rescue mix.
Speaker Change: Seem to be attributing much martinez to changing consumer preferences, as well, which is support of your some of your key categories. In the consumer segment I was hoping you could provide a bit more color.
Speaker Change: When we look at price.
Speaker Change: Overall revenue management price gap management all of those things, we certainly take a very hard look at.
Speaker Change: Whether or not Theyre smart from a from a profit perspective. So I can tell you that our team when they execute these programs they're doing because they know that they are strategically good for the business.
Speaker Change: And these changing consumer preferences that youre seeing and also how you would think about parsing out.
Speaker Change: And that we're seeing in the snacking between the consumer feeling financial pressure versus the consumer changing their preferences for eating thanks very much.
Speaker Change: Build loyalty and Theyre also financially smart and so we're we're pretty pleased with the performance. So I think overall in the first quarter and.
Speaker Change: Well. Thank you for the question, Matt as it relates to sort of snacking trends and.
Speaker Change: Just to kind of help bridge if there was any slight disappointment the consumer number I would just say.
Speaker Change: Yes.
Speaker Change: We felt like that number was pretty strong.
Speaker Change: Are the drivers related more towards affordability are the drivers related to health and wellness trends.
Speaker Change: Great. That's helpful. Thank you.
Speaker Change: Did I got it.
Speaker Change: Like a lot of things in life, it's a lot of those things. So I think probably it's hard to parse that out let.
Speaker Change: Want to make sure I call those points of your question Okay great.
Speaker Change: Okay. Our next question is from the line of Max comfort with BNP Paribas. Please proceed with your question.
Speaker Change: Let me tell you what I think we are seeing is in terms of snacking trends.
Speaker Change: There is a little bit more softness but.
Speaker Change: Okay. Thanks for that question recently packaged food players, particularly those with exposure to stacking some of whom are your key customers in flavor solutions had been observing prolonged softness in attributing it to the consumer feeling financial pressure it sounds like you've acknowledged some of those pressures, but you also.
Speaker Change: We're seeing pockets of growth also in snacking too so, especially within those value added segments. So protein based snacks and better for you options are in many ways part of the snacking category as well.
Speaker Change: We see growth in those areas. So I don't know that snacking by itself is the issue is just people are looking for other opportunities in other.
Speaker Change: Seem to be attributing much more or less to changing consumer preferences as well, which is support of your some of your key categories. In the consumer segment I was hoping you could provide a bit more color.
Speaker Change: Other options.
Speaker Change: As they consider snacking as part of the repertoire throughout the day.
Speaker Change: But we also in terms of our own performance believes that we're gaining market share in a number of these areas from competitors. So its helped offset what we believe to be maybe a little bit of <unk>.
Speaker Change: These changing consumer preferences that youre seeing and also how you would think about parsing out.
Speaker Change: That we're seeing in snacking between the consumer feeling financial pressure versus the consumer changing their preferences for eating thanks very much.
Speaker Change: Temporary weaknesses as we're looking at the snacking category, but it is more dynamic than maybe just one version of it and that would be.
Speaker Change: Well. Thank you for the question, Matt as it relates to sort of snacking trends and.
Speaker Change: One context, I would give from a from a consumer perspective, specifically on snacking now if you think about just broadly the state of the consumer Max.
Speaker Change: Yes.
Speaker Change: Are the drivers related more towards affordability are the drivers related to health and wellness trends.
Speaker Change: I think consumers continue to be resilient, but there is definitely still in a challenging environment.
Speaker Change: Like a lot of things in life, it's a lot of both things. So I think probably it's hard to parse that out let.
Speaker Change: As many of us sustained consumer sentiment has been impacted.
Speaker Change: Let me tell you what I think we are seeing is in terms of snacking trends.
Speaker Change: Special over this past month, primarily related to concerns over rising inflation potentially.
Speaker Change: There is a little bit more softness but.
Speaker Change: I think my our view is that this prolongs what we saw as we thought about sort of the back half of 'twenty for that the mindset of the consumer may not be getting shifting.
Speaker Change: We're seeing pockets of growth also in snacking too so, especially within those value added segments. So protein based snacks and better for you options are in many ways part of the snacking category as well.
Speaker Change: All that much towards the positive just still kind of remaining remaining resilient but challenged.
Speaker Change: We see growth in those areas. So I don't know that snacking by itself is the issue is just people are looking for other opportunities in other.
Speaker Change: They are still cautious about how they spend their money on food and beverage and we're continuing that value seeking behavior.
Speaker Change: Other options as they consider snacking as part of the repertoire throughout the day.
Speaker Change: In our own categories, what were seeing is.
Speaker Change: Some people are maybe trading down to smaller units are also seeing a lot of growth in our larger units actually so it tells me that people are looking for value. We're also putting a lot of focus on the value per ounce that their spend so I think consumers are quite savvy as we all know and they're trying to make their dollar stretch as much as they can.
But we also in terms of our own performance believes that we're gaining market share in a number of these areas from competitors. So its helped offset what we believe to be maybe a little bit.
Speaker Change: Temporary weaknesses as we're looking at the snacking category, but it is more dynamic than maybe just one version of it and that would be.
Speaker Change: Sure one context, I would give from a from.
Speaker Change: <unk>, which is another reason why they go into the perimeter of store to make scratch meals et cetera, they see them as healthier, but they also to UN is cheaper and so I think both of these kind of you start with the snacking segment permanent and just more broadly what we're seeing in our own categories as consumers are sort of blending both and it's hard to parse them apart.
Speaker Change: From a consumer perspective, specifically on snacking now if you think about just broadly the state of the consumer Max.
Speaker Change: We think consumers continue to be resilient, but there is definitely still in a challenging environment.
Speaker Change: As many of us sustained consumer sentiment has been impacted especially over this past month, primarily related to concerns over rising inflation potentially.
Speaker Change: Great. Thanks, very much I'll leave it there.
Speaker Change: Okay.
Speaker Change: I think my our view is that this prolongs what we saw as we thought about sort of the back half of 'twenty for that the mindset of the consumer may not be getting shifting.
Speaker Change: The next question is from the line of Steve Powers with Deutsche Bank. Please proceed with your question.
Steve Powers: Hey, everybody good morning, Thank you.
Speaker Change: Good morning, Todd good.
Speaker Change: Good morning, I was hoping you can talk a little bit more about what you're seeing in Europe.
Speaker Change: All that much towards the positive just still kind of remaining remaining resilient but are challenged.
Speaker Change: I guess in the EMEA segment as it relates to consumer.
Speaker Change: They are still cautious about how they spend their money on food and beverage and we're continuing that value seeking behavior in.
Speaker Change: Volume growth there as well this quarter.
Speaker Change: You've got some pricing coming through because of the commodity backdrop, but at the same time you cited other CTG.
Speaker Change: Our own categories, what were seeing is.
Speaker Change: Some people are maybe trading down to smaller units are also seeing a lot of growth in our larger units actually so it tells me that people are looking for value. We're also putting a lot of focus on the value per ounce.
Speaker Change: Companies in Europe kind of facing.
Speaker Change: Apparel apparel dynamics as we're seeing here in the U S with consumer weakness so as you think about that.
Speaker Change: So I think consumers are quite savvy as we all know and they're trying to make their dollar stretch as much as they can which is another reason why to go into the perimeter of the store to make scratch meals et cetera, they see them as healthier, but they also season is cheaper and so I think both of these kind of you start with the snacking segment permanent and just more broadly what we're <unk>.
Speaker Change: The progression of demand in Europe.
Speaker Change: The balance of the year I guess, how are you sort of take you through the scenarios there and is there is there incremental.
Speaker Change: Investments.
Speaker Change: They may have to be.
Speaker Change: Did you put into place in Europe, as well as the year goes on to offset some of that demand weakness.
Speaker Change: And our own categories as consumers are sort of blending both and it's hard to parse them apart.
Steve Powers: Thanks, Steve.
Speaker Change: In Europe specifically.
Speaker Change: Let me step back we do a lot of proprietary research throughout the year.
Speaker Change: Great. Thanks, very much I'll leave it there.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Frequently throughout the year and were.
Speaker Change: The next question is from the line of Steve Powers with Deutsche Bank. Please proceed with your question.
Speaker Change: Trying to understand consumer sentiment.
Steve Powers: Hey, everybody good morning, Thank you.
Speaker Change: Not only with cooking and shopping and value.
Good morning, Todd.
Speaker Change: <unk> et cetera, many other top many topics, but we do this.
Speaker Change: I was hoping you can talk a little bit more about what you're seeing in Europe.
Speaker Change: Almost every quarter and that helps us understand what the sentiment of the consumer is especially let's say comparing Europe too.
Steve Powers: I guess in the EMEA segment as it relates to consumer.
Steve Powers: Volume growth there as well this quarter.
Speaker Change: S or other big markets that we operate in.
You've got some pricing coming through because of the commodity backdrop.
Speaker Change: What's striking to US is the similarity that we're seeing.
Steve Powers: At the same time you cited other CTG.
Speaker Change: From a U S consumer sentiment broadly with European and so very similar trends in terms of payout cooking it scratched from scratch more often on meeting at home more often.
Steve Powers: Companies in Europe kind of facing.
Steve Powers: Parallel apparel dynamics as we're seeing here in the U S with consumer weakness so as you think about that.
Steve Powers: The progression of demand in Europe.
Speaker Change: Then I did im looking for value overall, we see growth of discounters.
Steve Powers: Over the balance of the year I guess, how are you sort of take you through the scenarios there and is there is there incremental.
Speaker Change: As an example of that.
Speaker Change: We're gaining distribution in.
Speaker Change: We also see performance.
Steve Powers: Investments.
Speaker Change: E Commerce really accelerating to show people are looking for sort of that convenience overall and thats accelerating quite nicely in that marketplace. So.
Steve Powers: It may have to be.
Steve Powers: Yeah.
Steve Powers: Put into place in Europe, as well as the year goes on to offset some of that demand weakness.
Steve Powers: Thanks, Steve.
Speaker Change: We're seeing somewhat of a similar.
Steve Powers: In Europe, specifically, let me step back we do a lot of proprietary research throughout the year.
Sort of parallel if you will.
Speaker Change: Behaviors and sentiment from a consumer standpoint, the worry about inflation is just as high there as it would be here in the U S.
Steve Powers: Frequently throughout the year.
Steve Powers: We're.
Steve Powers: Trying to understand consumer sentiment.
Speaker Change: So that's coming through in the data that we're looking at so I don't know that I can pinpoint something uniquely different in Europe that is happening in the U S right now.
Not only with cooking and shopping and value.
Speaker Change: Relation et cetera, many other top many topics, but we do this.
Speaker Change: Almost every quarter and that helps us understand what the sentiment of the consumer is especially let's say comparing Europe to the U S.
Speaker Change: Okay.
Speaker Change: Maybe if I could just follow up so is there as well.
Speaker Change: Our other big markets that we operate in.
Speaker Change: C net.
Speaker Change: Positive pricing flowing through your business.
Speaker Change: What's striking to US is the similarity that we're seeing.
Speaker Change: This quarter and over the course of the year as expected.
Speaker Change: From a U S consumer sentiment broadly with European and so very similar trends in terms of pay up cooking scratched from scratch more often a meeting at home more often.
Speaker Change: Is that.
Speaker Change: What we're really seeing and there is sort of commodity based pricing offset by.
Speaker Change: Promotional investments and the like or.
Speaker Change: And I did im looking for value.
Speaker Change: Yes.
Speaker Change: And value not quite is not quite as strong as the U S. Despite those dynamics.
Speaker Change: Overall, we see growth and discounters.
Speaker Change: Yes, the commodity inflation that we're experiencing is not broad based it's very targeted and specific items and so.
Speaker Change: As an example of that.
Speaker Change: We're gaining distribution.
Speaker Change: We also see performance.
Speaker Change: Commerce really accelerating too so people are looking for sort of that convenience overall and thats accelerating quite nicely in that marketplace. So.
Speaker Change: As you know like we for example, we have a homemade dessert business in France. So.
Speaker Change: Very specific items serve receiving some inflation there.
Speaker Change: We're seeing somewhat of a similar.
Speaker Change: So think about this as quite targeted but still having said that we're focused on making sure that we have the right price points on shelf.
Speaker Change: Sort of a parallel if you will.
Speaker Change: Behaviors and sentiment from a consumer standpoint, the worry of inflation is just as high there as it would be here in the U S.
Speaker Change: It isn't necessarily true promotions only but it's also true.
Speaker Change: Just sort of that.
Speaker Change: Making sure like price gap management.
Speaker Change: So that's coming through in the data that we're looking at so I don't know that I can pinpoint something uniquely different in Europe that that's happening in the U S right now.
Speaker Change: We're getting the right price point on the shelf, but I do want to illustrate that more of a targeted issue from a commodity standpoint, not broad based.
Speaker Change: Understood. Thank you so much.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: Maybe if I could just follow up so is there as we see net par.
Speaker Change: Our next question is from the line of Tom Palmer with Citi. Please proceed with your question.
Speaker Change: Positive pricing flowing through your business.
Good morning, and thanks for the question.
Speaker Change: This quarter and over the course of the year as expected.
Speaker Change: Maybe just to start out I wanted to clarify an element of Ken's question from earlier I appreciate the sales momentum and the expectation for gross margin to build as the year progresses.
Speaker Change: Okay.
Speaker Change: What we're really seeing and there is sort of commodity based pricing offset by.
Speaker Change: Promotional investments and the like or.
Speaker Change: I wanted to just clarify on SG&A given some of the timing items that were called out in <unk> I think traditionally SG&A dollars in the second quarter are quite a bit higher than we see in the first quarter does this still hold next year or was there enough pull forward of some of these items into <unk> that will be a bit more back.
Speaker Change: Yes, and value not quite is not quite as strong as the U S. Despite those dynamics.
Speaker Change: Yes, the commodity inflation that we're experiencing is not broad based it's very targeted and specific items and so.
Speaker Change: As you know likely for example, we have a homemade dessert businesses in France. So the various specific items are receiving some inflation there.
Speaker Change: <unk>.
Speaker Change: Yes.
Speaker Change: And it is going to be balanced between Q1 and Q2, we should look at those two quarters together, Tom as you think about the SG&A line.
Speaker Change: So think about this as quite targeted but still having said that we're focused on making sure that we have the right price points on shelf.
Speaker Change: There is a shifting to Q1 and negative shifting to pier one as I explained, but that's going to get tailwind into Q2 brand marketing technology will continue across both quarters. So Q1, you saw some of that although it would be more heavily.
Speaker Change: It isn't necessarily true promotions only but it's also true.
Speaker Change: Just sort of that.
Speaker Change: Making sure like price gap management.
Speaker Change: We're getting to the right price point on the shelf, but I do want to illustrate that more of a targeted issue from a commodity standpoint, not broad based.
Speaker Change: Anticipated, but this is going to come back in Q2 as well, we're going to continue to invest on the back of those two items. So.
Speaker Change: Understood. Thank you so much.
Speaker Change: Sure.
Speaker Change: I would look at it.
Speaker Change: Our next question is from the line of Tom Palmer with Citi. Please proceed with your question.
Speaker Change: The combination of Q1 and Q2 for a more of a normalized view on SG&A.
Tom Palmer: Good morning, and thanks for the question.
Speaker Change: Okay. Thank you.
Tom Palmer: Maybe just to start out I wanted to clarify an element of Ken's question from earlier I appreciate the sales momentum and the.
Speaker Change: And I wanted to ask on Canada, we've seen headlines about weaker sales for U S. Brands are you seeing any of that at this point and just any refresher on your exposure to Canada. Thank you.
Tom Palmer: The expectation for gross margin to build as the year progresses, but I wanted to just clarify on SG&A given some of the timing items that were called out in <unk> I think traditionally <unk>.
Speaker Change: In Canada, we actually had a really just like in the U S are really robust quarter in terms of consumption and performance there.
Tom Palmer: G&A dollars in the second quarter are quite a bit higher than we see in the first quarter.
Speaker Change: And I'm familiar with what.
Tom Palmer: It's still hold next year or was there enough pull forward of some of these items into <unk> that will be a bit more balance.
Speaker Change: Youre, referring to in terms of what we've seen written depressed.
Speaker Change: But currently we're not experiencing any sort of difficulties there.
Speaker Change: Honestly it just as we look at our performance from our consumption and sales standpoint, where we're pretty happy with it.
Tom Palmer: It is going to be balanced between Q1, and Q2 should look at those two quarters together, Tom as you think about the SG&A line.
Speaker Change: Okay. Thank you.
Tom Palmer: In all there is a shifting to Q1 and negative shifting to pier one as I explained, but thats going to be a tailwind into Q2 brand marketing technology. We will continue across both quarters. So Q1, you saw some of that a little bit more heavily than anticipated, but it is going to come back in Q2 as well, we're going to continue to invest on the back of those.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: Our final question is from the line of Matt Smith with Stifel. Please proceed with your question.
Hi, Good morning, I wanted to follow up on America's curious our trends are curious are trends more broadly you called out traffic week.
Speaker Change: Weaker traffic trends, but volumes were actually up can you talk about the drivers of growth that more than offset that traffic weakness in your expectation for the rest of the year in terms of industry traffic trends and your ability to outpace the industry traffic.
Tom Palmer: Two items so.
Tom Palmer: I would look at it.
Tom Palmer: The combination of Q1 and Q2 for a more of a normalized view on SG&A.
Tom Palmer: Okay. Thank you.
Tom Palmer: And I wanted to ask about Canada, we've seen headlines about weaker sales for U S. Brands are you seeing any of that at this point and then just any refresher on your exposure to Canada. Thank you.
Speaker Change: Some of the limited time offers and menu benefits more short term or do those continue and allow you to outperform.
Speaker Change: Traffic trends, we're seeing for kyocera. Thank you.
We've often described this business is lumpy.
Tom Palmer: In Canada, we actually had a really just like in the U S are really robust quarter in terms of consumption and performance there.
Speaker Change: Variability quarter to quarter and one of the variables that drives that is things like customer promotions and limited time offers because they may not they may or may not continue.
Tom Palmer: And I'm familiar with what.
Tom Palmer: You're referring to in terms of what we've seen written depressed.
Tom Palmer: But currently we're not experiencing any sort of difficulties there.
Speaker Change: For either a short period of time for a long period of time difficult for us.
Tom Palmer: As we look at our performance from a consumption sales standpoint, where we're pretty happy with it.
Speaker Change: To fully predict but that is one element in terms of what we saw is just particularly when you think about in Asia Pacific.
Tom Palmer: Okay. Thank you.
Tom Palmer: Okay.
Speaker Change: A lot more heightened activity in fact.
Tom Palmer: Thank you.
Speaker Change: <unk> and Asia Pacific have been doing.
Speaker Change: Our final question is from the line of Matt Smith with Stifel. Please proceed with your question.
Speaker Change: Pretty well for the last couple of quarters, and so they've been growing stores, but also.
Matt Smith: Hi, Good morning, I wanted to follow up on America's curious our trends are curious are trends more broadly you called out traffic week or <unk>.
Speaker Change: Accelerating on traffic overall in fact, I think the store growth itself is one other contributor to overall performance there, which is not the same store sales type.
Matt Smith: Weaker traffic trends, but volumes were actually up.
Matt Smith: You talk about the drivers of growth that more than offset that traffic weakness in your expectation for the rest of the year in terms of industry traffic trends and your ability to outpace the industry traffic.
Speaker Change: Metric.
Speaker Change: Overall.
Speaker Change: The other items that for us if we win more business or we get innovation that becomes incremental to the prior year and so.
Matt Smith: Some of the limited time offers and menu benefits more short term or do those continue and allow you to outperform.
Speaker Change: That enables one to sort of overcome whatever might be the trends with traffic going on in the industry. So.
Speaker Change: Traffic trends, we're seeing for kyocera. Thank you.
Speaker Change: We saw more of that happen.
Matt Smith: We've often described this business is lumpy.
Speaker Change: The Americas region.
<unk> ability to quarter to quarter.
Speaker Change: That is an example of something that isn't necessarily short term, but rather.
Matt Smith: And one of the variables that drives that is things like customer promotions and limited time offers because they may not they may or may not continue.
Speaker Change: Net sort of continuous.
Speaker Change: Continue to sort of improve our sales mix by either winning new customers or getting new products.
Matt Smith: For either a short period of time for a long period of time difficult for us to.
Speaker Change: Overall or selling them new products. If you will so thats the other context, there which is equivalent to gaining share if you will.
Matt Smith: To fully predict but that is one element in terms of what we saw is just particularly when you think about in Asia Pacific just a lot more heightened activity in fact.
Speaker Change: Thank you Brendan and I'll pass it on.
Speaker Change: Sure.
Speaker Change: Thank you I'll now turn the call back to Brendan Foley for closing remarks.
Matt Smith: <unk> niche specific have been doing.
Speaker Change: Okay.
Matt Smith: Pretty well for the last couple of quarters, and so they've been growing stores, but also.
Speaker Change: Thank you 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 conference call for this morning.
Matt Smith: Accelerating on traffic overall in fact, I think the store growth itself is one other contributor to overall performance there, which is not the same store sales type.
Matt Smith: Metric.
Matt Smith: Overall.
Matt Smith: The other items that if we win more business or we get innovation that becomes incremental to the prior year and so.
Matt Smith: That enables one to sort of overcome whatever might be the trends with traffic going on in the industry. So.
Matt Smith: We saw more of that happen.
Matt Smith: The Americas region.
And that is an example of something that isn't necessarily short term, but rather.
Matt Smith: Net.
Matt Smith: We're continuing to sort of improve our sales mix by either winning new customers or getting new products.
Matt Smith: Overall or selling the new products. If you will so thats the other context, there which is equivalent to gaining share if you will.
Matt Smith: Thank you Brendan I'll pass it on.
Matt Smith: Sure.
Speaker Change: Thank you I'll now turn the call back to Brendan Foley for closing remarks.
Matt Smith: Okay.
Brendan Foley: Thank you all for joining today's call. If you have any further questions regarding today's information please feel free to contact me.
Matt Smith: This concludes our conference call for this morning.
Brendan Foley: Okay.
Brendan Foley: [music].
Brendan Foley: Good morning. This is Boston Huh VP of Investor Relations. Thank you for joining today's first quarter earnings call to accompany this call. We've posted a set of slides on our IR website, IR and Don Mccormack Dot Com with me. This morning are Brendan Foley, Chairman, President and CEO, and Michael Gabriel Executive Vice President and CFO.
Brendan Foley: 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 in our comments certain percentages are rounded. Please refer to our presentation for complete information today's presentation contains.
Brendan Foley: Actions 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 Mahindra.
Brendan Foley: Please refer to our forward looking statements on slide two for more information I'll now turn the discussion over to Brendan.
Brendan Foley: Good morning, everyone and thank you for joining US we're pleased to start the year with solid first quarter results that are in line with our expectations. Our performance continues to demonstrate the success of our prioritized investments in the areas that we believe will continue to drive the most value and sustaining our momentum for the remainder of 2020.
Brendan Foley: Five and beyond.
Brendan Foley: Mccormick remains a growth oriented company with robust plans that leverages the demand for flavor and the strength of our brands.
Brendan Foley: Our strategies have proven to be effective by driving growth and compounding that growth over the years with our strategies and best in class leadership, we are well positioned to continue on our trajectory and 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 first quarter results focusing mostly on topline drivers next I will review, how Mccormick is positioned relative to an evolving consumer landscape.
Brendan Foley: Then I will highlight some areas of success and the areas. We continue to work on as well as our growth plans.
Brendan Foley: Marcos will then go into more depth on the first quarter results and review, our 2025 outlook and finally before your questions I will have some closing comments.
Marcos Gabriel: Turning now to our results on slide four.
Marcos Gabriel: In the first quarter total organic sales increased by 2%, primarily driven by volume and product mix growth and partially offset by pricing in line with our expectations.
Marcos Gabriel: Global consumer organic sales growth was volume led demonstrating continued momentum across key markets. We delivered robust volume growth in all three regions. This sustained growth is supported by investments across our core categories, including innovative brand marketing accelerated innovation aligned with consumer.
Marcos Gabriel: <unk> expanded distribution and robust category management initiatives.
Marcos Gabriel: As expected volume growth was partially offset by price in the Americas price declined due to price gap management plans that were implemented in the second quarter of 2024, and a targeted incremental promotion related to seasonal recipe mixes.
Marcos Gabriel: In EMEA, we took selective pricing actions to cover rising commodity costs and still maintain volume momentum.
Marcos Gabriel: For the year to go we expect price in our global consumer segment to be flat.
Marcos Gabriel: Now to the global flavor solutions segment, where organic sales growth was also volume wise, we delivered sequential volume improvement relative to the fourth quarter and are pleased with our results volume growth was driven by continued execution of our strategic priorities and flavors amid a challenging customer environment.
Marcos Gabriel: We're growing customers, partially offset larger CPG customers softness in addition give us our customer performance improved in Asia Pacific and the Americas led by innovation.
Marcos Gabriel: Furthermore, across Asia Pacific, including China, We delivered strong volume growth as we partnered with <unk> customers on new products and limited time offers.
Marcos Gabriel: <unk> with prior years, we expect flavor solutions volume growth fluctuate quarterly due to timing of customer activities.
Marcos Gabriel: However, on a full year basis, we continue to expect to deliver positive volume growth.
Marcos Gabriel: From a profitability perspective, we delivered results in line with our expectations as.
Marcos Gabriel: As the first quarter was impacted by increased investments in marketing and technology as well as the timing of stock based compensation expense that shifted relative to the prior year.
Marcos Gabriel: As we look to the year ago period, we remain confident in our operating income and earnings growth outlook on a constant currency basis.
Marcos Gabriel: Moving now to the macro environment, including the current state of the consumer.
Marcos Gabriel: There is increasing consumer uncertainty and concern over returning to more inflation and this has impacted consumer sentiment, particularly in the last month.
Marcos Gabriel: This prolongs the consumer context of 2024, where consumers, especially lower income consumers are more cautious exhibiting more value seeking behavior and tightening their budgets as many are worried about the future job security and rising costs. We are seeing this not just in the U S, but across our key markets.
Marcos Gabriel: At the same time, we are all witnessing shifts in consumer preferences. They are becoming more health conscious and this trend has continued to gain momentum. They are cooking at home more often increasingly shopping the perimeter for protein and produce as we look at growth in edible categories unit growth is primarily driven by these perimeter categories.
Healthier and better for you trends as well as the desire to stretch budgets are fueling the continued interest in cooking from scratch reinforcing the demand for flavor and for mccormick's categories spices, and seasonings remained the top growing center store category.
Marcos Gabriel: As a result consumption trends in our business remains strong ultimately we expect the global consumer segment to continue to benefit from these secular trends.
Marcos Gabriel: The plans, an advantaged portfolio to capitalize on them.
Marcos Gabriel: And in our flavor solutions segment, we continue to partner with customers to launch new products will reformulate existing ones to fit healthier lifestyles.
Marcos Gabriel: Furthermore, our exposure to faster growing customers allows us to win in several high growth categories, many of which are benefiting from the trends towards healthier eating.
Marcos Gabriel: In the context of this environment Mccormick's trends remained strong our volume driven first quarter results and continued strengthening consumption trends demonstrate our ability to continue to successfully meet our objectives for the year.
Marcos Gabriel: We continue to monitor consumer trends, our focus remains on meeting consumers and customers, where they are delivering value expanding our presence in growing channels, including mass club and e-commerce, and aligning them with flavor as well as helping customers innovate to meet consumers' changing dietary needs we.
Marcos Gabriel: We believe we have the right plans in place and we remained well positioned to capitalize on secular trends and continue to drive differentiated long term growth across both of our segments.
Marcos Gabriel: Let's move to slide five and let me highlight for the quarter some of the key areas of success.
Marcos Gabriel: Across our global consumer segment, we successfully executed on our plans with increased investment and competitive focus towards driving growth, we improved unit volume share gains across our core categories in key markets.
Marcos Gabriel: In the U S. The vast majority of our categories are growing unit share let me provide some color on the categories globally.
Marcos Gabriel: Starting with spices, and seasonings in Americas, EMEA, and Asia Pacific, including China, We delivered strong volume growth.
Marcos Gabriel: In the U S. We drove unit volume share growth outpacing private label for the third consecutive quarter.
Marcos Gabriel: In addition, we drove market share gains in Canada and China.
Marcos Gabriel: In recipe mixes we continued the strengthening consumption trends in the Americas and drove unit and volume share gains in the first quarter.
Marcos Gabriel: In the U S Mccormick gravy and chili recipe mixes, where a significant growth driver as they deliver on the value and convenience consumers are seeking.
Marcos Gabriel: In addition, we are outpacing the total category in total new buyers as well as dollars per buyer in Canada, We drove dollar unit and volume share gains.
Marcos Gabriel: And mustard, we've made great progress globally over the last four quarters and are pleased to see that our plans are driving great results.
Marcos Gabriel: In the first quarter, we drove dollar unit and volume share gains in the Americas in Poland. One of the top mustard consuming countries. Our muster consumption continues to grow and we are also realizing dollar share gains. In addition, we are gaining dollar share in the UK.
Marcos Gabriel: In hot sauce, our plans continued to yield great results in the U S. We drove positive unit share gains, reflecting significant progress distribution gains as well as investments in differentiated brand marketing, including a strong Super Bowl activation and innovation continue to fuel our performance outside of the U.
Marcos Gabriel: U S. We are gaining market share in France, the UK and Australia.
Marcos Gabriel: Additionally, we continue to make progress on total distribution points in the Americas, we significantly expanded tvp's across spices, and seasonings recipe mixes and hot sauce in the Americas and EMEA, we are seeing broad based distribution gains in spices, and seasonings and hot sauce.
Marcos Gabriel: We're also gaining distribution in high growth channels like discounters and E Commerce.
Marcos Gabriel: In Asia Pacific our business in China is recovering gradually relative to the prior year as expected.
Marcos Gabriel: We delivered strong performance amid and continually challenged environment growth in our categories, including spices, and seasonings and condiments outpaced the market, which included the Chinese new year holiday.
Marcos Gabriel: Moving to flavor solutions, we saw strength in our technically insulated high margin product category flavors.
Marcos Gabriel: In flavors in the Americas, we remain focused on being the partner of choice across our four taste competencies savory key naturally suite and citrus improve.
Marcos Gabriel: As a result of this continued focus we are winning new customers and gaining share.
Marcos Gabriel: We outperformed the industry across many end categories, including alcoholic and non alcoholic beverages as well as snacking bars.
Marcos Gabriel: Offsetting this is the softness we continue to see in larger CPG customer volumes.
Marcos Gabriel: He was our trends improved in the Americas and in Asia Pacific and the Americas, We are continuing to drive innovation with our customers driving volume growth amid soft foot traffic in.
Marcos Gabriel: In China, and Australia, our customers new products and promotions are driving strong volume growth in southeast Asia volume growth benefited from our customers lapping the impact of geopolitical boycotts and the prior year.
Marcos Gabriel: Let me now touch on some areas, where we are seeing some pressure.
The areas of pressure are primarily in our flavor solutions business in the Americas and in EMEA. Some of our CPG customers continue to experience softness in volumes within their own businesses. We continue to work on offsetting these trends through innovation and collaboration with customers and by winning new customers.
Marcos Gabriel: The foodservice environment remains challenged.
Marcos Gabriel: Our food away from home performance continues to outpace the industry, we are seeing flat performance in branded foodservice and the Americas.
Marcos Gabriel: As well as some of our customers are seeing softness in their volumes due to a slowdown in foot traffic.
Marcos Gabriel: He was store traffic remained soft in EMEA, we have seen this pressure impact our results for several quarters, it's difficult to predict USR traffic. However, we are collaborating with our customers as they focus on improving their volumes through innovation and value in line with consumer trends.
Marcos Gabriel: As outlined on slide six our growth plans remain consistent to drive growth through category management brand marketing new products, our proprietary technologies and our differentiated customer engagement.
Marcos Gabriel: Our growth levers are supported and enhanced through data and analytics as we continue to accelerate our digital transformation. 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.
Marcos Gabriel: Let me focus on brand marketing as our plans across all categories are supported by our global brand marketing initiatives. We are prioritizing investments to connect with consumers and fuel growth our differentiated brand marketing is driven by a combination of factors.
Marcos Gabriel: In addition to maintaining a high share of voice, we are committed to having the best content in our categories content that inspires and educates consumers and reaches them at the right points on their path to purchase and on their flavor or diet journey.
Marcos Gabriel: From flavor exploration to menu planning to shopping and cooking and even to eating and sharing the experience online.
Marcos Gabriel: In the first quarter brand marketing spend increased against the high spend in the prior year as expected. This increase was broad based and a key driver in supporting volume growth for this quarter as well as for maintaining our volume momentum for 2025 through.
Marcos Gabriel: Through our efforts across multiple channels and by leveraging our digital capabilities we have.
Marcos Gabriel: Driving further household penetration and increasing by rates across our core categories. Our holiday campaigns across our region proved successful our marketing campaigns in the Americas highlight our everyday value innovation and point of difference to consumers and are supporting our volume growth and driving share gains are.
Marcos Gabriel: Frank Superbowl activation campaign with Paris Hilton was very successful, we gained new buyers and media and consumer sentiment was incredibly positive.
Marcos Gabriel: To wrap up our growth plans, although we are navigating in a difficult environment. We remain confident in the long term health of our business and in our fundamentals and in delivering our 2025 financial outlook.
Marcos Gabriel: Both near term and long term objectives, we remain focused on investing behind our growth levers to continue to drive differentiated performance.
Marcos Gabriel: Now over to Marcos.
Marcos Gabriel: Thank you Brendan and good morning, everyone.
Marcos Gabriel: Starting on slide eight our total organic sales grew 2% for the quarter.
Marcos Gabriel: This increase was volume led with more than 2% volume and product mix growth, partially offset by pricing.
Moving to our consumer segment on slide nine organic sales increased 1% as volume growth of 3% was partially offset by a 2% impact of pricing investments.
Marcos Gabriel: <unk> organic sales in Americas was flat, 2% volume growth was offset by price investments volume.
Marcos Gabriel: Volume growth was strong across our core categories and was driven by our investments in brand marketing innovation and category management.
Marcos Gabriel: In terms of pricing the decline primarily reflects the price gap management investments that were mostly in place in the second quarter of 2024, as well as incremental and targeted promotional activity.
Marcos Gabriel: In EMEA, we grew consumer organic sales 4%.
Marcos Gabriel: And by a 2% increase in volume and 2% increase in price.
Marcos Gabriel: Volume growth was broad based across product categories in our major markets.
Marcos Gabriel: We're pleased with the strong sustained volume growth in EMEA.
Brendan Foley: Brendan mentioned, we took selective pricing actions in EMEA to offset commodity costs.
Brendan Foley: Consumer organic sales in the Asia Pacific region increased 3% driven by a 2% increase in volume and a 1% contribution from price. This.
Brendan Foley: This growth reflects the gradual recovery, we expected in China.
Brendan Foley: Pleased with our performance and expect these trends to continue through 2025.
Brendan Foley: Turning to our flavor solutions segment on slide 10, first quarter organic sales increased 3% driven by volume growth of 2% and a 1% contribution from price.
Brendan Foley: In the Americas flavor solutions organic sales increased 4%, reflecting 3% price contribution and 1% volume growth.
Brendan Foley: Our results reflect a strong performance with faster growing flavor customers any book too it's hard though.
Brendan Foley: These were partially offset by sub CPG customer volumes.
Brendan Foley: The price contribution is primarily related to currency in Latin America.
Brendan Foley: In EMEA organic sales decreased by 4%.
Brendan Foley: A 2% decline from price and mix.
Brendan Foley: <unk>, 2% impact of lower volume and product mix, reflecting the impact of soft CPG and Kyocera Christmas volumes.
Brendan Foley: In the Asia Pacific region flavor solutions organic sales increased 15% with volume growth of 16% driven by Kyocera customer promotions limited time offers as well as new products.
Brendan Foley: Partially offset by pricing.
Brendan Foley: Moving to slide 11, as expected gross profit margin expanded by 20 basis points in the first quarter versus a year ago period, driven primarily by the benefit from our comprehensive continuous improvement program or CCI.
Brendan Foley: Selling general and administrative expenses or <unk>.
G&A increase relative to the first quarter of last year.
Brendan Foley: Given primarily by a shift in timing of our stock based compensation expense from the second quarter into the first quarter as well as increased investments in technology and brand marketing as expected.
Brendan Foley: For the quarter.
Brendan Foley: Adjusted operating income declined by 5% exclude.
Brendan Foley: Excluding the impact of currency adjusted operating income decreased by 3%. This.
Brendan Foley: This decline was driven by the increased SG&A expenses I just mentioned.
Brendan Foley: Our first quarter adjusted effective tax rate was 22%.
Brendan Foley: Compared to 26% in the year ago period.
Brendan Foley: Our tax rate.
Brendan Foley: Last quarter benefited from discrete tax items.
Brendan Foley: Our income from unconsolidated operations in the first quarter declined 18%, primarily due to the strengthening of the US dollar against the Mexican peso.
Brendan Foley: Turning to our segment operational results on slide 12.
Brendan Foley: Adjusted operating income in the consumer segment decreased 17% or 16% in constant currency.
Brendan Foley: The decrease was primarily due to pricing and increased SG&A costs, including brand marketing and technology investments, partially offset by cost savings generated by our CCI program.
Brendan Foley: Looking ahead, we expect consumer adjusted operating income margin expansion to normalized in the year to go period.
Brendan Foley: The flavor solutions, adjusted operating income increased 28% or 33% in constant currency driven by product mix pricing and CCI led cost savings, partially offset by increased SG&A costs.
Brendan Foley: We continue to make progress in expanding operating margins in line with our objectives.
Brendan Foley: And the bottom line as shown on slide 13 first quarter 2025 of adjusted earnings per share of <unk> 60.
Brendan Foley: As compared to 63% for the year ago period.
Brendan Foley: This decrease was primarily due to the SG&A increase I mentioned earlier as well as increased impact of currency on our operating profit and consolidated results.
Brendan Foley: Partially offset by a more favorable tax rate.
Brendan Foley: The impact of currency on adjusted earnings per share is about <unk> <unk> per share.
Brendan Foley: On slide 14, we've summarized highlights for cash flow and balance sheet.
Brendan Foley: Our cash flow from operations for the first quarter of 2025 was $116 million compared to $138 million.
Brendan Foley: 24.
Brendan Foley: The decrease was driven primarily by higher cash used for working capital, partially offset by lower incentive compensation.
Brendan Foley: We returned $121 million of cash to shareholders through dividends and used $37 million for capital expenditures.
Brendan Foley: Note that the timing of capital expenditures would fluctuate on a quarterly basis, depending on the phasing of initiatives, including projects to increase capacity and capabilities to meet growing demand.
Brendan Foley: Our digital transformation and optimize our cost structure.
Brendan Foley: Our priority remains to have a balanced use of cash.
Brendan Foley: Funding investments to drive growth.
Brendan Foley: Return a significant portion of cash to shareholders through dividend.
Brendan Foley: Maintaining a strong balance sheet.
Brendan Foley: We remain committed to a strong investment grade rating and expect to continue to deliver strong cash flow in 2025, driven by profit and working capital initiatives.
Brendan Foley: Now turning to our 2025 financial outlook on slide 15.
Brendan Foley: We are maintaining our guidance for the year.
Brendan Foley: Our outlook continues to reflect our prioritize investments in key categories to strengthen volume trends and drive long term profitable growth, while appreciating the current level of uncertainty in the consumer and macro environment.
Brendan Foley: First let me address status.
Brendan Foley: As you know the situation remains fluid.
Brendan Foley: At this time, we plan to offset costs related to U S import tariffs on China, with our CCI savings and some very targeted price adjustments.
Brendan Foley: Our focus remains on safeguarding the health and competitiveness of our brands sustaining the growth momentum in our business and maintain its response with our customers.
Brendan Foley: We don't believe our current plant actions will be material to the total business.
Brendan Foley: We will have a significant impact on our volume mix outlook for the year.
Brendan Foley: That said due to continued uncertainty on this topic.
Outlook does not include any additional impact from tariffs that could potentially be implemented this year.
Brendan Foley: As things evolve, we will provide update on our outlook within our typical reporting cadence.
Brendan Foley: Turning now to the details of our outlook.
Brendan Foley: Currency rates are still expected to have a one point negative impact on both net sales and adjusted operating income and two points on adjusted earnings per share.
Brendan Foley: At the topline we continue to expect organic net sales growth to range between one and 3%.
Brendan Foley: For those to be volume late in.
Brendan Foley: In the years ago, we expect to deliver total volume growth across both segments and for total pricing to be flat to slightly positive primarily driven by flavor solutions.
Brendan Foley: For China, our outlook assumes a gradual recovery and we expect China consumer sales to improve slightly year over year.
Brendan Foley: We saw this come through this past quarter and we expect it to continue for the rest of the year.
Brendan Foley: Our 2025 gross margin is still projected to range between 50 to 100 basis points higher than 2024.
Brendan Foley: This gross margin expansion reflects favorable impact from product mix and cost savings from our CCI program.
Brendan Foley: Personally offset by the anticipated impact of a low single digit increase in cost inflation.
Brendan Foley: Consistent with historical trends, we expect our gross margin expansion to build throughout the year.
Brendan Foley: In addition, gross margin expansion, we expect SG&A benefits from cost savings to be partially offset by investments in technology as well as brand marketing to drive volume growth.
Brendan Foley: For the year, we expect our brand marketing spend to increase in the high single digits, reflecting double digit increase partially offset by anticipated CCI savings.
Brendan Foley: As a result, our adjusted operating income is expected to grow 4% to 6% in constant currency.
Brendan Foley: Similar to our gross margin trends, we expect growth in our operating income to build throughout the year.
Brendan Foley: This remains a balanced outlook that gave us the flexibility to continue to invest in the business, while expanding margins in line with our 2028 objectives.
Brendan Foley: In terms of tax we expect our tax rate to be approximately 22% for the year compared to 25% in 2024, where we benefited from a number of discrete tax items that are not expected to repeat in 2025.
Brendan Foley: We expect our income from unconsolidated operations to decline in the mid teens range in 2025, reflecting the strengthening of the US dollar against the Mexican peso, which is impacting the results of our largest joint venture Mccormick de Mexico.
Brendan Foley: To summarize our 2025 of adjusted earnings per share projection of $3 <unk>.
Brendan Foley: The $3 <unk> on a reported dollar basis reflect currency headwinds and the impact of increased tax rate relative to the prior year.
Brendan Foley: On a constant currency basis, adjusted EPS is still expected to grow between five and 7%.
Brendan Foley: To wrap up our continued volume growth underscores that our plants are yielding results and sustaining this differentiated performance.
Brendan Foley: Our cost savings programs will continue to fuel our investments and drive margin expansion and we remain confident in the underlying fundamentals of our business and in delivering on our 2025 financial outlook near term and long term objectives.
Speaker Change: Thank you Marcos before moving to Q&A I would like to close with our key takeaways on slide 16.
Speaker Change: While the environment has gotten more challenging consumer sentiment has been impacted we have managed through these environments in the past and we expect to navigate through this successfully as we continue to refine and align our plans.
Speaker Change: The long term trends that fuel our categories consumer interest in healthy flavorful cooking key flavor exploration and trusted brands continue to be strong and importantly, consumer interest in cooking is growing.
Speaker Change: We continue to execute on our strategic roadmap with speed and agility and in alignment with consumer trends.
Speaker Change: Capitalizing on our attractive categories across segments and driving category leadership.
Our results demonstrate that we are investing in the areas that drive the most value and we expect to maintain this momentum.
Speaker Change: We also expect to continue to expand margins and manage our cost as we are investing in the business. These improvements are led by a favorable product mix and cost savings programs.
Speaker Change: Our performance historically and over the last few quarters, coupled with our growth plans give us confidence in achieving our near and long term objectives. Ultimately we believe the execution of our growth plans will be a win for consumers customers or categories, and Mccormick, which will continue to differentiate and strengthen our leadership.
Speaker Change: Finally, I want to recognize all Mccormick employees for their dedication and contributions and reiterate my confidence that together, we will continue to drive differentiated results and shareholder value now.
Speaker Change: Now for your questions.
Speaker Change: Thank you.
Speaker Change: I'll now be conducting a question and answer session.
Speaker Change: Thank you Eric asked the question you May press Star one from your telephone keypad.
Speaker Change: Permission Tony indicate your line is in the question queue.
Speaker Change: You May press Star two Shiite withdrawing a question from the queue.
Speaker Change: Of tradition participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: For the first question.
Operator: Thank you our first question will be coming from the line of Andrew Lazar with Barclays.
Speaker Change: With your question.
Speaker Change: Great. Thanks, so much good morning, everybody.
Andrew Lazar: Good morning, Andrew.
Speaker Change: I think on last quarter's call you had guided to operating profit in fiscal <unk> should be sort of flat to slightly down.
Speaker Change: As you mentioned operating profit fell about 5% in the quarter decline was heavily weighted obviously to the consumer segment. I think you mentioned pricing stock based comp and Brandon mesh investments I think a lot of which were anticipated previously so I'm just trying to get a better sense for what drove maybe the stronger than forecast operating profit decline, particularly in consumer.
Speaker Change: Was it a timing shift relative to initial expectations or sort of what drove that and then more importantly, I guess what gives you the confidence in sort of reaffirming the full year. Thanks, so much okay.
Speaker Change: Andrew Let me kick it off and I'll have mark plus handle maybe more directly to the question on operating profit.
Speaker Change: High level Q1 was roughly in line with what our expectations were and in fact, we had planned for Q1 to be sort of a different quarter than what the rest of the year will look like.
Speaker Change: And I think you'd kind of see that play out in a lot of our prepared comments, but there are timing elements that were called out before like you mentioned that certainly impact that but did you remain confident in the year to go period, it's really supported by strong sales performance.
Speaker Change: Mark was unit, yes, sure so Andrew on the operating profit I mean, you mentioned minus 5% decline in July adjusted for currency was minus 3%.
Speaker Change: So on a constant currency basis III.
Speaker Change: A couple of timing related items as we mentioned on the call. One is the shift of the stock based compensation from Q2 into Q1 and ico normalize for that in <unk> would be essentially flat for Q1.
Speaker Change: Also we had some timing in terms of brand marketing and technology investments hitting in Q1, we're going to continue to have some of those investments on the back.
Speaker Change: In the future quarters of the year, but a little bit of timing between Q1 and Q2, there as well in the consumer space specifically.
Speaker Change: We had to lap the price gap management investments that we've put in place in 2024. So that was a headwind that's going to go away. If you think about the consumer operating profit decline of 16% I mean, two thirds of it will go away.