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| And we did see year-on-year increases in display activity and our return to merchandising and improving quality of displays will continue to gain traction as we head into the new year |
| We'd expect them to grow faster, scale in emerging markets, getting back to a full productivity program in our supply chain, some continued revenue growth management |
| We delivered another quarter of solid results as summarized on Slide number 7 |
| And we'll continue to look at further opportunities but all the other drivers, advantage brands, our Top 5 brands have higher margins |
| In the quarter, we delivered results for net sales, operating profit and EPS that all were better than the guidance ranges we provided back in November |
| And I think, like I said, we expect in 2024 to be at 14% margin, so very pleased with that, obviously |
| Importantly, the strength of our diverse emerging markets was again evident |
| And this led to operating profit growing at a rate that exceeded our long-term algorithm as well |
| Meantime, we delivered more free cash flow than we had anticipated further strengthening our balance sheet and financial flexibility, which was used to opportunistically accelerate share repurchases |
| I think in Nigeria specifically, we've had to take a lot of pricing given what's happened with the currency and the elasticities have been pretty good and better than expected |
| And that expansion is seeing good traction in terms of share and leading share positions in South Africa as well as in Egypt |
| So we're seeing strong volume growth |
| So pleased with the progress that we are making, and certainly the progress that we’re making the gross margins is ahead of what we had shared at Day at K |
| We are also confident in our sustained momentum in emerging markets, another point of differentiation for Kellanova |
| Meantime, we also expect margin expansion in all four regions in 2024 |
| The result is an outlook for an on-algorithm net sales and operating profit growth and free cash flow generation that is strong enough to incrementally invest in future growth and future margin expansion |
| Amit Banati Gross margins have come in better than expected, and so I think the supply chain is performing well |
| Rice Krispies Treats is already a multi-country brand, growing nicely in Europe, growing nicely in Australia and New Zealand |
| And even after deploying some of the savings into growth-oriented investments, particularly behind snacks and emerging markets, these actions enabled us to get to our medium-term operating profit margin of 15% by 2026, a little earlier than we had previously indicated, while also progressing on our strategy's ambition to deliver best-in-class service through agile, flexible supply chain |
| We’re confident that they’re terrific programs |
| And so we’re through that right now, and we see good opportunities in the frozen business |
| And so that gives us the confidence to talk about the quality of merchandising returning and our share performance improving as we go throughout 2024, again, coupled with more brand investments in the first half of the year |
| I think you’re going to see a cumulative improvement with probably the third quarter being the one where it be most notable and then we’ll exit the year with lots of momentum |
| And that gives us really good confidence in the top-line guide that we gave |
| For the full year, Kellanova's organic net sales growth was about 8%, well above our long-term growth target |
| We're also pleased with our progress and plans for restoring and expanding profit margins, which has proceeded faster than we had anticipated |
| This was driven by the solid top line growth as well as by a restoration of our underlying gross profit margin and reimbursement for expenses related to transition services we are providing to W.K |
| We're very excited about our 2024 commercial plans, which feature a return to a full complement of innovation, brand building, merchandising, as well as sustaining momentum and scale building in our emerging markets |
| Even taking into account the year-over-year impact of expense reimbursement for transition services, provided to WKKC in quarter four, 2023, which did not exist in the year earlier quarter, our year-on-year growth in operating profit was still in double digits for the quarter and the year, well ahead of our long-term target |
| Earnings per share on an adjusted and currency-neutral basis increased by about 19% year-on-year in quarter four and by 7% year-to-date as strong operating profit performance more than covered significant headwinds from macroeconomic factors that drove up interest expense and pull down pension income |
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| Along with the frozen breakfast category, Eggo’s consumption turned to a decline in the fourth quarter on rising elasticities |
| This, in conjunction with category elasticity, suddenly and rapidly rising, negatively impacted our volumes, particularly in the second half |
| Within its key category groups, we can see the deceleration in top line growth caused by the rising elasticities |
| Slide number 24 shows our North America snacks business, which experienced slowing category growth rates during the year |
| In fact, the combination of these spin-off factors amounted to about $300 million of negative impact |
| Can you give us a sense of the phasing throughout the year like the retail tracking data looks very, very weak in the U.S |
| Foreign currency translation was a headwind of about negative six percentage points in quarter four and about negative four percentage points for the full year |
| These below-the-line pressures were expected and were experienced year-on-year in quarter four and the full year, even comparing to a recast 2022, and for all the reasons we have discussed previously |
| Across most of our businesses, price mix growth will moderate as we continue to lap prior actions and industry-wide elasticities will fade gradually during the year |
| That similar slide at Investor Day was at 13%, I guess just first, was – is that just straining the costs from the recast because I think WK Kellogg's margins would have been lower |
| Organic growth, of course, excludes currency translation, which based on today's exchange rates, would be a headwind of 5% to 6% |
| If you think about what we’ve been through as an industry focused on supply, focused on getting through the pandemic, focused on bottlenecks and shortages, the ability to really dedicate resources towards effectiveness programs and efficiency programs like this was challenging |
| You don’t see – I’ve heard some of the noise around because volumes are down, is there going to be high levels of discounting and increased frequency of promotion |
| Amit, just to clarify your comments on the guidance understanding organic sales, the plus three, and I think you said it, current rates, a headwind of 5% to 6% on top line from FX |
| Despite the absence of the spun-off North America cereal cash flows for a quarter, and despite one-time cash outlays related to the spin-off |
| We continue to restore profit margins that had been pressured by last year's soaring input costs and rampant supply impediments |
| And you mentioned, Amit, that the operating profit number, the one -- the $1,850 to $1,900 does include the headwind of 2% from FX |
| Recall that we entered 2023 with low service levels due to economy-wide bottlenecks and shortages, and therefore we elected to launch less innovation and to return to merchandising only after we were strongly confident that service levels had returned to normal levels |
| But is it fair to say you'll have some kind of headwind in 2025 as those roll off |
| Now, obviously a large portion of this currency neutral growth came from Nigeria, where currency devaluation necessitated significant pricing actions |
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