Financial Performance and Results - Net sales growth in 2024 was 0.9% compared to 2023, driven by favorable pricing actions and product mix[142] - Operating income in 2024 was $1,060.3 million, a 10.1% increase from $963.0 million in 2023[142] - Adjusted diluted earnings per share in 2024 was $2.95, a 9.3% increase from $2.70 in 2023[143] - Net cash provided by operating activities in 2024 was $921.9 million, compared to $1,237.3 million in 2023[144] - Gross profit for 2024 increased by $88.5 million to $2,591.0 million, with gross profit margin rising 90 basis points to 38.5%, driven by pricing actions, favorable product mix, and cost savings[153] - Operating income for 2024 increased by $97.3 million to $1,060.3 million, with operating margin rising 130 basis points to 15.8%, driven by reduced special charges and improved profitability[158] - Special charges for 2024 decreased significantly to $9.5 million from $61.2 million in 2023, primarily related to the GOE program and manufacturing facility transition[155][156][157] - Effective tax rate for 2024 decreased to 20.5% from 21.8% in 2023, driven by $31.7 million in net discrete tax benefits, including deferred tax asset recognition and reserve reversals[160][161] - Adjusted operating income increased 4.5% to $1,069.8 million in 2024, with adjusted operating margin of 15.9%[184] - Adjusted diluted earnings per share for 2024 was $2.95, representing a 9.4% increase from 2023[184] - Net sales for 2024 increased by 0.9% to $6,723.7 million, driven by pricing actions (+0.5%), favorable volume and product mix (+0.3%), and foreign exchange (+0.3%), partially offset by divestiture impact (-0.2%)[152] - Consumer segment sales increased by 1.1% to $3,848.5 million in 2024, with EMEA region sales growing 7.3% and APAC region sales declining 5.1% due to slower demand in China[169][171][172] - Segment operating income for the consumer segment increased by $4.8 million to $740.3 million, with operating margin slightly decreasing by 10 basis points to 19.2%[169][173] - Flavor Solutions segment net sales increased by 0.7% in 2024 to $2,875.2 million, with organic growth of 0.9%[174] - Flavor Solutions segment operating income increased 14.1% to $329.5 million in 2024, with operating margin expanding 140 basis points to 11.5%[178] - Net sales for the Consumer segment in the Americas increased by 0.6% as reported, with a 0.7% increase on a constant currency basis[191] - Net sales for the Flavor Solutions segment in APAC increased by 4.1% as reported, with a 5.1% increase on a constant currency basis[191] - Total adjusted operating income for the Flavor Solutions segment increased by 14.1% as reported, with a 14.5% increase on a constant currency basis[192] - Net cash provided by operating activities in 2024 was $921.9 million, a decrease from $1,237.3 million in 2023[195] - Capital expenditures in 2024 were $274.9 million, with an expected increase to approximately $300 million in 2025[206] - Net cash used in financing activities in 2024 was $583.1 million, primarily due to repayments of long-term debt totaling $801.1 million[208] - The cash conversion cycle decreased to 36 days in 2024 from 40 days in 2023, driven by improved inventory management[203] - Repaid $268.1 million of long-term debt in 2023, including $250.0 million of 3.50% notes maturing on September 1, 2023[209] - Issued $500.0 million of 4.95% notes due 2033, with net cash proceeds of $496.4 million[209] - Repaid $772.0 million of long-term debt in 2022, including $750 million of 2.70% notes maturing on August 15, 2022[209] - Repurchased 0.7 million shares of common stock in 2023 for $53.1 million, compared to 0.5 million shares for $35.7 million in 2022[209] - As of November 30, 2024, $448 million remained of a $600 million share repurchase program authorized in November 2019[209] - Received proceeds from exercised stock options of $17.5 million in 2024, $16.6 million in 2023, and $41.4 million in 2022[210] - Repurchased $9.0 million, $10.8 million, and $19.4 million of common stock in 2024, 2023, and 2022, respectively, for employee tax withholding[210] - Total dividends paid increased to $451.0 million in 2024, up from $418.5 million in 2023 and $396.7 million in 2022[210] - Dividends per share increased by 7.7% in 2024 to $1.68, compared to 5.4% in 2023 and 8.8% in 2022[210] - Board approved a 7.1% increase in quarterly dividend from $0.42 to $0.45 per share in November 2024[210] Segment Performance - Consumer segment contributed 57% of consolidated net sales and 69% of consolidated operating income in 2024, while flavor solutions segment contributed 43% of net sales and 31% of operating income[13] - Approximately two-thirds of consumer segment sales are from spices, seasonings, condiments, and sauces, with McCormick being a global brand leader in these categories[14] - Top three customers in the flavor solutions segment represented between 47% and 49% of global flavor solutions sales in 2024[23] - Consumer segment sales increased by 1.1% to $3,848.5 million in 2024, with EMEA region sales growing 7.3% and APAC region sales declining 5.1% due to slower demand in China[169][171][172] - Segment operating income for the consumer segment increased by $4.8 million to $740.3 million, with operating margin slightly decreasing by 10 basis points to 19.2%[169][173] - Flavor Solutions segment net sales increased by 0.7% in 2024 to $2,875.2 million, with organic growth of 0.9%[174] - Pricing actions contributed 1.2% to sales growth in 2024, while unfavorable volume and product mix reduced sales by 0.3%[174] - Americas region flavor solutions sales grew 1.4% in 2024, with organic growth of 1.5%, driven by 1.6% pricing impact[175] - EMEA region flavor solutions sales declined 3.5% in 2024, with organic decline of 3.6%, impacted by 3.3% unfavorable volume and product mix[176] - APAC region flavor solutions sales increased 4.1% in 2024, with organic growth of 5.1%, driven by 4.2% favorable volume and product mix[177] - Flavor Solutions segment operating income increased 14.1% to $329.5 million in 2024, with operating margin expanding 140 basis points to 11.5%[178] - Net sales for the Consumer segment in the Americas increased by 0.6% as reported, with a 0.7% increase on a constant currency basis[191] - Net sales for the Flavor Solutions segment in APAC increased by 4.1% as reported, with a 5.1% increase on a constant currency basis[191] - Total adjusted operating income for the Flavor Solutions segment increased by 14.1% as reported, with a 14.5% increase on a constant currency basis[192] Sales and Customer Concentration - Sales to Walmart accounted for 12% of consolidated sales in 2024, while sales to PepsiCo accounted for 13% of consolidated sales in the same year[23] - Two major customers accounted for approximately 25% of consolidated sales in 2024, and any negative change in these relationships could significantly impact the company's financial results[54] Geographic and International Operations - Approximately 39% of sales in fiscal year 2024 were from non-U.S. operations[39] - McCormick operates in over 150 countries and territories, with major brands like Ducros, Schwartz, and Kamis in the EMEA region and McCormick and DaQiao in the APAC region[14] - Approximately 39% of the company's sales in fiscal year 2024 were generated outside the U.S., exposing it to risks such as currency fluctuations, trade barriers, and political uncertainties[107] - The company's international operations are subject to additional risks, including changes in tax laws, tariffs, and trade barriers, which could impact profitability[107] - The company's effective tax rate is influenced by global earnings mix, tax legislation changes, and the resolution of tax uncertainties, which could lead to volatility in financial results[108][109] - The company expects no material increase in its effective tax rate from the implementation of the global 15% minimum tax (Pillar 2) starting in fiscal year 2025[164] Raw Material and Supply Chain Management - The company relies on strategic raw material purchases and customer price adjustments to manage volatility in raw material costs, including pepper, onion, garlic, and dairy products[19][20] - Fluctuations in raw material prices and availability, driven by factors such as weather, climate change, and geopolitical instability, could adversely affect the company's business and operating results[55][56] - Supply chain disruptions could impair the company's ability to manufacture or sell products, particularly due to reliance on single-location production and third-party suppliers[58] - Increased consumer demand may exceed production capacity, straining the supply chain and potentially affecting business operations[59] - Labor shortages, turnover, and cost increases could lead to higher operational costs and reduced efficiency in manufacturing and distribution[60] - Inflationary pressures on raw materials, packaging, labor, and distribution costs are expected to continue in 2025, potentially impacting financial results[61] - Geopolitical conflicts, such as those between Russia and Ukraine, and Israel and Hamas, may disrupt global operations and increase supply chain costs[65][66] - Natural disasters, cyber-attacks, or health epidemics could interrupt business operations, leading to potential losses in inventory and data[67][68] Brand and Intellectual Property - The company owns a broad portfolio of trademarks, including "McCormick," "French's," "Frank's RedHot," and "Zatarain's," which are critical to its business[24] - Intellectual property rights are critical to the company's business, and failure to protect them could reduce the value of products and brands[94] Forward-Looking Statements and Risks - Forward-looking statements include expectations for net sales, gross margin, earnings, cost savings, and the impact of foreign currency rates, with potential risks and uncertainties that could materially affect results[40] - The company anticipates sales growth through brand marketing, product innovation, and expansion in e-commerce and various markets, but results may be impacted by economic conditions, consumer spending, and supply chain challenges[40] - Inflationary pressures and supply chain disruptions, including raw material costs and labor shortages, could negatively affect the company's operations and financial performance[41][42] - The company expects productivity improvements through its CCI program and Global Business Services initiative, but these may be offset by external factors such as geopolitical conflicts and economic volatility[40][42] - The company's ability to maintain brand relevance and respond to consumer preferences, including the use of data analytics and AI, is critical to its competitive position[48] - The company faces risks related to product quality, safety concerns, and potential recalls, which could damage its reputation and lead to financial losses[49][50] - The rise of e-commerce and changing consumer behaviors, including the shift to private label products, could impact the company's market position and financial performance[53] - Geopolitical tensions, such as the conflicts between Russia and Ukraine and the war in the Middle East, could create additional risks for the company's supply chain and regulatory compliance[57] - Acquisitions, joint ventures, and divestitures may present financial and operational challenges, potentially impacting profitability[69][70] - Goodwill and indefinite-lived intangible assets totaling $5.2 billion and $3.0 billion, respectively, are subject to impairment risks, which could negatively affect financial results[71] - Foreign currency fluctuations, particularly in the Euro, British pound, and Chinese renminbi, could impact net sales, earnings, and cash flows[74] - Climate change and related regulatory measures may increase costs and disrupt operations, affecting the availability and pricing of raw materials[76][77] - Company has established science-based target 2025–2030 goals for Scope 1, 2, and 3 greenhouse gas emissions[79] - Company faces risks related to ESG goals, including potential negative impacts on reputation, business, and financial performance if goals are not met or perceived as unmet[82] - Increased regulatory requirements related to environmental causes may result in higher compliance costs and operating expenses[84] - Company's credit ratings impact borrowing costs and availability, with potential adverse effects if ratings are downgraded[87] - Cybersecurity threats and attacks pose risks to the company's information technology systems and data, with potential material impacts on operations and reputation[96] - Company's dividend payments are subject to board discretion and may be reduced, suspended, or discontinued based on financial conditions and other factors[93] - The company is implementing a multi-year business transformation initiative, including replacing its ERP system, to enhance global processes and reduce costs, with potential risks of business disruption and revenue loss if not managed effectively[98] - The company relies on third-party cloud-based services, and any failure by these providers could lead to increased costs, reputational damage, or legal issues[99] - The company faces compliance obligations under data privacy laws like GDPR and CCPA, with potential financial penalties and reputational damage for non-compliance[102][103] - The company has not experienced any material cybersecurity threats to date but maintains a comprehensive cybersecurity risk management program, including incident response plans and insurance[113][116][117] - The company has an Executive Cybersecurity Steering Committee and a dedicated information security team led by a Certified Information Systems Security Professional (CISO) to manage cybersecurity risks[121] - The company conducts regular cybersecurity training for employees and evaluates third-party service providers' cybersecurity risks to mitigate potential threats[115][114] Debt and Financial Structure - As of November 30, 2024, the company had total outstanding variable rate debt of approximately $449 million at a weighted-average interest rate of 4.7%[85] - Company had total outstanding fixed to variable interest rate swaps with a notional value of $600 million as of November 30, 2024[86] - Total indebtedness of the company and its subsidiaries as of November 30, 2024, is approximately $4.3 billion[88] Share Repurchases and Dividends - The company repurchased 298,747 shares of Common Stock in 2024, with an approximate dollar value of $448 million remaining under the share repurchase authorization[131] - Diluted earnings per share for 2024 was $2.92, with a projected range of $2.99 to $3.04 for 2025, representing a 3% to 5% increase, or 5% to 7% on a constant currency basis[151] - Repurchased 0.7 million shares of common stock in 2023 for $53.1 million, compared to 0.5 million shares for $35.7 million in 2022[209] - As of November 30, 2024, $448 million remained of a $600 million share repurchase program authorized in November 2019[209] - Received proceeds from exercised stock options of $17.5 million in 2024, $16.6 million in 2023, and $41.4 million in 2022[210] - Repurchased $9.0 million, $10.8 million, and $19.4 million of common stock in 2024, 2023, and 2022, respectively, for employee tax withholding[210] - Total dividends paid increased to $451.0 million in 2024, up from $418.5 million in 2023 and $396.7 million in 2022[210] - Dividends per share increased by 7.7% in 2024 to $1.68, compared to 5.4% in 2023 and 8.8% in 2022[210] - Board approved a 7.1% increase in quarterly dividend from $0.42 to $0.45 per share in November 2024[210] Future Guidance and Projections - The company expects 2025 net sales growth between 0% and 2%, with a 1% unfavorable impact from foreign currency rates[146] - 2025 gross profit margin is projected to improve by 50 to 100 basis points from the 38.5% reported in 2024[147] - 2025 operating income is anticipated to increase by 3% to 5%, including a 1% unfavorable impact from foreign currency rates[148] - The company expects a 2025 effective tax rate of 22.0%, compared to 20.5% in 2024[149] - Income from unconsolidated operations in 2025 is expected to decline by a mid-teen percentage rate due to the strengthening of the U.S. dollar against the Mexican peso[150] - 2025 guidance projects adjusted diluted earnings per share of $3.03 to $3.08, including $0.04 impact from special charges[188] - Projected net sales for 2025 are expected to grow between 0% to 2%, with organic net sales growth projected at 1% to 3%[194] - Adjusted operating income for 2025 is projected to grow between 3% to 5%, with a 4% to 6% increase on a constant currency basis[194] - Adjusted earnings per share (diluted) for 2025 are projected to grow between 3% to 5%, with a
McCormick(MKC_V) - 2024 Q4 - Annual Report