In the paragraph, Faten Freiha, VP of Investor Relations, introduces the Fourth Quarter Earnings Call for McCormick. She mentions that a set of slides is available on their website to accompany the call. The company's Chairman, President, and CEO, Brendan Foley, and CFO, Marcos Gabriel, are also present. Freiha explains the use of non-GAAP financial measures and provides information on where to find reconciliations with GAAP results. The presentation includes forward-looking statements with a disclaimer that actual results may differ, and there's no obligation to update them. Changes have been made to the release and slides for better communication based on feedback. They are adopting the organic sales measure excluding certain factors. Freiha then hands over to Brendan Foley, who expresses satisfaction with the strong performance for the fourth quarter and fiscal year 2024, highlighting momentum and growth for McCormick.

The paragraph discusses McCormick's financial performance and strategic initiatives. The company focused on core categories to improve unit and volume share, expand margins, and achieve strong earnings growth. McCormick's plans capitalize on the demand for flavor and the strength of its brands, leading to effective growth strategies. Confident in the leadership team and employees, the company aims for industry-leading performance in both near-term and long-term objectives. In the fourth quarter, organic sales grew by 2%, driven by a 4% increase in consumer segment volume and product mix, particularly in the Americas, despite a challenging environment. Future plans and positions relative to consumer trends will also be discussed by the company's leadership.

The paragraph discusses the company's growth and strategic focus on core categories, brand marketing, and innovation. In EMEA, positive volume growth was achieved, while in Asia Pacific, results were challenged by the market environment in China, with recovery expected in 2025. In the Flavor Solutions segment, global volumes were flat due to softness in CPG and QSR customer volumes. The Global Consumer segment saw success with increased investment and growth in core categories, particularly in the Americas, where unit and volume consumption growth surpassed competitors. The company also noted strong performance in Global Spices and Seasonings and improved competitiveness in the US, with successful holiday sales and demand for innovative products.

The paragraph highlights strong performance across various product categories, including Finishing Sugars, Recipe Mixes, Mustard, and Hot Sauce, contributing to share and volume growth in different regions. In the US, the Cholula line drives significant growth, while new products like Short Seasonings in the UK perform well. The Americas saw unit volume and dollar share gains, particularly in mustard and e-commerce, which recorded double-digit growth. Distribution gains, enhanced marketing, and innovation are key factors contributing to this success, with expanded distribution points in spices, seasonings, and sauces across the Americas and EMEA.

The paragraph discusses the company's strengths and challenges in its Flavor Solutions and Branded Foodservice segments. It highlights success in the Americas with high-margin Flavor products and volume growth in Spices, Seasonings, and Condiments. Challenges include low consumer sentiment and inventory issues in China, continued softness in customer volumes in the Americas and EMEA, and geopolitical boycotts affecting EMEA due to a Middle East conflict. Despite these pressures, the company is working with customers to improve QSR traffic through innovation and consumer trends. The company reflects positively on achieving its goals for the fiscal year 2024.

The paragraph highlights McCormick's commitment to achieving sustainable volume-led growth, which aligns with investor expectations. The company is proud of its progress in 2024, achieving near top-end sales growth and positive volume growth, particularly in the consumer business. McCormick is focused on maintaining long-term growth by strengthening profitability, cash flow, and reducing debt leverage. Significant advancements were made in Flavor Solutions operating margins, reinforcing confidence in meeting 2028 targets. The company leverages consumer insights to adapt strategies to global flavor trends, ensuring continued growth momentum into 2025 and beyond.

The paragraph discusses the strong and growing demand for flavor, which is central to the company's growth. The business, which focuses on flavoring rather than competing for caloric content, sees opportunities regardless of changes in calorie consumption. Consumer products enhance home cooking, while collaborations in the Flavor Solutions segment cater to evolving healthy product needs. Trends show that while lower income consumers face challenges, mid and higher income groups are beginning to ease their spending. There is an elevated demand for larger product sizes, depicting a search for value, alongside interest in small or trial sizes for flavor exploration. Home cooking continues to rise, driven by healthier eating and budget stretching trends, boosting demand in McCormick's product categories, with spices and extracts leading growth. The company maintains a consumer-focused approach, informed by changing consumer and customer priorities, with consistent growth strategies in category management, brand marketing, product innovation, and customer engagement, all supported by data and analytics and ongoing digital transformation.

The paragraph discusses McCormick's focus on strengthening its business in major markets and key categories, particularly Spices and Seasonings, Condiments and Sauces, Branded Foodservice, and Flavors. The company highlights consumer demand for hot and spicy flavors as a growth driver and emphasizes its strong position in this area due to its iconic brands, consumer insights, and technological expertise. McCormick attributes its long-term growth objectives to a combination of its global portfolio, powerful brands, and strategic acquisitions, supported by a strong company culture. Finally, Marcos Gabriel reports on the company's strong results, noting a 2% organic sales growth for the quarter.

The paragraph describes the company's performance across different segments and regions. In the Consumer segment, there was a 3% organic sales increase driven by a 4% volume growth, despite a 1% price investment impact, particularly strong in the Americas and EMEA. However, the APAC region saw a 10% decline in consumer sales due to an 11% volume decrease related to the macro environment in China. The Flavor Solutions segment saw a 1% increase in organic sales led by pricing, though there were volume declines in the Americas tied to CPG and QSR customers. In EMEA, Flavor Solutions sales declined 4% due to reduced volumes and pricing challenges. Overall, strong volume-led growth was recorded, especially in core categories, with a hopeful outlook for continuing momentum into 2025.

In the APAC region, Flavor Solutions saw a 6% increase in organic sales primarily due to QSR promotions and new products, despite a 1% pricing impact. Gross profit margin improved by 20 basis points in the fourth quarter, aided by a Continuous Improvement Program, and expanded by 90 basis points for the year thanks to product mix and pricing. Selling, general, and administrative (SG&A) costs rose due to increased technology expenses, with SG&A as a percentage of net sales increasing by 80 basis points in the fourth quarter. The fiscal year saw a 40 basis point SG&A increase from 2023, primarily due to brand marketing. Adjusted operating income declined by 1% in the fourth quarter due to higher SG&A costs, but rose 4.5% for the fiscal year, with a 50 basis point operating margin expansion. The adjusted effective tax rate for the fourth quarter was 25.4%, up from 22.3%, and the annual rate decreased by 150 basis points to 20.5% due to more discrete tax benefits. Income from unconsolidated operations fell by 3% in the fourth quarter.

The paragraph discusses the financial performance of the company, emphasizing the impact of currency fluctuations, particularly the strengthening of the US dollar against the Mexican peso, which affected reported results despite strong performance in McCormick de Mexico. The Consumer segment saw a 3% decrease in adjusted operating income due to pricing and increased SG&A costs, though this was minimally impacted by currency. Investments led to a slight rise in adjusted operating income and a small decline in operating margin within this segment. In the Flavor Solutions segment, adjusted operating income increased by 5% (7% in constant currency) thanks to product mix, pricing, and cost savings, countered by higher SG&A costs. The segment's operating income grew by 14%, and its operating margin expanded significantly. Overall, fourth-quarter adjusted earnings per share for 2024 decreased to $0.80 from $0.85 in the previous year.

The paragraph explains the company's financial performance and highlights from the year 2024. Despite a decrease in operational cash flow to $922 million due to strategic inventory decisions and tax payments, the company achieved a 9% increase in adjusted earnings per share to $2.95, surpassing guidance expectations. The company returned $451 million to shareholders in dividends and invested $275 million in capital expenditures focused on capacity, digital transformation, and cost optimization. Emphasizing a balanced cash strategy, the company improved its leverage ratio to below three times and enhanced its cash conversion cycle by 10%. Looking ahead to 2025, the company anticipates continued strong cash flow underpinned by profit and working capital strategies, aligning with its consistent 2024 results and strategic focus.

The company remains optimistic about its long-term growth strategy, committing to key investments and managing uncertainties in the consumer and macro environment. They forecast negative impacts from currency rates on financial metrics, with expected organic net sales growth of 1% to 3%, primarily driven by volume rather than pricing. In China, a gradual sales recovery is anticipated despite current weak demand. The company projects a gross margin increase of 50 to 100 basis points in 2025, aided by product mix improvements and cost savings, though partially offset by inflation. Brand marketing investments are set to rise significantly, supported by savings from their cost-saving initiatives. Adjusted operating income is expected to grow 4% to 6% in constant currency, aligning with the company's 2028 objectives and allowing for continued business investments.

The paragraph outlines McCormick's financial expectations for 2025, highlighting a projected tax rate increase to 22% and a decline in income from unconsolidated operations due to currency fluctuations affecting their joint venture in Mexico. Despite these challenges, the company anticipates adjusted earnings per share (EPS) to grow 5-7% on a constant currency basis. McCormick expects overall volume growth across both segments and modest gross margin expansion initially, with improvement expected throughout the year. Strategic investments in brand marketing and shifts in stock-based compensation expenses will impact quarterly comparisons, with first-quarter profits remaining flat or slightly decreasing. However, operating profit growth is anticipated to strengthen in subsequent quarters, reflecting McCormick's focus on strategic investments to drive performance.

The paragraph highlights McCormick's confidence in its growth strategy, emphasizing that their volume-led growth approach is on track to meet their 2025 financial goals. The company attributes its success to alignment with consumer trends such as healthy cooking and flavor exploration, alongside effective investment strategies. McCormick is seeing strong quarterly and annual results, expanding margins, and managing costs efficiently, contributing to confidence in achieving both short and long-term objectives. The company plans to continue capitalizing on attractive market segments and driving category leadership. The paragraph concludes with an acknowledgment of employee contributions and an invitation for questions.

The paragraph is a conversation during a Q&A session where Andrew Lazar from Barclays asks Brendan Foley about the strong consumer organic sales and volume growth, despite challenges in China and the broader packaged food environment. Brendan attributes this success to being well-positioned, delivering on plans and guidance, and strong performance in core categories. He highlights volume growth of around 4% globally, with 5% growth in the Americas and EMEA, indicating strong performance in the fourth quarter.

Leading up to the fourth quarter, the company experienced strong volume growth driven by increased business investments, brand marketing, innovation, expanded distribution, and price gap management. The fourth quarter saw exceptional holiday season execution, a successful limited-time offering, and a new, effective marketing campaign. Growth was also noted in e-commerce and other unmeasured channels, resulting in a 5% increase in both volume and consumption growth. Looking ahead to 2025, the company plans to continue investing in brand marketing and innovation due to the strong returns on investment they provide.

The paragraph outlines the company's plans and expectations for future performance and investments. It mentions strong performance for product launches in 2024 and 2025, with a focus on renovating product packaging and maintaining pricing strategies. Key highlights include a new package for the grilling line, a gourmet product relaunch, and plans to share more details at the CAGNY conference. Marcos Gabriel discusses fiscal year 2025 as a reinvestment year, specifically targeting technology investments. These include advancements in ERP implementation, AI, machine learning, and data analytics. The goal is to drive CCI (Continuous Cost Improvement) and productivity savings while acknowledging the impact on SG&A expenses.

In this paragraph, Peter Galbo from Bank of America asks Brendan Foley about the changes in organic sales expectations for 2025 compared to initial forecasts from Investor Day. Previously expected to be between 2% to 3%, the range has dropped slightly, suggesting a potential deceleration despite strong performance in the fourth quarter of 2024. Brendan Foley explains that the guidance now represents a volume-driven plan with little emphasis on pricing and reflects a balanced growth between their Consumer and Flavor Solutions businesses. He emphasizes that this adjusted guidance takes into account the evolving context of the marketplace.

The paragraph discusses the outlook for consumer and flavor solutions markets in different regions. On the low end, there's weak consumer confidence in China and weakness in QSR channels in EMEA. On the high end, there's strength in consumer volumes in the Americas and EMEA. The outlook for 2025 is consistent with previous predictions made in 2024 and during an Investor Day event. Brendan Foley indicates ongoing strength in EMEA's consumer business despite weakness in Flavor Solutions. The US Foodservice market is anticipated to improve in 2025. Overall, EMEA's consumer segment remains strong, and there's a gradual improvement expected in the Flavor Solutions sector.

The paragraph discusses the performance and strategic focus of the Flavor Solutions segment in a specific region, noting an expected improvement despite geopolitical issues, particularly in the Middle East, affecting both QSR and CPG sectors. Peter Galbo introduces the topic, followed by a question from Alexia Howard about the segment's pivot toward faster-growing, innovative customers. Brendan Foley responds, indicating that while overall volume growth is flat, there is noticeable acceleration in growth from these new customer segments, which include categories such as bars, granola, crackers, soups, broth, and beverages, both alcoholic and non-alcoholic. However, specific sales proportions from these new customers are not disclosed.

The paragraph discusses the company's strategies and outlook for growth. It highlights the success in specific market categories and the expectation of continued growth into 2025 through volume increases and market share gains. The company has seen positive performance in Branded Foodservice and anticipates improved customer traffic and activity. It also addresses the potential impact of changes in food regulations, such as the removal of certain food additives, and emphasizes the company's proactive role in reformulations and product improvements to align with the industry's shift towards healthier eating.

The paragraph discusses the importance of innovation in driving industry changes and working with customers to modify product formulations, such as removing artificial colors or reducing sodium, aiming for cleaner ingredients by 2025. Following this, Alexia Howard concludes her input in the discussion, and Robert Moskow from TD Cowen asks about the 1% to 3% guidance range, specifically regarding China's economic performance. Brendan Foley responds by explaining that the lower end of the range considers China's historical underperformance, but there is an expectation for gradual improvement. He mentions a recent visit to China to evaluate market changes and growth plans, indicating a cautious approach in their forecast due to past challenges in the region.

In the dialogue, Marcos Gabriel explains that their financial guidance is positive yet balanced given the current dynamic environment. When Robert Moskow asks about operating income for the fourth quarter, Gabriel clarifies that it was in line with expectations. The quarter saw some of their expenses, mainly in technology and R&D, shift from Q3 to Q4, reflecting in a slight negative operating profit due to SG&A impacts. However, on a yearly basis, the SG&A was in line with expectations, showing a 40 basis point increase driven by ongoing investments in advertising, technology, and R&D, which are expected to continue into 2025.

In the paragraph, Robert Dickerson inquires about the need to continue managing price gaps and investing in pricing strategies for the upcoming year, particularly in Q1, especially given the strong consumer volumes in Q4. Brendan Foley responds by explaining that the level of investment in price management will remain consistent with previous quarters (Q2 and Q3) as they move into Q1, without any significant increase. Foley emphasizes that the focus is on maintaining a baseline investment to support brand and volume growth throughout the year, with continuous evaluation and adjustment of pricing strategies.

The paragraph discusses the company's reflection on their performance in the fourth quarter, emphasizing strong execution and increased consumer interest in scratch cooking during the holiday season, which contributed to good results. The conversation then shifts to the broader consumer portfolio, highlighting better performance of meal-related items like chicken and pasta compared to discretionary items. The dialogue suggests that consumers have continued to focus on meal-related purchases, a trend that began during COVID-19, and considers how this might impact their Consumer Americas business in 2025.

The paragraph discusses a stable consumer outlook with a focus on flavor and healthier eating. It emphasizes the continued demand for flavor and cooking at home, positioning the portfolio well for performance. Value remains crucial, especially for lower-income consumers globally, seeking affordability. The focus will remain on promoting healthy eating as people look to stretch budgets and choose healthier options. The speaker is asked about margin growth, noting the past year's flat performance for the consumer segment, while Flavor Solutions saw significant margin growth.

In the paragraph, Marcos Gabriel discusses the company's financial outlook and strategic focus. He expresses satisfaction with the gross margin expansion achieved in 2024 and expects further growth in 2025, citing a projected increase of 50 to 100 basis points. Key drivers for this expectation include productivity savings, technological advancements, and leveraging the Global Business Services Organization to streamline processes. Additionally, there is an emphasis on shifting the portfolio towards high-margin categories within Flavor Solutions, which is expected to drive higher margins compared to the Consumer segment. The plan aligns with their commitment to enhance profitability, with notable improvements in operating margin already achieved, and a target to reach 14.5% by 2028.

Max Gumport from BNP Paribas questions the disparity in consumer segment performance, noting strong volumes in the U.S. but softer volumes in CPG Customers and Flavor Solutions. Brendan Foley explains that their focus on segments like herbs, spices, seasonings, condiments, and sauces benefits from healthy growth. He attributes their success to early execution efforts in 2024, aiming to quickly meet consumer needs. Their strategy includes targeting fast-growing subcategories such as heat-related condiments and emphasizing products like mustard. Overall, their improved performance is due to strategic execution and operating in healthy market categories.

The paragraph discusses a conversation between Max Gumport and Marcos Gabriel about the financial strategy for the company. Marcos explains that the company has made strategic decisions to increase inventory by purchasing commodities to protect service, drive supply chain availability, and lock in favorable costs. This is part of their standard approach to managing input costs and procurement globally. Max thanks Marcos, and then Stephen Powers from Deutsche Bank asks about their brand marketing plans for the year, querying whether the rate of increase in spending will remain consistent year-over-year and where the marketing budget will be allocated. Brendan Foley is also mentioned, suggesting he might provide additional insights.

The paragraph discusses a company's approach to brand marketing and advertising spending for 2025. They plan to maintain spending at high single-digit levels, similar to 2024, consistently across all quarters. The company focuses on achieving strong returns and considers strategically allocating resources to different brands. They prioritize increasing spending on brands that show good performance, such as Frank's RedHot, while continuing to adjust the allocation of advertising and promotion (A&P) funds to maximize effectiveness.

The paragraph discusses a conversation during an investor call where Thomas Palmer from Citi inquires about the company's earnings trajectory concerning its guidance ranges for organic sales and operating profit growth. Brendan Foley responds, indicating that top-line momentum will continue from 2024 into 2025, with volume growth expected across both segments throughout the year. He notes a slight shift in operating profit between the first two quarters, with Q1 being slightly down or flat due to pricing lapses and compensation shifts. However, this will be offset by increased operating profit in Q2. Gross margin is expected to grow consistently from Q2 to Q4. When asked about joint venture (JV) income, Foley clarifies that, excluding currency headwinds, the business is expected to continue growing into 2025.

In the paragraph, Marcos Gabriel discusses the positive performance of a business in Mexico despite challenges from foreign exchange (FX) fluctuations. The Mexican peso has devalued approximately 20% year-on-year against the dollar, affecting financial translations, but the business itself remains strong and profitable. Thomas Palmer thanks Marcos for his insights, and the operator concludes the call after Faten Freiha offers additional assistance for further inquiries.

This summary was generated with AI and may contain some inaccuracies.