Kellogg Company SECOND QUARTER 2017 FINANCIAL RESULTS August 3, - PDF document

Kellogg Company August 3, 2017 Kellogg Company SECOND QUARTER 2017 FINANCIAL RESULTS August 3, 2017 Forward-Looking Statements This presentation contains, or incorporates by reference, “forward - looking statements” with projections concerning, among other things, the Company’s global growth and efficiency program (Project K), the integration of acquired businesses, the Company’s strategy, zero -based budgeting, and the Company’s sales, earnings, margin, operating profit, costs and expenditures, interest expense, tax rate, capital expenditure, dividends, cash flow, debt reduction, share repurchases, costs, charges, rates of return, brand building, ROIC, working capital, growth, new products, innovation, cost reduction projects, workforce reductions, savings, and competitive pressures. Forward-looking statements include predictions of future results or activities and may contain the words “expects,” “believes,” “should,” “will,” “anticipates,” “projects,” “estimates,” “implies,” “can,” or word s or phrases of similar meaning. The Company’s actual results or activities may differ materially from these predictions. The Company’s future results could also be affected by a variety of factors, including the ability to implement Project K (including the exit from its Direct Story Delivery system) as planned, whether the expected amount of costs associated with Project K will differ from forecasts, whether the Company will be able to realize the anticipated benefits from Project K in the amounts and times expected, the ability to realize the anticipated benefits from Revenue Growth Management, the ability to realize the anticipated benefits and synergies from the acquisitions in the amounts and at the times expected, the impact of competitive conditions; the effectiveness of pricing, advertising, and promotional programs; the success of innovation, renovation and new product introductions; the recoverability of the carrying value of goodwill and other intangibles; the success of productivity improvements and business transitions; commodity and energy prices; labor costs; disruptions or inefficiencies in supply chain; the availability of and interest rates on short-term and long-term financing; actual market performance of benefit plan trust investments; the levels of spending on systems initiatives, properties, business opportunities, integration of acquired businesses, and other general and administrative costs; changes in consumer behavior and preferences; the effect of U.S. and foreign economic conditions on items such as interest rates, statutory tax rates, currency conversion and availability; legal and regulatory factors including changes in food safety,advertising and labeling laws and regulations; the ultimate impact of product recalls; business disruption or other losses from war, terrorist acts or political unrest; and other items. Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to update them publicly. This presentation includes non‐GAAP financial measures. Please refer to the Appendices for a reconciliation of these non‐GAAP financial measures to the most directly comparable GAAP financial measures. Management believes that the use of such non-GAAP measures assists investors in understanding the underlying operating performance of the company and its segments. 2 Q2 Kellogg Company Earnings August 3, 2017 Page 1 of 10

Kellogg Company August 3, 2017 Q2 Overview Business Transformation: On Track • Nearing completion of transition to warehouse from DSD • Parati (Brazil) integration progressing well • Improved cereal performance in core international markets Financials: On Track • Sequential improvement in Net Sales • Continued Profit Margin improvement • Cash Flow on track Note: All referenced metrics are on a currency-neutral comparable basis; Cash Flow is defined as cash from operations less capital expenditure. 3 Q2 Kellogg Company Earnings August 3, 2017 Priority – Restore Top-Line Growth Progress Toward Returning to Growth: Winning Brand- On-Trend Where the Emerging Return to low Building Food & single-digit Shopper Markets Effectiveness Packaging growth * Shops   Special K and Kashi  Continued share gains  Progress on DSD Strong growth in Asia, Co. stabilizing share in transition for kid-segment led by Pringles U.S. Cereal cereal brands  U.S. Snacks now  Integration and 100% warehouse   Expanding Momentum for growth of Parati distributed distribution of new Cheez-It and Rice (Brazil), momentum in  Entering final, wind- Special K and Kashi Krispies Treats Bisco Misr (Egypt) down phase snack bars   Sequential Double-digit growth  Pivoting to demand-  Removed-artificials improvement in U.K., in Africa and China pull model Eggo gaining share Canada, and Australia Joint Ventures **  Growth in cereal e-Commerce * All referenced metrics are on a currency-neutral comparable basis. ** Joint Ventures are not included in consolidated results. 4 Q2 Kellogg Company Earnings August 3, 2017 Page 2 of 10

Kellogg Company August 3, 2017 Financial Results – Summary Change Versus Prior Year 1 st Half Q2 Net (2.5)% (3.3)% Reported Sales (3.1)% (3.8)% Currency-Neutral Comparable * Operating +0.7% (8.4)% Reported Profit +6.9% +4.6% Currency-Neutral Comparable * Earnings + 1.3% +19.4% Reported Per +7.7% +11.3% Currency-Neutral Comparable * Share * Please refer to appendices for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. 5 Q2 Kellogg Company Earnings August 3, 2017 Net Sales – Sequential Improvement Net Sales Growth Components Year-over-year, % change Currency-Neutral Comparable Net Sales: Q1: (4.4)% Q2: (3.1)% 1.8% 1.3% 1.3% 1.3% Q1 2017 Q2 2017 -0.7% -1.0% -2.5% -4.1% -4.9% -5.7% Volume Price/Mix Acq. & Div. * Currency Net Sales (Reported-Basis) * The acquisition/divestiture figure includes the negative impact of deconsolidating our Venezuela results, beginning January 1, 2017. 6 Q2 Kellogg Company Earnings August 3, 2017 Page 3 of 10

Kellogg Company August 3, 2017 Profit Margins – Continued Expansion Second Quarter and First Half 2017 % of Net Sales, Currency-Neutral Comparable Basis Gross Profit Margin Operating Profit Margin 40.0% 39.7% 17.2% 16.7% 39.1% 38.9% 15.6% 15.4% +30 basis points +160 +130 +20 basis points basis points basis points Q2 1H Q2 1H 2016 2017 2016 2017 * Please refer to appendices for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. 7 Q2 Kellogg Company Earnings August 3, 2017 Cash Flow – On Track First Half 2017 vs. First Half 2016 Cash Flow * Core Working Capital ** 6.0% $500 5.0% $400 4.0% $300 3.0% $200 2.0% $100 1.0% $0 0.0% 1H 2016 1H 2017 1H 2016 1H 2017 * Cash Flow defined as cash from operating activities, less capital expenditure. Please refer to appendices for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. ** Expressed as % of net sales, “Core Working Capital” is an internal Kellogg metric defined as last 12 months’ average trade receivables and inventory, less 12 mo nth s’ average trade payables, divided by last 12 months’ net sales. 8 Q2 Kellogg Company Earnings August 3, 2017 Page 4 of 10

Kellogg Company August 3, 2017 Full Year 2017 – Reaffirming Guidance Current Previous In the Second Half: - Overlay of DSD price adjustment / disruption Net Sales ~ (3)% ~ (3)% + Sequential improvement in rest of business, Currency-Neutral Comparable Basis led by Pringles + Productivity savings offset Net Sales decline Operating Profit +7-9% +7-9% Currency-Neutral Comparable Basis - Higher y-o-y investment and tax rate in Q3 + DSD overhead savings weighted to Q4 Earnings Per Share +8-10% +8-10% Currency-Neutral Comparable Basis Cash Flow $1.1-$1.2 bn $1.1-$1.2 bn Cash From Ops., Less Capital Expenditure * Please refer to appendices for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. 9 Q2 Kellogg Company Earnings August 3, 2017 Kellogg North America – Overview Currency-Neutral Comparable Basis • Sequential NSV improvement, across several businesses Q2 YTD Net Sales * (2)% (3)% • RTEC category remained soft, but share Op. Profit * +7% +2% performance improving OP Margin * +170 bp +110 bp • DSD transition on track and nearing completion • Strong margin expansion continues * Please refer to appendices for reconciliation of non-GAAP measures to the most directly comparable GAAP measure. 10 Q2 Kellogg Company Earnings August 3, 2017 Page 5 of 10