K - Kellanova (K) Q4 2023 Earnings Call Transcript
2024-02-08 12:24:13 ET
Kellanova (K)
Q4 2023 Earnings Conference Call
February 08, 2024 9:30 AM ET
Company Participants
John Renwick – Vice President of Investor Relations and Corporate Planning
Steve Cahillane – Chairman, President and Chief Executive Officer
Amit Banati – Vice Chairman and Chief Financial Officer
Conference Call Participants
Chris Carey – Wells Fargo
Tom Palmer – Citi
Rob Dickerson – Jefferies
Max Gumport – BNP Paribas
Michael Lavery – Piper Sandler
Ken Goldman – JPMorgan
Presentation
Operator
Good morning. Welcome to Kellanova's Fourth Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session with publishing analysts.
At this time, I will turn the call over to John Renwick, Vice President of Investor Relations and Corporate Planning for Kellanova. Mr. Renwick, you may begin your conference call.
John Renwick
Thank you, operator. Good morning and thank you for joining us today for a review of our fourth quarter results and a discussion of our outlook for 2024. I'm joined this morning by Steve Cahillane, our Chairman, President and Chief Executive Officer; and Amit Banati, our Vice Chairman and Chief Financial Officer. Slide number 3 shows our forward-looking statements disclaimer. As you are aware, certain statements made today, such as projections for Kellanova's future performance, are forward-looking statements. Actual results could be materially different from those projected. For further information concerning factors that could cause these results to differ, please refer to the third slide of this presentation as well as to our public SEC filings.
A recording of today's webcast and supporting documents will be archived for at least 90 days on the Investor page of www.kellanova.com. As always, when referring to our results and outlook, unless otherwise noted, we will be referring to them on an organic basis for net sales and on a currency-neutral adjusted basis for operating profit and earnings per share. Included in our press release, our financial results for the fourth quarter 2023 as well as the first three quarters and full years of 2023 and 2022 recasting W.K. Kellogg Co in those periods as discontinued operations in accordance with applicable accounting guidelines. These recast financials will be the basis of comparison used in the year-on-year growth rates we provide today for all items except free cash flow, which was not recast.
Keep in mind that the accounting guidelines for discontinued operations are such that the recast financials for the periods prior to the spinoff include expenses related to providing transition services to WKKC such as warehousing and IT-related expenses, but they do not include the reimbursement for those expenses, which Kellanova is receiving from WKKC under a transition services agreement. For periods after the spin-off, that is from Q4 2023 on, both the expenses and the reimbursements will be included, which will impact year-on-year comparisons. This also creates a difference from the carve-out financials that you would have seen from WKKC as different accounting guidelines apply to carve-out financials.
And now I'll turn it over to Steve.
Steve Cahillane
Thanks, John, and good morning, everyone. It's a real pleasure to be able to present to you results for Kellanova for the first time. Allow me first to point to you to Slide number 5 and remind everyone of Kellanova's more focused, more growth-oriented portfolio and let me also remind you of our updated and sharpened strategy. This strategy appropriately called differentiate drive and deliver as shown on Slide number 6. This strengthened portfolio and sharpened strategy were in full force during our initial quarter as Kellanova. We delivered another quarter of solid results as summarized on Slide number 7. We began the quarter with our transformational spin-off, which we executed successfully from a transactional, financial and operational perspective. We did not let this transformational transaction distract us from the task at hand, delivering results. 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.
Our organic net sales growth remained at a rate that is above our long-term algorithm, even in spite of challenging industry conditions marked by rising elasticities in our categories around the world. Importantly, the strength of our diverse emerging markets was again evident. We continue to restore profit margins that had been pressured by last year's soaring input costs and rampant supply impediments. 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....
Kellanova (K) Q4 2023 Earnings Call Transcript