General Mills, Inc.

Greetings and welcome to the General Mills fiscal 2021 Q4 earnings call. During the presentation, all participants will be in the listen only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded on Wednesday, June 30th, 2021. I will now like to turn the conference over to the VP of Investor Relations, Mr. Jeff Seaman. Please go ahead. Thank you, Frank, and good morning. Thanks, everyone, for joining us today for our Q&A session on fourth quarter results. I hope you had time to review our press release, listen to our prepared remarks, and view our presentation materials, which were made available this morning on our Investor Relations website. It's important to note that in our Q&A session, we may make forward-looking statements that are based on management's current views and assumptions, including facts and assumptions related to the potential impact of the COVID-19 pandemic on our results in fiscal 22. Please refer to this morning's press release for factors that could impact forward-looking statements and for reconciliations of non-GAAP information, which may be discussed on today's call. I'm here this morning with Jeff Harmoning, our chairman and CEO, Kofi Bruce, our CFO, and John Newdy, group president of our North America retail segment. Let's go ahead and get to the first question. Frank, can you get us started, please? Thank you. If you would like to register a question, please press the 1-4 on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the 1 followed by the 3. One moment, please, for the first question. Our first question comes from Ken Goldman with JP Morgan. Please proceed. Hey, good morning. Thank you. Two for me. The first is, can you give us a sense of what to expect for the cadence of the cost inflation this year? And then the second one is the street, I think, is looking for maybe about 40 basis points in your gross margin in terms of the decline year on year in fiscal 22. I know you're not guiding to this, but given what you've said about inflation, HMM and pricing and nearly net pricing, Is it kind of reasonable to expect something in this range, or is that far off from what you're looking for? Thank you. Hey, Ken. This is Kofi. Thanks for the question. So as we look at the year, I think it's important for us to just get some perspective, and I'll address it maybe through the lines of the flow of margin. We would expect our back half to deliver significantly. higher margins than the front half, particular pressure on Q1, where we would see the combination, obviously, of inflation and pricing that starts later in the quarter, the benefits of pricing flowing through later in the quarter. So as for the flow of those, that guidance on margins would reflect roughly, you know, relatively balanced flow on our expectations for the full year for inflation. And then obviously with the pricing really kicking in as we step into Q2. All right, thank you. And then just the second question, is that 40 basis points for the year that the street is looking for? Is that far out of line with what you're thinking, Kofi? Well, we're not going to give guidance at gross margin, but obviously our guidance on operating profit and sales would indicate something in the range of a modest decline in operating profit margin. Okay. Thanks so much. You bet. Our next question comes from Andrew Lazar with Barclays PCC.

Thanks for the question. Good morning, everybody. Good morning, Andrew. Jeff, I know you use the words dynamic and uncertain a bunch of times in your prepared remarks. And even though the consumer side of things may be getting maybe a little bit more visible, obviously the cost and comparison side of the equation are still pretty challenging. So I guess my question is, how much flexibility do you think you've left yourselves in the FY22 guidance in light of the industry challenges, also knowing how the timing of pricing and other actions tends to work to offset costs?

Yeah, Andrew, I think your observation is a good one. We use dynamic and we use uncertain. I'd also say volatile, so we can throw that one in too. And it is, from a demand perspective, it still is volatile. And even if mentally many consumers are getting beyond COVID, the demand environment is volatile, not only with respect to at-home versus away-from-home conditions, but also, you know, what is the impact of pricing going to be and what does that mean for elasticity? So I would say the demand environment is still volatile, and as is the cost environment. And so whether that's input costs on manufacturing or whether that's transportation or whether those are commodities, you know, it is a pretty volatile environment. You know, what I'm proud of is, you know, over the past year, you know, we've been able to navigate that well and do what we said we were going to do. In fact, you know, each of the last three years, we've done what we said we were going to do. And now we still have to face this year. But I feel good about our guidance. I don't think it's so conservative, and I don't think we're out over our skis. We're trying to tell you here's what we think we will do. And is it easy in this kind of environment? No. But I feel good about our capabilities and how we're executing right now, and we're very clear on our path forward. So all of those things give me confidence that we can do what we said we're going to do. But it's a tricky environment. I think that it will be.