Kellogg Company (NYSE:K) Q3 2023 Earnings Call Transcript

Kellogg Company (NYSE:K) Q3 2023 Earnings Call Transcript November 8, 2023

Kellogg Company beats earnings expectations. Reported EPS is $1.03, expectations were $0.93.

Operator: Good morning, and welcome to the Kellanova Third 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 Company. Please go ahead.

John Renwick : Thank you, operator. Good morning, and thank you for joining us today for a review of our third quarter results when we were Kellogg Company and a discussion of our outlook for the fourth quarter of 2023, during which we will be post spin-off Kellanova. 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. Please note that we will have discontinued operations impacts to Kellanova’s historical financial statements available during our fourth quarter earnings release in February 2024. Until then, any commentary about Kellanova performance is based on estimates and should therefore be viewed as directional. And now I’ll turn it over to Steve.

Steve Cahillane : Thanks, John, and good morning, everyone. While our quarter three results predated the spin-off, it is exciting to be talking to you as Kellanova for the first time. It bears reminding that Kellanova is a strengthened portfolio with the business, brands and geographies that make Kellanova a global snacks-led powerhouse. As shown on Slide number 5, over 80% of our annual net sales comes from snacks and emerging markets, both of which have been and will continue to be above-average growth categories and markets. Half of our net sales come from five highly differentiated brands, Pringles, Cheez-It, Pop-Tarts, Rice Krispie Treats and Eggo, that offer above-average growth and accretive economics. And we generate half of our revenue from outside of the United States and Canada, giving us geographic diversification, global reach, access to fast-growing emerging markets and the opportunity to expand big United States brands into international markets.

And when you see temporary softness in one market, it can be offset elsewhere, which is precisely what we saw in the third quarter. Kellanova is also a company with a sharpened strategy, one that better suits a global snacking powerhouse, while still emphasizing the capabilities that enable us to win in the marketplace, protect our planet and serve our communities, and deliver attractive and dependable financial returns. This strategy appropriately called differentiate, drive and deliver is shown on Slide number 6. But before we enter the Kellanova era, let’s talk about our final quarter as Kellogg Company on Slide number 7. We turned in another good performance in the third quarter. Organic net sales growth was sustained at an on-algorithm pace despite a challenging environment marked by a financially strained consumer and the long-awaited return toward normal levels of elasticities.

We’re pleased with our continued restoration of gross profit margins. As service levels have returned to normal levels, productivity initiatives are delivering savings and pricing has caught up with input cost inflation. And this enabled us to deliver above-algorithm growth in operating profit even as we increased our brand building at a double-digit rate. Our free cash flow was strong, ahead of last year, even with upfront outlays related to the spin-off. And speaking of the spin-off, we executed it with excellence. So it was another busy and successful quarter, and we are heading into the Kellanova era from a position of strength. Externally, the focus lately has been less about our improved portfolio strategy and long-term growth prospects and much more about current industry dynamics.

Fair enough, but I would remind everyone that most of what we are seeing today from decelerating cost inflation to restoration of service levels and margins, to a return to normal levels of elasticities have been in our budget, our guidance and our commentary for quite some time. This is illustrated on slide number 8. The decelerated net sales growth was inevitable because after significant cumulative price increases, including right through the second quarter of 2023, there was going to be a return to typical levels of elasticities in our industry. And across our categories and across our regions, we have seen this rise in elasticities every quarter this year. We don’t think this is about price gaps over private label, which largely remain below 2019 levels.

And the relatively small shares of private label in our categories remain around their 2019 levels. We did have a couple of additional factors that impacted our volumes in the quarter, but again, these were anticipated. One was lapping trade inventory replenishment from last year, notably in North America cereal and snacks and the other, also in North America, was our decision to delay merchandising activity earlier this year in order to gain full confidence in our return to high service levels, particularly given the lead time required for quality display activity. This caused us some volume in the second and third quarter. But by the latter part of quarter three, we had returned in merchandising, and we expect quality display activity to follow.

In short, these conditions and timing differences will pass. Our brand-building investment is increasing. We are returning to merchandising, and we are ramping back up our innovation. We will return to more balanced volume and price/mix within our net sales growth over time, accompanied by sustained improvement in profit margins. Meantime, our brands remain in great shape. And our focus remains on growing our biggest, most differentiated brands around the world. Shown on slide number 9, these brands accounted for half of Kellanova’s net sales in 2022 and a little more than that so far in 2023 as their growth continues to outpace the rest of the portfolio. In the quarter and year-to-date periods, we increased brand-building investment behind these advantaged brands at strong double-digit rates year-on-year, faster than the rest of the portfolio.

As we prioritize investment behind these brands, we expect them to continue to lead our growth and contribute positively to margin mix. Our focus is also on growing the right way, and slide number 10 shows some of the ways our Better Days Promise program manifested itself during the third quarter. We unveiled new, more ambitious targets for Kellanova, sustained our legacy of helping our communities and found ways to link these activities to our commercial endeavors, and we continue to be recognized for our efforts. So let me now turn it over to Amit, who will walk you through our financials, before I come back and discuss each of our businesses in more detail.

Amit Banati: Thanks, Steve. Good morning, everyone. Slide number 12 summarizes the results of Kellogg Company because the spin-off occurred after the quarter ended. Net sales increased by about 4% on an organic basis in quarter three, which is right on the second half pace implied by our full year guidance. Year-to-date, this translates into 8% organic growth. Operating profit increased by 10% on an adjusted and currency-neutral basis, sustaining double-digit growth in spite of higher A&P investment and the divestiture of our Russia business. Year-to-date, this translates to 14% growth, which is ahead of the pace implied by our full year guidance. Earnings per share on an adjusted and currency-neutral basis decreased by about 2% year-on-year in quarter three and increased by 2% year-to-date.

This is ahead of the pace implied by our full year guidance, delivering year-on-year growth in spite of some 11 to 12 percentage points of headwind from macroeconomic factors driving higher interest expense and lower pension income. And free cash flow came in at $894 million, which is higher than last year, even in spite of onetime outlays related to the spin-off. This put cash flow well on pace towards our full year guidance for Kellogg Company. So as you step back, you see that our growth in net sales and operating profit were on algorithm or better in the quarter and year-to-date period, and EPS would have been as well were it not for the macro-related pressures on our non-operating items. And we were well on pace to achieve the full year guidance we had given for the Kellogg Company.

Now, let’s take a look at each metric in closer detail, starting with our net sales growth on slide number 13. As expected, price elasticities rose around the world, putting pressure on volume, though this volume did come in modestly better than projected. Price/mix moderated sequentially from recent quarters as we began to lap some of our largest revenue growth management actions last year. The divestiture of our Russia business, which occurred in July, clipped about 1 percentage point from our overall net sales growth in quarter three and will do so again in quarter four. Foreign currency translation once again was a headwind of about negative 3 percentage points. And based on where rates are today, we are probably facing a similar headwind in quarter four.

Most of this is related to the devaluation of the Nigerian naira, partially offset by strength in the euro, pound sterling and Mexican peso. We estimate that portions of the business that represent Kellanova generated better organic growth than total Kellogg Company in the third quarter. So even with the long anticipated rise in elasticities and the lapping of last year’s pricing actions, our organic net sales growth remains within our long-term target range. Now, let’s discuss gross profit, starting with slide number 14. As we’ve stated many times, our focus during the period of heightened input cost inflation and supply bottlenecks and shortages was on growing gross profit dollars. And as you can see, we have done just that every quarter this year.

And as you can see on slide number 15, we have also made good progress in restoring our gross profit margin as well. We’re still not back to our 2019 pre-pandemic levels, but this restoration of margins is proceeding faster than expected with year-on-year expansion in each quarter so far this year. This progress also applies to the Kellanova business, which gets an immediate lift from the absence of North America cereal, and should continue to benefit from the same drivers going forward price realization catching up to input cost inflation, improving supply chain conditions, and the ongoing combination of productivity, revenue growth management and mix shift towards our most differentiated brands. Slide number 16 shows how our sustained top line growth and margin expansion resulted in another quarter of double-digit growth in operating profit.

Keep in mind that, this growth includes the divestiture of Russia, and it also includes a double-digit increase in brand building on a currency-neutral basis. Slide number 17 indicates that we are not only restoring our margins at the gross profit level, but at the operating profit level as well. We have delivered year-on-year expansion in operating margin in each quarter of this year, putting our year-to-date margin a full 100 basis points ahead of last year and ahead of our own projections as Kellanova will start immediately with a modestly higher operating margin just from the absence of North America cereal. And we expect to continue to improve our margin going forward as we discussed at our Day@K Investor event. This, along with top line growth propelled by our strong brands and growth-oriented categories and markets, give us confidence in sustaining profit growth.

Moving down the income statement. Slide number 18 shows that our adjusted basis earnings per share growth in quarter three was once again mostly attributable to operating profit, which has grown enough to more than offset what are severe macro-related headwinds within our below-the-line items. Those below-the-line pressures were expected and will continue through the year. Interest expense increased significantly year-on-year in the quarter and the year-to-date period due to higher interest rates. Other income decreased sharply year-on-year in each of the first three quarters this year, reflecting the accounting of pension and post-retirement plan asset values stemming from last year’s decline in the financial markets and the rising interest rates.

Our effective tax rate in quarter three was up year-on-year, keeping our year-to-date rate at the 22% we’ve been expecting for the full year. Average shares outstanding were again up slightly year-on-year in quarter three, and we would expect that to be the case for the full year as well. Foreign currency translation was positive to earnings per share in quarter three as strength in European and Mexican currencies more than offset what is a relatively small impact from Nigerian Naira at the EPS level. Turning to slide number 19. We see that our free cash flow year-to-date is ahead of the prior year, even in spite of one-time cash outlays related to the spin-off and despite lapping a year ago period in which our capital expenditure was delayed because of supply disruptions.

We are pleased with our cash flow conversion, which is higher than last year despite deal factors. This year-to-date free cash flow performance put us well on our way to achieving the full year guidance of $1 billion to $1.1 billion that we had communicated for the Kellogg Company. Meanwhile, we continue to reduce our debt leverage year-on-year, further enhancing our financial flexibility. The slide shows how our net debt continued to decrease even as we continue to deliver higher operating profit and therefore EBITDA. This was our net debt at the end of quarter prior to the spin-off. Upon the spin-off, the transfer of net debt to W.K. Kellogg Company was executed and is estimated to be approximately $600 million. Now, let’s discuss our outlook at Kellanova now that W.K. Kellogg Company, our North America cereal business, is no longer in our portfolio.

Work is underway to prepare Kellanova financials for all four quarters of 2022 and the first three quarters of 2023, treating W.K. KC as a discontinued operation. We will have those completed a few months from now, and we plan to share them with you at our next quarterly earnings release in early February. In the meantime, slide number 20 offers estimates in absolute dollars for the fourth quarter, our initial quarter at Kellanova. Kellanova was projected to deliver net sales of approximately $3.1 billion in the quarter. Excluding W.K. KC from the base and excluding about 1% negative impact of the Russia divestiture and foreign currency translation that at current rates would be similar to the negative impact we saw on net sales in quarter three, we believe organic net sales growth will be within our long-term growth target even as we assume continued elasticity impact and the lapping of the year-on-year price increases.

We expect the restoration of gross profit margin to continue, increasing year-on-year and reaching a level in quarter four of just over 33%. We project adjusted basis operating profit of approximately $380 million to $390 million, which we estimate will translate into year-on-year growth that is within our long-term growth target. Excluding W.K. KC from the base and excluding the small impacts of this year’s Russia divestiture and currency translation. We project adjusted basis earnings per share of approximately $0.73 to $0.76 after accounting for interest expense of around $85 million and other income of around $25 million, both of which will continue to reflect the year-on-year headwinds we’ve experienced all year. In short, we expect Kellanova’s quarter four 2023 to remain within our long-term algorithm for net sales and operating profit growth.

Looking to 2024. As indicated at our Day at K investor event a few months ago, we expect to sustain on-algorithm growth on sales and profit. We are still in our budgeting process, and we will provide those details at our normal time in February. Allow me to summarize on slide number 21. We feel very good about our financial performance and conditions heading into quarter four as the new Kellanova. Our top line growth remains ahead of our long-term target. Our profit margins continue to recover more quickly than we had anticipated. Our balance sheet is solid as is our free cash flow even as we executed a transformational spin-off. Let me now turn it back to Steve for a run-through of our businesses around the world.

Steve Cahillane: Thanks, Amit. Slide number 23 splits our portfolio into category groups to help remind you of their relative sizes and how Kellanova’s portfolio is clearly oriented toward growth. Beginning in the fourth quarter, Kellanova will no longer have the North America cereal portion nor the very small Caribbean cereal portion of international cereal. As you can see on the slide, the businesses that will remain with Kellanova continue to drive most of our growth in quarter three. As we walk through our regions, which is how we are structured, we will once again organize our discussion around the businesses that comprise Kellanova first, followed by the North America cereal business that is now part of W.K. Kellogg Co. We’ll start with the region’s most exposed to emerging markets.

Slide number 24 shows the financial performance of our AMEA region. Once again, this region generated double-digit organic net sales growth on top of extremely strong comparisons. It again expanded its operating profit margin year-on-year in the third quarter and it again posted exceptional profit growth, up 14% on an adjusted and currency-neutral basis. And this profit was delivered in spite of high cost inflation and substantial reinvestment into the business. Within AMEA, we see on slide number 25 that snacks turned in another quarter of double-digit organic growth in net sales. This organic growth was again broad-based across Australia, Asia and Africa and the Middle East. In market, Pringles continues to gain share in the region with notably strong outperformance relative to the category this quarter in Australia and Japan.

As shown on Slide 26, AMEA cereal also sustained growth in the third quarter in spite of lapping elevated year ago growth. Growth was broad-based with notable growth in Australia, Africa and Southeast Asia. And in market, our overall share gain in the region was led by notably strong performance in Korea and New Zealand. And then we come to noodles and others shown on Slide number 27. This business continues to post exceptional growth even as it begins to lap substantial price increases taken last year to offset cost inflation and weakened currencies. Our business in Nigeria continues to grow strongly, owing to the strength of Dufil’s brands and the huge competitive advantage of our distributor arm Multipro. We also continue to expand our Kellogg’s noodle business outside of Nigeria.

AMEA enters the Kellanova era with solid momentum. For the full year, we continue to expect to sustain strong growth across all three category groups, delivering yet another year of organic net sales growth. And we plan to do that while restoring our profit margins and investing for the future. Now let’s look at our other emerging markets region, Latin America, starting on Slide number 29. Kellogg Latin America in quarter three delivered another quarter of strong organic net sales growth on top of exceptionally strong growth last year. This organic growth was once again led by our two largest markets, Mexico and Brazil, though our Pacific subregion also putted strong growth. It’s important to note that roughly half of our volume decline, both in the third quarter and year-to-date, was attributable to price pack architecture changes and SKU rationalization that we have undertaken to improve profitability.

We again expanded our operating margin in quarter three, leading to a fourth straight quarter of operating profit growth of 20% or better. On Slide number 30, we see that our snacks business in Latin America generated strong organic net sales growth in the third quarter, led by sustained momentum in Mexico and Brazil. Both of those markets saw double-digit category growth in salty snacks, and Pringles gained share in both of these key markets. And in portable wholesome snacks, we continue to outpace the category in Mexico. On Slide number 31, you can see that Kellogg Latin America grew net sales organically again in cereal in spite of lapping exceptional growth in the year ago quarter. This growth was led by Mexico and our Pacific subregion.

Keep in mind that a sliver of this business, our Caribbean cereal business, has since been spun off with W.K. Kellogg Co., but this business represented only about 5% of our Latin America cereal business last year, so it is quite small. So Latin America is performing well as it heads into the Kellanova era. For the full year, we continue to expect this region to sustain strong top line momentum with growth in both snacks and cereal and continued recovery in its profit margins. Once again, we can see that both of our emerging markets regions are showing current momentum to go with their outstanding long-term prospects. Now let’s turn to our developed markets regions, starting with Kellogg Europe and Slide number 33. This region sustained yet another quarter of strong organic net sales growth on top of strong year-earlier growth.

Operating profit increased sharply year-on-year, owing to good top line growth, moderating cost pressures and solid margin expansion, all of which more than offset the impact of divesting Russia earlier in the quarter. If we look deeper into the business, on Slide number 34, you can see that snacks, which represents over half of our sales in Kellogg Europe, continue to lead our growth in this region. In fact, quarter three marked the quarter in the last 11 in which we have posted double-digit organic net sales growth in our European snacks business. The growth in quarter three also continued to be broad based with double-digit gains in all three of our sub-regions. In markets, salty snacks category remains in double-digit growth overall with Pringles outpacing the category in markets like the UK, France, Spain, Italy and Poland.

And in portable wholesome snacks, category growth rates have accelerated into the double-digits. And we continued to gain substantial share in the UK, led by double-digit growth in Rice Krispies Squares. Our cereal business in Europe, shown on Slide number 35, posted a small organic decline in net sales in the third quarter. As we’ve discussed previously, this business has slowed owing to the rising category elasticities. But we are confident in our quarter four plans, which includes incremental brand building shifted from previous quarters. So it was another strong quarter for Kellogg Europe. For the full year, we continue to expect the region to post yet another year of solid top line growth led by snacks. We also remain on track to deliver improved margins during the second half in spite of sustained cost pressures.

Our divestiture of our business in Russia was a necessary move in an unfortunate situation. But overall, this region is showing good momentum as it heads into the Kellanova era. We’ll now turn to Kellogg North America in Slide number 37. As anticipated, net sales growth has decelerated in recent quarters as elasticity continued to move higher and as we begin to lap last year’s sizable replenishment of trade inventories. However, we continue to recover gross profit margin, reflecting productivity, revenue growth management and diminishing bottlenecks and shortages. This enabled us to substantially increase investment in our brands and still deliver high single-digit operating profit growth year-on-year in the third quarter. The rise in elasticities, as well as the lapping of last year’s strong growth in inventory replenishment can be seen in all three category groups in the third quarter.

Slide number 38 shows snacks, which represents over half of our North America net sales. In the third quarter, its net sales were up very slightly against a very big quarter last year. In market, all three of our snacks categories experienced rising elasticities, particularly in higher cash outlay items like multipacks. In addition, we took a more measured approach than many in restoring merchandising activity. It was a similar story in frozen foods, shown on Slide number 39. Our frozen foods net sales were flat in the third quarter. Like snacks, our Eggo business faced a rise in category elasticities. In addition, our Morningstar Farms brand continued to feel the impact of a shakeout in the plant-based category even as it continued to gain share.

Now let’s turn to our North America cereal business, which forms most of what is now W.K. Kellogg Co. You will get more detail from W.K. Kellogg Co. in its own earnings release. But as shown on Slide number 40, this business faced the same dynamics as the Kellanova businesses in the third quarter: flattish sales, reflecting a continued rise in category elasticities and the lapping of strong year-ago growth. Turning to Slide number 41. Our North America region is having a good year in terms of balanced financial delivery. We now are bad full commercial activity and feel confident in our ability to execute. Snacks should finish the year solidly in growth, while Frozen is expected to continue to finish with improved performance. We are off to an earlier-than-expected start to margin recovery in this region even as we reinvest more in our brands.

And with the spin-off, we become that much more focused and streamlined behind snacks and frozen foods. Simply put, North America too is ready to start our new era as Kellanova. So let me summarize with Slide number 43. The third quarter closes the books on the 117-year-old Kellogg Company and does so in a solid way. In spite of rising elasticities across the industry, we continue to deliver good top line growth while getting our service levels back to where they should be and continuing to restore profit margins faster than we had anticipated. And we delivered all that while executing the spin-off of W.K. Kellogg Co. During the quarter, we made all the final preparations to ensure business continuity and the sustained success of both companies.

Our company and the company-parallel operations were successful, and our transition services agreements are in place and in operation. And we now enter the Kellanova era from a position of strength. We’re back to full commercial activity. Our free cash flow and balance sheet are strong, giving us good financial flexibility. We are proactively mitigating stranded margins. And we have a plan that should continue to deliver the kind of financial algorithm that you would expect from a portfolio that is weighted towards snacking, emerging markets and highly differentiated brands. In sum, we are on track and ready to deliver as Kellanova. So in closing, I want to first express a heartfelt congratulations and thank you to our entire family of Kellogg employees for the tireless efforts and endless passion that went into executing the spin-off and creating such a promising future for both companies.

We wish our former colleagues all the best as they embark on their next chapter as W.K. Kellogg Co. And to our Kellanova employees, I share in your excitement for our future. We entered this new era with a more growth-oriented portfolio, a sharpened strategy and more ambitious financial expectations, and we have just the team to deliver on it. And now, we’ll be happy to take your questions.

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question for today comes from Jason English of Goldman Sachs. Your line is open. Please go ahead.

Jason English: Hey, good morning, folks. Thanks for spotting me in. A couple of questions in regards

Amit Banati: Hi, Jason.

Jason English: Hey guys. A couple of questions in regards to your reiteration of long-term algo for next year. First, you gave a base — estimated base earnings number at your Analyst Day of around 3 35 for this year. Is that still the right base to use?

Amit Banati: I think, Jason, we will update the details when we get to our normal cycle in February once we’ve had this year’s actual latest foreign exchange rates. So I think we’ll update the absolutes as we kind of get to February. We’re right in the middle of our budgeting process right now. But as I mentioned in our prepared remarks, we fully expect to be on our algorithm growth rates we had shared in August.

Jason English: Okay. But that 3 35 number for this year, even though we’re 10 months through, may not be a good number to anchor to. Is that — did I — am I hearing that right?

Amit Banati: No, we are on track, I mean, from a 2023 standpoint, right? We are ahead of pace in the first nine months. And like I mentioned, we are on track from a 2023 standpoint. So we’ll share the specific details when we get to February.

John Renwick: But that we gave for 2023, as we indicated at that time, that was for a full year estimate of what Kellanova might look like. It’s not quite the real what you’ll see us report because we’ll have three quarters of Kellogg Company and one quarter of Kellanova. So, that was just a way for you to calculate.

Jason English: Yes, which is why I’m still trying to anchor to it just because as is evident in today’s press release, it’s really muddy, right? There’s a lot of noise here. So, I’m just trying to keep it simple. Okay. And sticking with the long-term–

Amit Banati: From an underlying business performance, right, we are right on track with — on 2023.

Jason English: Yes, that’s good to hear. And I think it came through our results, but there is a lot of noise. And sticking with the long-term algo, I think Steve mentioned this upfront. Your diversified business with a diversified global footprint and you’ve got long-term algo by each segment, but there time where some are going to lag and some are going to do better. And it now feels like it’s one of those points in time where the developed world, particularly North America, is lagging. I don’t think it’s structural, but at a moment in time, your emerging market businesses are doing quite well. Investors are concerned that you’re not going to able to hit LTL algo across all segments next year. Is it reasonable to say that?

That shouldn’t be a concern. You don’t need to LTL algo across all segments next year. It could look very much like what we’re seeing right now, where perhaps North America does lag, but the strength you have elsewhere could offset that. Or do you actually — do you really expect and are you entering to a return to a long-term algo in North America?

Steve Cahillane: I think a couple of things, Jason. You’re exactly right. We don’t need to be on long-term algo in all regions in order to make it corporately because power of the portfolio. Having said that, I think what you’re seeing in North America, just to put it in context, we did return to merchandising activity later than most. That was purposeful. In hindsight, perhaps we could have come sooner. But we’re back now. We were also going through obviously the spin, which was a massive amount of work. And so as we approach 2024, we look to North America with much more optimism in terms of turning back to quality merchandising activity. The strength of our brands, we know, is there, very, very strong. We were lagging in innovation for the same reasons, so holding back to get our supply chain back to where we wanted it to be.

So, we’ve got a much more ambitious innovation plan in 2024. So, as we look at North America in 2023, a series of events, obviously led by the spin, but also, again, measured return to innovation and merchandising activity, will all be very different in 2024. So, we have more confidence in our long-term algo in North America, which bolsters our confidence in our long-term algo overall as a company.

Jason English: Appreciate it. Thank you guys. I’ll pass it on.

Operator: Thank you. Our next question comes from Nik Modi from RBC. Your line is now open, please go ahead.

Nik Modi: Thank you. Good morning everyone. Steve, I was hoping you could comment on volume growth. Obviously, revenue has been very strong driven by pricing, but volumes continue to lag. Some of your global snacking peers have actually posted volume growth. So, I just wanted to get some context from you on how you’re thinking about that. And then just a second question, and this is more of a kind of an abstract question that I was just thinking about. One of the big growth drivers in the future for Kellanova will be white space and global expansion with some of your existing brands. And I wondered if, do you have global P&Ls for your key brands? Or is that something that still needs to be developed as you spin out the company? Thanks.

Steve Cahillane: Yes, Nik. So, I would say on the volume question, clearly, when you take the type of pricing that we’ve taken, mid-teens pricing on top of mid-teens pricing a year ago, you’re going to have elasticities. The difference from — for us relative to some competition, as I mentioned earlier, we did return to merchandising activity later than most. We did return — we’re returning to innovation activity later than most. That’s a fact. And obviously, we had the spin as well as those other items, which leads us to be much more optimistic about 2024. There’s nothing structural in our volumes or our performance or our brand health that points to anything other than optimism in 2024 and beyond. In terms of white space, the global P&L, yes, we track in detail the financial performance of all of our brands at a SKU level and at a geographic level, so a very good understanding of that.

Nik Modi: Excellent. I’ll pass it on. Thank you.

Operator: Thank you. Our next question comes from David Palmer of Evercore ISI. David, your line is now open. Please go ahead.