McCormick & Company, Incorporated (NYSE:MKC) Q4 2022 Earnings Call Transcript

Lawrence Kurzius: Great. Thanks.

Operator: Thank you. Our final question today comes from the line of Peter Galbo with Bank of America. Please proceed with your question.

Peter Galbo: Hey guys. Good morning. Thanks for taking the question. I will keep it pretty quick. I guess just as I think about the operating income bridge, the incentive comp piece of that, that’s kind of an 800 basis point headwind as you rebuild that function. Like how flexible is that, or how discretionary is that? And the reason for the question is, let’s say, if something in the plan that you have, the year goes wrong outside of your factors, right, China take longer to reopen or destocking take longer or restock gets stronger in the U.S. Like can you pull that piece of the puzzle back more as a means to kind of still hit the operating income target, or is that pretty much you have to €“ you are committed to spending that at this point?

Lawrence Kurzius: Well, Peter, our incentive comp pays for growth. And we fell short of growth in 2022. And so that’s reflected in a very low incentive comp that we didn’t take back and confidence to the P&L. As we went through 2022, in 2023, it starts a New Year. And so we are starting with the expectation that we are going to hit our goals. And of course, as we over or under achieve, we will adjust incentive comp as we go through the year.

Mike Smith: Yes, it’s very formulaic. The majority of our incentive competence based on McCormick profit, which is basically our operating profit less a capital charge we call kind of light EVA model to make sure all of us are held accountable for capital improvement. So, it’s really focused a lot on operating profit and a bit on EPS, too, very formulaic. We pay for growth.

Peter Galbo: Great. Thanks very much guys.

Operator: Thank you. At this time, I will turn the floor back to Lawrence Kurzius for closing remarks.

Lawrence Kurzius: Great. Thank you. McCormick is aligned with consumer trends and the rising demand for flavor in combination with the breadth and reach of our global portfolio and our strategic investments provide a strong foundation for sustainable growth. We are disciplined in our focus on the right opportunities and investing in our business. We are continuing to drive further growth as we successfully execute on our long-term strategy actively respond to changing consumer behavior and capitalize on opportunities from our relative strength. We continue to be well positioned for continued success and remain committed to driving long-term value for our shareholders.

Kasey Jenkins: Thank you, Laurence and thank you to everybody for joining today’s call. If you have any questions regarding the information, please feel free to contact me. This concludes the call for today.