MCCORMICK & CO INC

We measure the performance of our business segments based on operating income, excluding special charges for the periods presented. See Note 11 of the notes to our accompanying condensed consolidated financial statements for additional information on our segment measures as well as for a reconciliation by segment of operating income, excluding special charges, to consolidated operating income. In the following discussion, we refer to our previously described measure of segment profit as segment operating income.

CONSUMER SEGMENT

In the second quarter of 2026, sales of our Consumer segment increased by 22.8% compared to the second quarter of 2025 and increased by 0.8% on an organic basis. The acquisition of McCormick de Mexico increased sales by 19.6%. Unfavorable volume and product mix decreased sales by 1.9%, driven by declines in the Americas region which were partially offset by growth in the EMEA and APAC regions. Favorable pricing impacted sales by 2.7% primarily driven by the Americas region. The favorable impact of foreign currency rates increased sales by 2.4%.

In the Americas region, Consumer segment sales increased by 28.0% in the second quarter of 2026 compared to the same quarter of 2025 and decreased by 0.2% on an organic basis. The acquisition of McCormick de Mexico increased sales by 27.9%. Unfavorable volume and product mix decreased sales by 3.6%, which included the unfavorable impact of price elasticity. Favorable pricing impacted sales by 3.4%. The favorable impact of foreign currency rates increased sales by 0.3%.

In the EMEA region, Consumer segment sales increased by 10.7% in the second quarter of 2026 compared to the same quarter of 2025 and increased by 3.3% on an organic basis. Favorable volume and product mix increased sales by 1.9%, driven by higher sales in France and the UK. Favorable pricing impacted sales by 1.4%. The favorable impact from foreign currency rates increased sales by 7.4%.

In the APAC region, Consumer segment sales increased by 10.0% in the second quarter of 2026 compared to the same quarter of 2025 and increased by 2.9% on an organic basis. Favorable volume and product mix increased sales by 2.4%, driven by higher sales in China. Favorable pricing impacted sales by 0.5%. The favorable impact from foreign currency rates increased sales by 7.1%.

For the six months ended May 31, 2026, sales of our Consumer segment increased 23.7% as compared to the same period in 2025 and increased by 1.3% on an organic basis. The acquisition of McCormick de Mexico increased sales by 19.7%. Unfavorable volume and product mix decreased sales by 1.2% driven by declines in the Americas region which were partially offset by growth in the EMEA and APAC regions. Favorable pricing impacted sales by 2.5% driven by the Americas region. The favorable impact from foreign currency rates increased sales by 2.7% .

Segment operating income for our Consumer segment for the second quarter of 2026 increased by $53.3 million, or 32.6%, as compared to the same period of 2025 driven by an increase in gross profit, partially offset by an increase in SG&A expense. The increase in gross profit was driven by the impacts of our acquisition of McCormick de Mexico, favorable pricing, the IEEPA tariff refund, and CCI-led cost savings, partially offset by increased commodity costs and higher freight costs due to the conflict in the Middle East. The increase in SG&A expense was driven by the items described in the consolidated discussion. Segment operating margin increased by 140 basis points to 19.0%. On a constant currency basis, segment operating income increased by 30.7%.

Segment operating income for our Consumer segment for the six months ended May 31, 2026 increased by $86.2 million, or 27.8%, as compared to the same period in 2025, driven by the effects of an increase in gross profit partially offset by an increase in SG&A expense. The increase in gross profit was driven by the impacts of our acquisition of McCormick de Mexico, the IEEPA tariff refund, favorable pricing, and CCI-led cost savings, partially offset by increased commodity costs and higher freight costs due to the conflict in the Middle East. Segment operating margin increased by 50 basis points to 17.3%. On a constant currency basis, segment operating income increased by 25.9%.

FLAVOR SOLUTIONS SEGMENT

In the second quarter of 2026, sales of our Flavor Solutions segment increased by 8.9% as compared to the second quarter of 2025 and increased by 2.9% on an organic basis. The acquisition of McCormick de Mexico increased sales by 3.0%. Favorable volume and product mixincreased sales by 1.4% driven by the Americas and APAC regions, partially offset by lower sales in the EMEA region. Favorable pricing increased sales by 1.5% driven by the Americas and EMEA regions. The favorable impact of foreign currency rates increased sales by 3.0%.

In the Americas region, Flavor Solutions sales increased by 10.0% in the second quarter of 2026 compared to the second quarter of 2025 and increased by 3.9% on an organic basis. The acquisition of McCormick de Mexico increased sales by 4.2%. Favorable volume and product mix increased sales by 2.1% driven by the effect of higher sales to packaged food customers. Favorable pricing impacted sales by 1.8%. The favorable impact from foreign currency rates increased sales by 1.9%.

In the EMEA region, Flavor Solutions sales increased by 5.4% in the second quarter of 2026 compared to the second quarter of 2025 and increased by 0.4% on an organic basis. Unfavorable volume and product mixdecreased sales by 1.2% driven by the effect of lower sales to quick-service restaurant customers. Favorable pricing impacted sales by 1.6%. The favorable impact from foreign currency rates increased sales by 5.0%.

In the APAC region, Flavor Solutions sales increased by 7.5% in the second quarter of 2026 compared to the second quarter of 2025, and increased by 0.2% on an organic basis. Favorable volume and product mix increased sales by 0.8%, primarily driven by growth in China. Pricing unfavorably impacted sales by 0.6%. The favorable impact from foreign currency rates increased sales by 7.3%.

For the six months ended May 31, 2026, sales of our Flavor Solutions segment increased 7.6% as compared to the same period in 2025 and increased by 1.7% on an organic basis. The acquisition of McCormick de Mexico increased sales by 2.7%. Favorable volume and product mix increased sales by 0.2% driven primarily by growth in the APAC region partially offset by lower sales in the EMEA region. Favorable pricing increased sales by 1.5%, driven by the Americas and EMEA regions partially offset by unfavorable pricing in the APAC region. The favorable impact of foreign currency rates increased segment sales by 3.2%.

Segment operating income for our Flavor Solutions segment for the second quarter of 2026 increased by $24.5 million, or 25.8%, compared to the same period of 2025 driven by an increase in gross profit partially offset by an increase in SG&A expense. The increase in gross profit was driven by favorable pricing, the impact of our acquisition of McCormick de Mexico, and CCI-led cost savings. The increase in SG&A expense was driven by the impact of the McCormick de Mexico acquisition and increased investments in technology. Segment operating margin increased by 210 basis points to 15.1%. On a constant currency basis, segment operating income increased by 21.4%.

Segment operating income for our Flavor Solutions segment for the six months ended May 31, 2026 increased by $34.0 million, or 19.6%, compared to the same period in 2025, driven by the effects of an increase in gross profit partially offset by an increase in SG&A expense. The increase in gross profit was driven by favorable pricing, the impact of our acquisition of McCormick de Mexico, and CCI-led cost savings. The increase in SG&A expense was driven by the impact of the McCormick de Mexico acquisition and increased investments in technology. Segment operating margin increased by 130 basis points to 13.6%. On a constant currency basis, segment operating income increased by 15.1%.

MARKET RISK SENSITIVITY

We utilize derivative financial instruments to enhance our ability to manage risk, including foreign exchange, interest rate, and commodity exposures, which exist as part of our ongoing business operations. We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative instrument. The use of derivative financial instruments is monitored through regular communication with senior management and the utilization of written guidelines.

Foreign Exchange Risk

We are exposed to foreign currency risk affecting net investments in subsidiaries, transactions (both third-party and intercompany) and earnings denominated in foreign currencies. Management assesses foreign currency risk based on transactional cash flows and translational volatility and may enter into forward contract and currency swaps with highly-rated financial institutions to reduce fluctuations in the long or short currency positions. All derivatives are designated as hedges.

The following table sets forth the notional values and unrealized net gains (losses) of the portfolio of our forward foreign currency and cross currency swap contracts:

The outstanding notional value is a result of our decisions on foreign currency exposure coverage, based on our foreign currency and foreign currency translation exposures.

Interest Rate Risk

We manage our interest rate exposure by entering into both fixed and variable rate debt arrangements. We use interest rate swaps to minimize worldwide financing costs and to achieve a desired mix of fixed and variable rate debt. We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative instruments, and all derivatives are designated as hedges.

The following table sets forth the notional values and unrealized net gains (losses) of our interest rate swap contracts:

The change in fair values of our interest rate swap contracts is due to changes in interest rates on the notional amounts outstanding as of each date as well as the remaining duration of our interest rate derivative contracts.

Commodity Risk

We purchase certain raw materials which are subject to price volatility caused by weather, market conditions, growing and harvesting conditions, governmental actions, and other factors beyond our control. Our most significant raw materials are dairy products, pepper, onion, garlic, capsicums (red peppers and paprika), salt, tomato products, sugar, and soybean oil. While future movements of raw material costs are uncertain, we respond to this volatility in a number of ways, including strategic raw material purchases, purchases of raw material for future delivery, customer price adjustments, and the use of derivative instruments. Our use of commodity derivatives is currently limited to swaps, futures, and options to reduce our exposure to the price volatility of soybean oil.

The following table sets forth the notional values and unrealized net gains (losses) of our commodity contracts:

Credit Risk

The customers of our Consumer segment are predominantly food retailers and food wholesalers. Consolidations in these industries have created larger customers. In addition, competition has increased with the growth in alternative channels including mass merchandisers, dollar stores, warehouse clubs, discount chains, and e-commerce. This has caused some customers to be less profitable and increased our exposure to credit risk. Some of our customers and counterparties are highly leveraged. We continue to closely monitor the credit worthiness of our customers and counterparties. We believe that our allowance for credit losses properly recognizes trade receivables at realizable value. We consider nonperformance credit risk for other financial instruments to be insignificant.