Clorox Company (the) · NYSE:CLX
Clorox Company (the) — The Clorox Company — CAGNY 2019
78 slides from Clorox Company (the)'s conference presentation, Feb 21, 2019
Slide 1: CAGNY 2019
CAGNY 2019 Benno Dorer Kevin Jacobsen Chair and Chief Executive Officer Chief Financial Officer February 2019 1
Slide 2: Safe Harbor
Safe Harbor Except for historical information, matters discussed in this presentation, including statements about the success of the Company’s future volume, sales, costs, cost savings, earnings, earnings per share, including as a result of the Nutranext acquisition, diluted earnings per share, marg
Slide 3: Key Messages
Key Messages • Consistent strategy and track record of delivering strong results for our shareholders • Solid progress behind decisive actions to address near-term headwinds • Continue strong investments with focus on long-term profitable growth 3
Slide 4: cionox ZS wrusas vrac
cionox ZS wrusas vrac
Slide 5: A Foundation and Future in Health and Wellness
A Foundation and Future in Health and Wellness 1957 – 1969 1999 2006 – current Acquired then divested by P&G, First Brands acquisition Expanded Health and Wellness portfolio through acquisitions 1913 1970s & 1980s Launched household bleach Diversification and international expansion Recognized for c
Slide 6: Consistent Track Record of Strong Shareholder Return
Consistent Track Record of Strong Shareholder Return 1 Year 3 Year 5 Year 20 Year Top Tertile KDP KDP KDP CHD CHD CHD CHD RB-GB KO EL CLX CLX 90 EL CLX CLX 7 CLX CLX 31 EL HSY PG S&P S&P500 500 PEP CLX CLX 343 EL HSY S&P S&P500 500 PEP Mid Tertile KMB PG RB-GB KMB HSY KO KO CL S&P 500 S&P 500 PEP KM
Slide 7: A Proven Value Creation Model
A Proven Value Creation Model 7
Slide 8: Leading Brands
Leading Brands Over 80% of Global Sales from #1 or #2 Share Brands United States Share Position International Share Position Disinfecting Wipes #1 Argentina Bleach #1 Bleach #1 Saudi Arabia Bleach #1 Toilet Bowl Cleaner #1 Malaysia Bleach #1 Peru Bleach #1 Dilutable Cleaners #1 Hong Kong Wipes #1 Dr
Slide 9: Mid-Sized Categories
Mid-Sized Categories International: 17% Cleaning: 34% Latin America 8% Home Care 19% Canada 4% Laundry 9% Australia / NZ 2% Rest of World 3% FY18 Professional 6% Lifestyle: 17% $6.1B Household: 32% in Sales Food 9% Bags/Wraps 14% Natural Charcoal 9% Personal Care 4% Water Filtration 3% Cat Litter 7%
Slide 10: Operational Excellence
Operational Excellence Leading Brands Focus on Process & World Class Health & Efficiency Capabilities Wellness Top-Tier SG&A ● Top-Tier ROIC ● Healthy Cash Flow 10 As of June 30th, 2018, Clorox’s S&A/Sales was ~13.7% vs. peer average of 18% . This number does not include R&D or marketing expenses an
Slide 11: Good Growth: Profitable, Sustainable, Responsible
Good Growth: Profitable, Sustainable, Responsible PERFORMANCE PEOPLE Commitment to Environment, 2020 Good Social, Strategy Growth & Corporate PRODUCTS Governance (ESG) PLANET PURPOSE 11
Slide 12: Leading Through Strategic Change in CPG
Leading Through Strategic Change in CPG Digital >50% of advertising Growing with top retailers Retail and eCommerce Consumer Value >50% Superior 12
Slide 13: 2020 Strategy
2020 Strategy Mission • We make everyday life better, every day • Maximize economic profit Objectives • Big-share brands in mid-sized categories and countries • Drive superior consumer value behind strong brand investment, Strategy innovation and technology transformation • Accelerate portfolio mome
Slide 14: Driving Superior Consumer Value
Driving Superior Consumer Value DIFFERENTIATED • Value is an outcome of: PRODUCTS - The right pricing CONSUMER - Differentiated products VALUE BRAND - Great brand equity PRICING EQUITY 14
Slide 15: Driving Superior Consumer Value
Driving Superior Consumer Value DIFFERENTIATED • Value is an outcome of: PRODUCTS - The right pricing CONSUMER - Differentiated products VALUE BRAND - Great brand equity PRICING EQUITY 15
Slide 16: FY19 Pricing Executed and On Track
FY19 Pricing Executed and On Track • FY19 pricing on ~50% of portfolio DIFFERENTIATED PRODUCTS CONSUMER • Progress in line with expectation VALUE BRAND • >50% of brands still maintain PRICING EQUITY superior value perception • Drove gross margin expansion to fuel innovation investments 16
Slide 17: Investing in Differentiated Products
Investing in Differentiated Products DIFFERENTIATED • Value is an outcome of: PRODUCTS - The right pricing CONSUMER - Differentiated products VALUE BRAND - Great brand equity PRICING EQUITY 17
Slide 18: Differentiated Products Through Innovation
Differentiated Products Through Innovation 18
Slide 19: Strong and Consistent Innovation Track Record
Strong and Consistent Innovation Track Record Burt’s Bees PineSol Clorox Clothes Clorox Performance Scentiva® Clorox Fuzion International Canada UAE/KSA Bleach with Cloromax Platform International Cleaning Burt’s Bees Hidden Valley Ranch Withs Brita Stream Fresh Step Glad Odorshield Kingsford Cosmet
Slide 20: Innovation Built Into Our DNA
Innovation Built Into Our DNA 3-Year Pipeline High R&D Investment Product External Partnerships Marketing White Space 3% Agile Culture Cost Growth* Speed to Market 20 * Incremental annual sales
Slide 21: Strong FY19 Innovation: Cleaning
Strong FY19 Innovation: Cleaning International Cleaning Lifestyle Household 21
Slide 22: Strong FY19 Innovation: Cleaning
Strong FY19 Innovation: Cleaning CAGNY 2017 • Scent seekers are 1/3 of the Kills 99.9% of bacteria and viruses population – 45M households Cleans, disinfects and and growing deodorizes Two experiential custom blended scents from top fragrance houses • Forced to trade off scent for efficacy Tus
Slide 23: Scentiva Platform is a Big, Sustained Success
® Scentiva Platform is a Big, Sustained Success • Drove ~50% of home care segment’s growth in FY181 • Over indexes in growth segments: e.g. Hispanics, Millennials2 • Fueled Clorox 4th consecutive year of share growth1 Scent Expansion Bathroom Cleaners + Scent Expansion All Purpose Cleaners 2017 2018
Slide 24: Scentiva Platform Advertising (30 sec)
Scentiva Platform Advertising (30 sec) 24
Slide 25: Scentiva Floor Wipes Advertising (15 sec)
Scentiva Floor Wipes Advertising (15 sec) Introducing New Disinfecting Wet Mopping Cloths 25
Slide 26: Scentiva Disinfecting Wet Mopping Cloths
® Scentiva Disinfecting Wet Mopping Cloths • ~$500M category in US* • No disinfection option in category • Scentiva® Disinfecting Wet Mopping Cloths: • Kills 99.9% of viruses and bacteria • Safe on multiple surfaces ® • Added Scentiva scent experience: • Tuscan Lavender & Jasmine • Pacific Breeze &
Slide 27: Strong FY19 Innovation: Household
Strong FY19 Innovation: Household International Cleaning Lifestyle Household 27
Slide 28: Innovation-Led Business Turnaround
Innovation-Led Business Turnaround 28
Slide 29: Cat Litter Growing Sales and Market Share
Cat Litter Growing Sales and Market Share Clorox Litter Brand Sales * 550K 25 Clorox Litter Dollar Share* 24 500K Dollar Share Brand Sales 23 450K 22 400K 21 CY16 CY17 CY18 29 *Brand Dollar and Share Source: IRI MULO + Pet 52wks ending 12/31, Clorox Litter Brand = Fresh Step and Scoop Away
Slide 30: Continuing to Drive Consumer-Preferred Innovation
Continuing to Drive Consumer-Preferred Innovation 2018: Introduced Fresh Step® Clean PawsTM • #1 New item in the category* • #2 SKUs in Fresh Step® portfolio 2019: Doubling down with more scents • Fresh PawsTM Unscented • Fresh Step® with Febreze Mediterranean Lavender 30 * Source: IRI MULO 52wks en
Slide 31: Strong FY19 Innovation: Lifestyle
Strong FY19 Innovation: Lifestyle International Cleaning Lifestyle Household 31
Slide 32: Hidden Valley Ranch... More Than Just Salad Dressing
Hidden Valley Ranch®… More Than Just Salad Dressing • #1 salad dressing with 16 consecutive quarters of share growth • Ranch is a growing in popularity • >70% of ranch usage is outside of salad dressing 32
Slide 33: mae YOU EITHER
mae YOU EITHER DeeA LOVE IT OR YOU REALLY LOVE IT
Slide 34: New Hidden Valley Ranch Ready to Eat Dips
New Hidden Valley Ranch Ready to Eat Dips • Introducing new Ready- to-Eat Dips • $2B category and growing fast • In 3 great flavors: • Bacon Ranch • Buffalo Ranch • Classic Ranch 34
Slide 35: Purpose Driven Marketing Innovation
Purpose Driven Marketing Innovation GOING BOLD ON A BIG PROBLEM 35
Slide 36: Single-use plastic bottle consumption in the US
+2,000 # of single use plastic bottle consumed per second in the US1 60% of bottle water consumption happening in-home2 60% of plastics bottles end up in landfills and oceans3 1. Source: Beverage Marketing Corporation’s report, ‘Beverage Packaging in the US’ (2017) 2. Source: McKinsey & Co., Proprie
Slide 37: National Geographic
NATIONAL GEOGRAPHIC
Slide 38: Giving Consumer a Brita Reason to Switch
Giving Consumer a Brita® Reason to Switch • Consumers spend $18B on bottled water annually in the US • Introducing Brita® premium filtering water bottle: • Only major filtering bottle brand • Premium features • 6 SKUs including stainless steel 38
Slide 39: Strong FY19 Innovation: International
Strong FY19 Innovation: International International Cleaning Lifestyle Household 39
Slide 40: Innovation Fuels Go-Lean Strategy
Innovation Fuels Go-Lean Strategy Innovation drives superior consumer value and enables: • Pricing on over 50% of portfolio in FY19 • Four quarters of profit growth UAE/KSA: Australia/NZ: LatAm: Clorox Clothes Stain Chux Dish Wand Clorox Quitamanchas Remover Supreme Whites 40
Slide 41: Driving Superior Consumer Value
Driving Superior Consumer Value PRODUCT EXPERIENCE • Value is an outcome of: - The right pricing CONSUMER - Differentiated products VALUE BRAND - Great brand equity PRICING EQUITY 41
Slide 42: Building Superior Brands for Tomorrow
Building Superior Brands for Tomorrow Technology Human Purpose Enabled Centered Driven 42
Slide 43: Technology Enabled: Leaning Into Digital
Technology Enabled: Leaning Into Digital 55% >50% 49% 45% 41% Expect to invest 34% over 50% of media in digital FY15 FY16 FY17 FY18 FY19 Est 43
Slide 44: eCommerce Sales Well Ahead of 2020 Goals
eCommerce Sales Well Ahead of 2020 Goals • Early investment paying off $500M 2020 Aspiration • +38% Sales CAGR (FY15 to FY18) • On track for ~8% of Company Sales in FY19 2020 Goal Actual Actual Actual Goal Goal Goal FY16 FY17 FY18 FY20 Goals 44 FY18 includes eCommerce sales from Nutranext
Slide 45: Building Brands with Purpose
Building Brands with Purpose Technology Human Purpose Enabled Centered Driven 45
Slide 46: The Business Case for Purpose
The Business Case for Purpose Strong Correlation Between Strong Correlation Between Purpose Purpose and Growth1: and Long-Term Performance2: • 85% of purpose-led businesses showed positive growth • 42% of non-purpose-led businesses showed drop in revenue 1. Source: EY Beacon & HBR 46 2. Source: Brig
Slide 47: Burt's Bees: Prior Marketing Execution
Burt’s Bees®: Prior Marketing Execution 47
Slide 48: Brands with Purpose: Burt's Bees
Re-connect people to the wisdom, power and beauty of nature Brands with Purpose: Burt’s Bees® 48
Slide 49: New Burt's Bees Campaign: Celebrating Purpose
® New Burt’s Bees Campaign: Celebrating Purpose 49
Slide 50: Burt's Bees Ad
® Burt’s Bees Ad 50
Slide 51: Brand Purpose Driving Strong Results
Brand Purpose Driving Strong Results Burt’s Bees® Lip Care US Results1 GROWTH +12.5% last 52 weeks SHARE +1.4 pts last 52 weeks Became the #1 lip balm in the total lip balm category in FY182 1. IRI MULO 52wks ending 12/30/18 51 2. IRI MULO 13wks ending 6/17/18
Slide 52: Key Messages
Key Messages • Consistent strategy and track record of delivering strong results for our shareholders • Solid progress behind decisive actions to address near-term headwinds • Continue strong investments with focus on long-term profitable growth 52
Slide 53: Financial Performance
Financial Performance Kevin Jacobsen Chief Financial Officer 53
Slide 54: Long-Term Growth Algorithm
Long-Term Growth Algorithm U.S. Domestic International Total Company (~80% of Clorox Sales) (~20% of Clorox Sales) +2 to 4pts +5 to 7pts +3 to 5pts annual growth annual growth annual growth Annual EBIT Margin Improvement: +25 to +50 bps Annual Free Cash Flow % of Sales: 11% to 13% EBIT (a non-GAAP m
Slide 55: Consistent Strong Performance
Consistent Strong Performance Sales Earning Per Share* +3% CAGR +9% CAGR $6.26 $6.1B $5.5B $4.39 FY14 FY18 FY14 FY18 55 *Earnings per share is from from continuing operations
Slide 56: FY19 Outlook (February 4th Earnings Call)
FY19 Outlook (February 4th Earnings Call) Innovation: ~ +3pts Sales ~ 2% to 4% M&A: ~ +3pts (vs Year Ago) F/X: ~ -3pts Gross Margin: about flat Diluted EPS $6.20 to $6.40 Selling and Admin: ~14% of Sales from cont. ops (-1 to +2%) (vs Year Ago) Adv & Promo: ~10% of Sales 56
Slide 57: Decisive Actions to Address Challenging Environment
Decisive Actions to Address Challenging Environment • Taking actions to rebuild gross margin • Cost savings • Margin accretive innovation • International “Go-Lean” strategy • Cost justified pricing • Achieved gross margin inflection point in Q2 of FY19 57
Slide 58: Executed Pricing in Support of Profitable Growth
Executed Pricing in Support of Profitable Growth • Pricing 50% of portfolio • In line with expectations • Strong brand investment 58
Slide 59: Strong Track Record of Cost Savings
Strong Track Record of Cost Savings EBIT Margin Benefit from Cost Savings 250 bps 200 bps +150bps Annual Goal 150 bps 100 bps 50 bps 0 bps FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19+ EBIT (a non-GAAP measure) represents earnings from continuing operations before income taxes (a GAAP measure), excl
Slide 60: Continued Discipline on SG&A
Continued Discipline on SG&A As of Fiscal Year Ending June 30, 2018 30% Goal: % of Sales 20% < 14% Sales 13.7% 10% 0% CPB KHC K KMB CHD GIS CLX PG HSY NWL CL COTY DPS PEP 60 SG&A % of Sales as of latest fiscal year end for CLX as of June 30, 2018
Slide 61: Delivering Top-Tier ROIC
Delivering Top-Tier ROIC As of Fiscal Year Ending June 30, 2018 40% 30% 29% 20% Peer Average: 19% 10% 0% CL CLX HSY KMB CPB CHD RB-GB DPS GIS K NWL EL KHC PG PEP KO COTY Return on invested capital (ROIC), a non-GAAP measure, is calculated as earnings from continuing operations before income taxes an
Slide 62: Strong Free Cash Flow
Strong Free Cash Flow Annual Free Cash Flow Goal Raised to 11%-13% of Sales Free Cash Flow % of Sales: 11% 12% 13% 10% 11% 13% $974 $858 $871 $780 $786 $768 $590 $649 $733 $596 $640 $780 FY13 FY14 FY15 FY16 FY17 FY18 $ in Millions Operating Cash Flow Free Cash Flow 62 Free Cash Flow (a non-GAAP meas
Slide 63: Use of Cash Priorities
Use of Cash Priorities Business Growth Support Dividend (includes targeted M&A) Free Cash Flow Debt Leverage* Share Repurchases (Target: 2.0 – 2.5x) 63 * Debt Leverage = Gross Debt / EBITDA. EBITDA is a non-GAAP measure. See reconciliation in the supplemental financial schedules located at: https://
Slide 64: M&A Focus Unchanged
M&A Focus Unchanged Strong Fit with Strong, US Strategy & Capabilities Centric Brands Fast Growing Margin Accretive 64 Please note that this slide refers to general goals for Clorox’s M&A focus – each element may not be relevant or applicable to each potential M&A transaction.
Slide 65: Healthy Dividend Growth...
Healthy Dividend Growth… Dividends Have Increased Each Year Since 1977 Dividend Yield as of December 31, 2018 +14% Dividend 8% announced in Feb 2018 7% 6% 5% 4% Peer Average: 3.6% 3% 2.5% 2% 1% 0% COTY KHC GIS NWL CPB K KMB KDP KO PEP PG CL HSY CLX CHD EL RB-GB 65 Source: FactSet, Trailing dividend
Slide 66: Over $2B Returned to Stockholders in the Last 4 Years
Over $2B Returned to Stockholders in the Last 4 Years Initiated up to $2B share repurchase $ in Millions program in May 2018 $819 $721 $652 $595 FY15 FY16 FY17 FY18 Cash Returned to Shareholders* 66 *Cash returned to shareholders is defined as cash dividends paid plus treasury stock purchased as out
Slide 67: Consistent Track Record of Strong Shareholder Return
Consistent Track Record of Strong Shareholder Return 1 Year 3 Year 5 Year 20 Year Top Tertile KDP KDP KDP CHD CHD CHD CHD RB-GB KO EL CLX CLX 90 EL CLX CLX 7 CLX CLX 31 EL HSY PG S&P S&P500 500 PEP CLX CLX 343 EL HSY S&P S&P500 500 PEP Mid Tertile KMB PG RB-GB KMB HSY KO KO CL S&P 500 S&P 500 PEP KM
Slide 68: Long-Term Investment Case Remains Solid
Long-Term Investment Case Remains Solid • Investing behind leading brands to grow categories and share • Margin improvement opportunities continue to exist • Strong cash flow generation 68
Slide 69: Good Growth: Profitable, Sustainable, Responsible
Good Growth: Profitable, Sustainable, Responsible 69
Slide 70: Good Growth: Profitable, Sustainable, Responsible
Good Growth: Profitable, Sustainable, Responsible PERFORMANCE Commitment to PEOPLE Environment, 2020 Good Social, Strategy Growth & Corporate PRODUCTS Governance (ESG) PLANET PURPOSE 70
Slide 71: Reducing Our Environmental Footprint
Reducing Our Environmental Footprint 2020 GOAL 20% WASTE TO LANDFILL 33% WATER CONSUMPTION 22% GREENHOUSE GAS EMISSIONS 32% ENERGY CONSUMPTION 17% On track to meet or beat our goal of 20% reduction by 2020 Source: 2018 Clorox Integrated Annual Report 71 Cumulative progress to date since 2011 base ye
Slide 72: Our Efforts Are Broadly Recognized
Our Efforts Are Broadly Recognized 72
Slide 73: Superior Employee Engagement
Superior Employee Engagement World class levels Higher than peers +7* +2* *Statistically Significant Source: Willis Towers Watson FMCG Norm: Based on responses from more than 160,000 employees globally. 73 Global High Performing Companies: Companies meeting two criteria: (a) superior financial perfo
Slide 74: Key Messages
Key Messages • Consistent strategy and track record of delivering strong results for our shareholders • Solid progress behind decisive actions to address near-term headwinds • Continue strong investments with focus on long-term profitable growth 74
Slide 75: Q&A
Q&A Aw THE CLOROX COMPANY > Za
Slide 76: Return on Invested Capital (ROIC) Reconciliation
Return on Invested Capital (ROIC) Reconciliation Dollars in millions and all calculations based on rounded numbers FY18 Earnings from continuing operations before income taxes $ 1,054 Interest expense 85 Earnings from continuing operations before income taxes and interest expense $ 1,139 Income taxe
Slide 77: Return on Invested Capital (ROIC) Reconciliation
Return on Invested Capital (ROIC) Reconciliation Dollars in millions and all calculations based on rounded numbers (Amounts shown below are five quarter averages) FY18 Total assets $ 4,887 Less: non-interest bearing liabilities (1,792) Average invested capital $ 3,095 77
Slide 78: Cash Returned to Stockholders Reconciliation
Cash Returned to Stockholders Reconciliation Cash Returned to Stockholders is defined as Cash Dividends paid plus Treasury Stock Purchased as outlined in the Statement of Cash Flows Dollars in millions FY 2018 FY 2017 FY 2016 FY 2015 Treasury stock purchased * $271 $183 $254 $434 Cash dividends paid