Clorox Company (the) · NYSE:CLX
Clorox Company (the) — The Clorox Company — Q3 2020 Earnings Presentation
53 slides from Clorox Company (the)'s earnings presentation, May 1, 2020
Slide 1: The Clorox Company
BP. THE CLOROX COMPANY WF
Slide 2: Safe Harbor
SAFE HARBOR Except for historical information, matters discussed in this presentation, including statements about the Company’s future volume, sales, organic sales growth, costs, cost savings, earnings, earnings per share, diluted earnings per share, margins, foreign currencies, foreign currency exc
Slide 3: Near Term Priorities
NEAR TERM PRIORITIES “Our hearts go out to everyone who has been affected by the COVID-19 pandemic. We’re privileged to be in a position to serve the public health during this time. The Clorox Company is fundamentally a health and wellness company at heart and guided by our most important value to D
Slide 4: Long-Term Playbook
LONG-TERM PLAYBOOK CHOICEFUL AND DISCIPLINED Leading brands Purposeful & targeted loved by consumers in where we play ECONOMIC PROFIT Deeply rooted Good growth: discipline sustains ESG integration as a operational excellence competitive advantage 4
Slide 5: Contents
CONTENTS Key Sections Slide # • Who We Are 6 • Financial Performance 15 • IGNITE Strategy 27 • Appendix 41 5
Slide 6: Diverse, U.S.-Centric Portfolio
DIVERSE, U.S.-CENTRIC PORTFOLIO FY19 RESULTS 34% • 19% HOMECARE • 6% PROFESSIONAL PRODUCTS $6.2B NET SALES CLEANING • 9% LAUNDRY • 13% BAGS, WRAPS, CONTAINERS • 7% CAT LITTER 25+ 30% COUNTRY / TERRITORY HOUSEHOLD • 8% CHARCOAL • 2% DIGESTIVE HEALTH OPERATIONS 20% • 9% FOOD PRODUCTS • 5% NATURAL PERS
Slide 7: Leading Brands Loved by Our Consumers
LEADING BRANDS LOVED BY OUR CONSUMERS • Nearly 80% of our global portfolio from #1 and #2 share brands • Majority of our portfolio has superior consumer value • Our products are in 9 out 10 US homes 7
Slide 8: Big Share Brands, Mid-Sized Categories
BIG SHARE BRANDS, MID-SIZED CATEGORIES Charcoal CLX #1 • Categories that are more Bleach CLX #1 rational with less multi- nationals Water Filtration CLX #1 Wipes CLX #1 • Grow categories with deep Premium Trash CLX #1 consumer insights & world- class capabilities Salad Dressing CLX #1 Cat Litter CLX
Slide 9: Operational Excellence
OPERATIONAL EXCELLENCE Our leading brands, world-class capabilities and deeply rooted discipline drive operational excellence +150bps 3+ pts Low Margin from Top-Tier Strong Sales from Selling & Cost ROIC Cash Flows Innovation Admin Savings 9
Slide 10: Strong Financial Results
STRONG FINANCIAL RESULTS FY14 TO FY19 CAGR Sales EPS EP 2.4% 7.6% 7.5% 10 NOTE: CAGR refers to Compounded Annual Growth Rate. Earnings per share is from from continuing operation. EP refers to Economic Profit and reconciliation can be found in the appendix
Slide 11: Strong Shareholder Returns
STRONG SHAREHOLDER RETURNS FY14 TO FY19 91% 66% 50% Clorox S&P 500 Peers 11 SOURCE: FactSet, Total Share Return as of June 30, 2019. Peers consist of 16 companies: CHD, CL, COTY, CPB, DPS, EL, GIS, HSY, K, KHC, KMB, KO, RB-GB, NWL, PEP, and PG
Slide 12: Strong Value for Society
STRONG VALUE FOR SOCIETY PERFORMANCE PEOPLE PRODUCTS PLANET PURPOSE +3% Sales from 87% Employee 58% Products 20% reduction by $50M Product innovation engagement with sustainability 2020 on track: donations improvements • Waste to landfill +7.5% EP CAGR Top-tier diversity $16M in employee • Water (FY
Slide 13: Strong Results the Right Way
STRONG RESULTS THE RIGHT WAY 13
Slide 14: IGNITE Strategy
IGNITE STRATEGY Vision Exceptional innovators who earn people’s enduring loyalty Maximize economic profit Objectives Good growth — profitable, sustainable, and responsible Fuel growth in our brands Strategy Innovate brand and shopping experiences of the future Reimagine how we work 14 Evolve our por
Slide 15: The Clorox Company
Am THE CLOROX COMPANY 74
Slide 16: FY20 Outlook
FY20 OUTLOOK Full Year Outlook Q3 YTD Results (As of May 1st Earnings Call) Sales +3% Up +4% to +6% (vs year ago) (OSG +5%) (OSG +6% to +8%) Diluted EPS $4.95 $6.70 to $6.90 (vs year ago) (+11%) (+6% to +9%) Organic sales growth (OSG) is defined as GAAP net sales growth excluding the effect of forei
Slide 17: IGNITE Strategy Financial Goals
IGNITE STRATEGY FINANCIAL GOALS Annual Goals US +2% to 4% (~85% of Clorox sales) Sales International +1% to 4% growth (~15% of Clorox sales) Total company +2% to 4% EBIT margin improvement +25 to 50 bps Free cash flow % of sales 11% to 13% EBIT (a non-GAAP measure) represents before income taxes (a
Slide 18: Strong Track Record of Cost Savings
STRONG TRACK RECORD OF COST SAVINGS RAISING COST SAVINGS TARGET FROM +150BPS TO +175BPS EBIT Margin Benefit from Cost Savings 150 bps 0 bps FY15 FY16 FY17 FY18 FY19 18 EBIT (a non-GAAP measure) represents earnings before income taxes (a GAAP measure), excluding interest income & interest expense. EB
Slide 19: More Opportunity to Drive S&A Productivity
MORE OPPORTUNITY TO DRIVE S&A PRODUCTIVITY REIMAGINING HOW WE WORK TO CREATE FUEL FOR GROWTH S&A % of Sales 13.8% CLX 19 S&A % of Sales as of latest fiscal year end for CLX as of December 31, 2019. Peers consist of 16 companies: CHD, CL, COTY, CPB, , EL, GIS, HSY, K, KHC, KMB, KO, RB-GB, NWL, PEP, a
Slide 20: Relentless Focus on Economic Profit Drives Top-Tier ROIC
RELENTLESS FOCUS ON ECONOMIC PROFIT DRIVES TOP-TIER ROIC Return on Invested Capital (ROIC) 28% Peer average: 18% CLX ROIC as of Fiscal Year Ending June 30, 2019 Return on invested capital (ROIC), a non-GAAP measure, is calculated as earnings from continuing operations before income taxes (a GAAP mea
Slide 21: Delivered Strong Free Cash Flow
DELIVERED STRONG FREE CASH FLOW 13% $0.8B • Company generates consistent strong free cash flow 12% $0.6B • Increased annual free cash flow by +20% since FY14 • Raised our annual goal to 11% to 13% of net sales FY14 FY19 *Adjusted to reflect the retrospective adoption of Accounting Standards Update N
Slide 22: Disciplined Uses of Cash
DISCIPLINED USES OF CASH 1 2 Business growth Support dividend (includes targeted M&A) FREE CASH FLOW 3 4 Debt leverage1 Stock repurchases (Target: 2.0 – 2.5x) 1. Debt Leverage = Gross Debt / EBITDA. EBITDA is a non-GAAP measure. See reconciliation in the supplemental financial schedules located at:
Slide 23: Long Track Record of Dividend Growth
LONG TRACK RECORD OF DIVIDEND GROWTH Dividend per share annualized $4.24 Dividend Yield 2.4% as of 3/31/2020 $3.94 $3.60 $3.24 $3.11 $2.99 $2.87 $2.56 $2.44 $2.25 $2.05 $1.88 $1.66 $1.31 $1.08 $1.11 $1.15 $0.93 $0.81 $0.84 $0.85 JUN JUN JUN '00 '09 '19 23 SOURCE: FactSet
Slide 24: Strong Cash Returned to Shareholders
STRONG CASH RETURNED TO SHAREHOLDERS $1.2B • ~2X increase in annual cash returned to shareholders $0.6B • Initiated up to $2B repurchase program in May 2018 • +60% growth in FY19 on top of +21% growth in FY18 FY14 FY19 24 *Cash returned to stock holders is defined as cash dividends paid plus treasur
Slide 25: Long-Term Investment Case Remains Solid
LONG-TERM INVESTMENT CASE REMAINS SOLID Investing behind leading brands to grow categories and share • Increasing expected value from innovation • Healthy category and brand building investments, including digital/E-Commerce Fueled by cost savings and admin productivity • Pursuing margin accretive i
Slide 26: Long Track Record of Delivering Value
LONG TRACK RECORD OF DELIVERING VALUE TOTAL SHAREHOLDER RETURN 20 YEAR (as of 3/31/2020) 794 CLOROX S&P 500 155 Mar-00 Mar-05 Mar-10 Mar-15 Mar-20 26 SOURCE: FactSet, 20 Year Total Share Return as of March 31, 2020.
Slide 27: The Clorox Company
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Slide 28: Innovating Where We Have Advantage
INNOVATING WHERE WE HAVE ADVANTAGE Leading brands Purposeful & loved by targeted in where consumers we play ECONOMIC PROFIT Deeply rooted discipline Good growth: sustains operational ESG integration as excellence competitive advantage 28
Slide 29: IGNITE Strategy
IGNITE STRATEGY Vision Exceptional innovators who earn people’s enduring loyalty Maximize economic profit Objectives Good growth — profitable, sustainable, and responsible Fuel growth in our brands Strategy Innovate brand and shopping experiences of the future Reimagine how we work Evolve our portfo
Slide 30: IGNITE Strategy Choice: Fuel Growth
IGNITE STRATEGY CHOICE • Increase cost savings target to +175bps Fuel • Widening the cost savings Growth funnel, leveraging – Digital – Integrated design – Sustainability 30
Slide 31: Sustainability Unlocks Cost Savings
SUSTAINABILITY UNLOCKS COST SAVINGS From: CARTON To: WRAP 31
Slide 32: IGNITE Strategy Choice: Innovate Experiences
IGNITE STRATEGY CHOICE • Purpose-driven, personalized brands Innovate • Frictionless shopping Experiences with retailers • Bigger, stickier innovation platforms 32
Slide 33: Driving Bigger, Stickier Platforms
DRIVING BIGGER, STICKIER PLATFORMS • Bigger ideas • Wider net • Longer focus 33
Slide 34: IGNITE Strategy Choice: Reimagine Work
IGNITE STRATEGY CHOICE • Inclusive Reimagine • Digital Work • Fast 34
Slide 35: Investing in Digital Capabilities
INVESTING IN DIGITAL CAPABILITIES BRAND BUILDING - DATA, ANALYTICS & HUMAN INSIGHT • Data science expertise • Predictive analytics • Data-savvy marketers 35
Slide 36: IGNITE Strategy Choice: Evolve Portfolio
IGNITE STRATEGY CHOICE • Grow the core Evolve • Accelerate International Portfolio profitable growth • M&A criteria largely unchanged 36
Slide 37: Accelerate Core with Megatrends
ACCELERATE CORE WITH MEGATRENDS Health & Wellness Multicultural Accelerating Millennials the Core Personalization & Customization Responsibility 37
Slide 38: IGNITE Strategy Integrated Choices
IGNITE STRATEGY INTEGRATED CHOICES 38
Slide 39: IGNITE Strategy ESG Leadership Areas
IGNITE STRATEGY ESG LEADERSHIP AREAS PLANET Plastic and other waste reduction; science-based climate action PRODUCTS Responsible product stewardship; enhance industry best practices PEOPLE Enhance people’s lives through choices that promote well-being GOVERNANCE Executive compensation tied to ESG go
Slide 40: Pursuing Bold 2030 Environmental Goals
PURSUING BOLD 2030 ENVIRONMENTAL GOALS 50% Reduction Science-based targets in virgin packaging on green gas emission across our operations & value chain 100% Recyclable, reusable 100% Renewable electricity or compostable packaging in US & Canada by 2021 by 2025 Comprehensive IGNITE ESG Goals can be
Slide 41: Appendix
BAe. THE CLOROX COMPANY RZ
Slide 42: Key Credit Metrics
KEY CREDIT METRICS $ in B FY14 FY15 FY16 FY17 FY18 FY19 EBITDA $1.1 $1.2 $1.2 $1.3 $1.3 $1.3 Total Debt / EBITDA 2.0x 1.8x 1.9x 1.7x 1.9x 2.1x EBITDA Interest Coverage 9.5x 11.3x 11.9x 14.0x 14.8x 15.3x EBIT / Interest 8.0x 9.6x 10.2x 12.1x 12.7x 13.3x Free Cash Flow / Debt 25% 28% 33% 26% 29% 31% F
Slide 43: Gross Margin Reconciliation
GROSS MARGIN RECONCILIATION 43
Slide 44: Reportable Segments (Unaudited)
REPORTABLE SEGMENTS (UNAUDITED) Dollars in Millions 44
Slide 45: Net Sales Drivers
NET SALES DRIVERS (1) This represents the net impact on net sales growth/ (decrease) from pricing action, mix and other factors. (2) Organic sales growth/ (decrease) is defined as net sales growth/ (decrease) excluding the effect of any acquisitions and divestitures and foreign exchange rate changes
Slide 46: Organic Sales Reconciliation
ORGANIC SALES RECONCILIATION Reconciliation of organic sales growth/(decrease) (non-GAAP) to net sales growth/(decrease) (GAAP), the most comparable GAAP measure: 46
Slide 47: Return on Invested Capital Reconciliation
RETURN ON INVESTED CAPITAL RECONCILIATION FY19 Dollars in millions and all calculations based on rounded numbers Earnings from continuing operations before income taxes $FY18 1,024 (GAAP measure) Earnings from continuing operations before income taxes $ 1,054 Interest expense Interest expense 85 97
Slide 48: Return on Invested Capital Reconciliation
RETURN ON INVESTED CAPITAL RECONCILIATION Dollars in millions and all calculations based on rounded numbers (Amounts shown below are five quarter averages) FY19 Total assets $ 5,094 Less: non-interest bearing liabilities (1,825) Average invested capital $ 3,269 48
Slide 49: 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 2019 FY 2018 FY 2017 FY 2016 FY 2015 Treasury stock purchased* $ 661 $ 271 $ 183 $ 254 $ 434 Ca
Slide 50: Economic Profit Reconciliation
ECONOMIC PROFIT RECONCILIATION THE CLOROX COMPANY RECONCILIATION OF ECONOMIC PROFIT (UNAUDITED) (1) Dollars in m illions FY19 FY18 FY17 FY16 FY15 FY14 Earnings from continuing operations before income taxes $ 1,024 $ 1,054 $ 1,033 $ 983 $ 921 $ 884 Add back: Noncash U.S. GAAP restructuring and intan
Slide 51: Economic Profit Reconciliation: Footnotes
ECONOMIC PROFIT RECONCILIATION: FOOTNOTES • (1) Economic profit (EP) is defined by the Company as earnings from continuing operations before income taxes, excluding non-cash U.S. GAAP restructuring and intangible asset impairment charges, and interest expense; less income taxes (calculated utilizing
Slide 52: Economic Profit Reconciliation: Average Capital Deployed
ECONOMIC PROFIT RECONCILIATION: AVERAGE CAPITAL DEPLOYED FY19 FY18 FY17 FY16 FY15 FY14 Total assets (5) $ 5,116 $ 5,060 $ 4,573 $ 4,510 $ 4,154 $ 4,251 Less: Accounts payable and accrued liabilities (6) 1,033 1,000 1,002 1,032 976 912 Income taxes payable 9 - - - 31 8 Other liabilities (6) 774 778 7
Slide 53: Economic Profit Reconciliation: Footnotes
ECONOMIC PROFIT RECONCILIATION: FOOTNOTES • (4) Capital charge represents average capital employed multiplied by a cost of capital, which was 9% for all fiscal years presented. The calculation of capital charge includes the impact of rounding numbers. • (5) Amounts for fiscal years 2016, 2015 and 20