Clorox Company (the) · NYSE:CLX
Clorox Company (the) — The Clorox Company — Q3 2021 Earnings Presentation
57 slides from Clorox Company (the)'s earnings presentation, Apr 30, 2021
Slide 1: FY21 Q3 Investor Presentation
FY21 Q3 Investor Presentation
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 attributable to the Company, earnings per share, diluted earnings per share, margins, fo
Slide 3: Contents
CONTENTS Key Sections Slide # • Who We Are 4 • Financial Performance 15 • IGNITE Strategy 25 • Accelerating Growth 39 • Appendix 46 3
Slide 4: Who We Are
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Slide 5: Choiceful, Disciplined Playbook
CHOICEFUL, DISCIPLINED PLAYBOOK Leading brands Purposeful & targeted loved by consumers in where we play ECONOMIC PROFIT Deeply rooted Purpose-driven growth: discipline sustains ESG integration as a operational excellence competitive advantage 5
Slide 6: Diverse, U.S.-Centric Portfolio
DIVERSE, U.S.-CENTRIC PORTFOLIO FY20 RESULTS 41% • 30% CLEANING • 7% PROFESSIONAL PRODUCTS $6.7B Health & NET SALES Wellness • 4% VITAMINS, MINERALS and SUPPLEMENTS 26+ • 12% BAGS AND WRAPS • 7% CAT LITTER COUNTRY / 27% TERRITORY HOUSEHOLD • 8% GRILLING OPERATIONS 17% • 9% FOOD PRODUCTS • 4% WATER F
Slide 7: Leading Brands Loved by Our Consumers
LEADING BRANDS LOVED BY OUR CONSUMERS • Over 80% of our global portfolio from #1 and #2 share brands • Majority of our portfolio has superior consumer value • Accelerating growth with purpose-driven brands 7
Slide 8: Big-Share Brands, Mid-Sized Categories
BIG-SHARE BRANDS, MID-SIZED CATEGORIES Grilling CLX #1 • Categories that are more rational Bleach CLX #1 and less crowded with multinationals 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 L
Slide 9: Operational Excellence
OPERATIONAL EXCELLENCE Our leading brands, world-class capabilities and deeply rooted discipline drive operational excellence Sales +175bps Low Growth Margin Top-Tier Strong Selling & Through From Cost ROIC Cash Flows Admin Innovation Savings 9 Cost Savings Target is +175 bps EBIT Margin. EBIT (a no
Slide 10: Strong Financial Results
STRONG FINANCIAL RESULTS FY15 TO FY20 CAGR Sales EPS EP 3.5% 10.0% 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 FY15 TO FY20 140% 66% 55% Clorox S&P 500 Peers 11 SOURCE: FactSet, Total Share Return as of June 30, 2020. Peers consist of 16 companies: CHD, CL, EL, GIS, HSY, K, KHC, KMB, KO, RB-GB, MDLZ, NESN, PEP, PG, REYN and ULVR.
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 $13M Product innovation engagement with sustainability 2020 on track: donations improvements • Waste to landfill +7.5% EP CAGR Top-tier diversity $3M in employee • Water (FY1
Slide 13: Strong Results the Right Way
STRONG RESULTS THE RIGHT WAY 13
Slide 14: IGNITE Strategy
IGNITE STRATEGY Purpose We champion people to be well & thrive every single day Vision Exceptional innovators who earn people’s enduring loyalty Maximize economic profit Objectives Purpose-driven growth — profitable, sustainable, and responsible Fuel growth in our brands Strategy Innovate brand and
Slide 15: Financial Performance
Financial Performance
Slide 16: FY21 Performance & Outlook
FY21 PERFORMANCE & OUTLOOK Q3 FY21 Outlook FY21 (As of April 30 Earnings Call) Sales Flat +10% to +13% (vs year ago) (OSG -1%) (OSG +10% to +13%) Adjusted EPS $1.62 $7.45 to $7.65 (vs year ago) (-14%) (+1% to +4%) Organic sales growth (OSG) is defined as GAAP net sales growth excluding the effect of
Slide 17: IGNITE Strategy Financial Goals
IGNITE STRATEGY FINANCIAL GOALS Original IGNITE NEW Annual Goals Annual Goals* Sales Growth +2% to 4% +3% to 5% EBIT Margin Improvement +25 to 50 bps +25 to 50 bps Free Cash Flow % of Sales 11% to 13% 11% to 13% *Raised annual sales growth goal in February 2021 EBIT (a non-GAAP measure) represents b
Slide 18: Strong Track Record of Cost Savings
STRONG TRACK RECORD OF COST SAVINGS COST SAVINGS TARGET +175BPS EBIT Margin Benefit From Cost Savings 150 bps 0 bps FY16 FY17 FY18 FY19 FY20 EBIT (a non-GAAP measure) represents earnings before income taxes (a GAAP measure), excluding interest income & interest expense. EBIT margin is a measure of E
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 14.4% CLX S&A % of Sales as of latest fiscal year end for CLX as of June 30, 2020. 19 Peers consist of 16 companies: CHD, CL, EL, GIS, HSY, K, KHC, KMB, KO, RB-GB, MDLZ, NESN, PEP, PG, REYN an
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) 30% Peer average: 17% CLX ROIC as of Fiscal Year Ending June 30, 2020 Return on invested capital (ROIC), a non-GAAP measure, is calculated as earnings before income taxes (a GAAP measure) and interest expense,
Slide 21: Delivered Strong Free Cash Flow
DELIVERED STRONG FREE CASH FLOW 19% • Company generates consistent strong free cash flow • Increased annual free cash 13% 13% flow in FY20 by +64% vs YA 11% 10% FY16 FY17 FY18 FY19 FY20 Free Cash Flow (a non-GAAP measure) represents Net Cash less Capital Expenditures. 21 See reconciliation in the su
Slide 22: Disciplined Uses of Cash
DISCIPLINED USES OF CASH Business Growth Support Dividend (Strong reinvestments in FY21) (Average annual dividend increase FY18-FY20) CLX 9% People/ A&P CAPEX Tech +100bps +70bps Peer Average 4% +60bps STRONG CASH Cash Returned to Shareholders FLOW Debt Leverage* (Nearly $4B in last 5 years) (Target
Slide 23: Long Track Record of Delivering Value
LONG TRACK RECORD OF DELIVERING VALUE TOTAL SHAREHOLDER RETURN 20 YEAR (as of 3/31/2021) 943 CLOROX 409 S&P 500 Mar-01 Mar-06 Mar-11 Mar-16 Mar-21 23 SOURCE: FactSet, 20 Year Total Share Return as of March 31, 2021.
Slide 24: 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 25: IGNITE Strategy
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Slide 26: 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 Purpose-driven sustains operational growth: excellence ESG integration as competitive advantage 26
Slide 27: IGNITE Strategy
IGNITE STRATEGY Purpose We champion people to be well & thrive every single day Vision Exceptional innovators who earn people’s enduring loyalty Maximize economic profit Objectives Purpose-driven growth Fuel growth in our brands Strategy Innovate brand and shopping experiences of the future Reimagin
Slide 28: 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 28
Slide 29: Sustainability Unlocks Cost Savings
SUSTAINABILITY UNLOCKS COST SAVINGS From: CARTON To: WRAP 29
Slide 30: IGNITE Strategy Choice: Innovate Experiences
IGNITE STRATEGY CHOICE • Purpose-driven, personalized brands Innovate • Frictionless shopping Experiences with retailers • Bigger, stickier innovation platforms 30
Slide 31: Driving Bigger, Stickier Platforms
DRIVING BIGGER, STICKIER PLATFORMS • Bigger ideas • Wider net • Longer focus 31
Slide 32: IGNITE Strategy Choice: Reimagine Work
IGNITE STRATEGY CHOICE • Inclusive Reimagine • Digital Work • Fast 32
Slide 33: Investing in Digital Capabilities
INVESTING IN DIGITAL CAPABILITIES BRAND BUILDING - DATA, ANALYTICS & HUMAN INSIGHT • Data science expertise • Predictive analytics • Data-savvy marketers 33
Slide 34: IGNITE Strategy Choice: Evolve Portfolio
IGNITE STRATEGY CHOICE • Grow the core Evolve • Accelerate International profitable growth Portfolio • M&A criteria largely unchanged 34
Slide 35: Accelerate Core with Megatrends
ACCELERATE CORE WITH MEGATRENDS Health & Wellness Multicultural Accelerating Millennials the Core Personalization & Customization Responsibility 35
Slide 36: IGNITE Strategy Integrated Choices
IGNITE STRATEGY INTEGRATED CHOICES 36
Slide 37: 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 38: 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 2025 achieved January 2021 Comprehensive IGNITE ESG
Slide 39: Accelerating Growth
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Slide 40: Lasting Shifts in Consumer Behavior
LASTING SHIFTS IN CONSUMER BEHAVIOR CREATES NEW GROWTH OPPORTUNITIES GREATER THE ROLE OF HIGHER FOCUS PREFERENCE HOME HAS ON HEALTH & FOR TRUSTED CHANGED HYGIENE BRANDS 40
Slide 41: Doubling Down on Our Strengths
DOUBLING DOWN ON OUR STRENGTHS BUILDING A GLOBAL CLEANING & DISINFECTING BRAND • Leading and trusted brand • Established capabilities and relationships • Scaling up to meet growing demand across channels and markets In Home • Building a strong ecosystem and Out of Home more growth runways (strategic
Slide 42: Building a Global Disinfecting & Cleaning Brand: Out-of-Home
BUILDING A GLOBAL DISINFECTING & CLEANING BRAND GROWING CLOROX OUT-OF-HOME BUSINESS New Forms & New Applications Technologies Strategic New Channels Partners 42
Slide 43: Building a Global Disinfecting & Cleaning Brand: International
BUILDING A GLOBAL DISINFECTING & CLEANING BRAND GROWING CLOROX INTERNATIONAL Dedicated New Forms & Supply Chain Applications Localized Trade Up, Insights New Markets 43
Slide 44: Touchless Disinfecting Innovation
TOUCHLESS DISINFECTING INNOVATION AVAILABLE Q4 FY21 Clorox® Total 360® Clorox® TurboPro™ Clorox® Turbo™ Clorox® Turbo™ & TurboPro™ ProPack Electrostatic Sprayer Powered Sprayer Disinfectant Cleaner Electrostatic Sprayer for Sprayer Devices • Backpack electrostatic sprayer • Handheld electrostatic sp
Slide 45: Progress on Collaborative Relationships
PROGRESS ON COLLABORATIVE RELATIONSHIPS 45
Slide 46: Appendix
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Slide 47: Key Credit Metrics
KEY CREDIT METRICS FY16 FY17 FY18 FY19 FY20 S&P Credit Rating BBB+ A- A- A- A- Moody’s Credit Rating Baa1 Baa1 Baa1 Baa1 Baa1 Debt/ EBITDA 1.9x 1.7x 1.9x 2.1x 1.9x Free Cash Flows as % of Sales 13% 10% 11% 13% 19% Note: FCF is a Non-GAAP measure with reconciliations available in the supplemental fin
Slide 48: Debt to EBITDA (Debt Leverage) Reconciliation
Debt to EBITDA (Debt Leverage) Reconciliation FY FY FY FY FY 6/30/16 6/30/17 6/30/18 6/30/19 6/30/20 Earnings before income taxes $ 983 $ 1,033 $ 1,054 $ 1,024 $ 1,185 Interest income -$5 -$4 -$6 -$3 -$2 Interest expense $88 $88 $85 $97 $99 EBIT (1)(3) $1,066 $1,117 $1,133 $1,118 $1,282 EBIT margin
Slide 49: Gross Margin Reconciliation
GROSS MARGIN RECONCILIATION The table below provides details on the drivers of gross margin change versus the prior year. (1) In Q4 of fiscal year 2020, ‘All other” includes the positive impact from volume growth and mix and assortment. In Q1 of fiscal year 2020, “All other” includes about -180bps o
Slide 50: Reportable Segments (Unaudited)
REPORTABLE SEGMENTS (UNAUDITED) Dollars in Millions (1) Percentages based on rounded numbers (2) .The earnings (losses) before income taxes for the Health and Wellness segment includes $329 noncash impairment charges for the Vitamins, Minerals and Supplements strategic business unit for the three 50
Slide 51: 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 52: 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: Non-GAAP Financial Information Management believes that the presentation of organic sales growth / (decrease) is useful to investors beca
Slide 53: Adjusted Earnings Per Share and Adjusted Effective Tax Rate
Adjusted Earnings Per Share and Adjusted Effective Tax Rate Dollars in millions except per share data; shares in thousands (a) During the quarter ended March 31, 2021, noncash impairment charges of goodwill, trademarks and other assets were recorded of $329 ($267 after tax). (b) Includes the dilutio
Slide 54: Return on Invested Capital Reconciliation
RETURN ON INVESTED CAPITAL RECONCILIATION Dollars in Millions FY20 Earnings before income taxes (GAAP measure) $ 1,185 Interest expense 99 Earnings before income taxes and interest expense $ 1,284 (2) Income taxes before income taxes and interest expense $ (267) Adjusted after-tax profit $ 1,017 (3)
Slide 55: Cash Returned to Stockholders Reconciliation
CASH RETURNED TO STOCKHOLDERS RECONCILIATION(1) Dollars in Millions FY 2020 FY 2019 FY 2018 FY 2017 FY 2016 FY 2015 (2) Treasury Stock purchased $ 248 $ 661 $ 271 $ 183 $ 254 $ 434 Cash dividends paid(2) $ 533 $ 490 $ 450 $ 412 $ 398 $ 385 (1) Cash Returned to Stockholders $ 781 $ 1,151 $ 721 $ 595
Slide 56: Economic Profit Reconciliation
ECONOMIC PROFIT RECONCILIATION Dollars in Millions FY20 FY19 FY18 FY17(2) FY16(2) FY15(2) Earnings before income taxes $ 1,185 $ 1,024 $ 1,054 $ 1,033 $ 983 $ 921 Add back: Noncash U.S. GAAP restructuring and intangible asset impairment charges 2 2 2 4 9 1 Interest expense 99 97 85 88 88 100 Earning
Slide 57: Economic Profit Reconciliation: Average Capital Deployed
ECONOMIC PROFIT RECONCILIATION: AVERAGE CAPITAL DEPLOYED Dollars in Millions FY20 FY19 FY18 FY17(2) FY16(2) FY15(2) Total assets (6) $ 6,213 $ 5,116 $ 5,060 $ 4,573 $ 4,510 $ 4,154 Less: Accounts payable and accrued liabilities (7) 1,327 1,033 1,000 1,002 1,032 976 Current operating lease liabilitie