Clorox Company (the) · NYSE:CLX
Clorox Company (the) — The Clorox Company — Q1 2021 Earnings Presentation
50 slides from Clorox Company (the)'s earnings presentation, Nov 2, 2020
Slide 1: FY21 Q1 Investor Presentation
FY21 Q1 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: 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 3
Slide 4: Contents
CONTENTS Key Sections Slide # • Who We Are 5 • Financial Performance 14 • IGNITE Strategy 26 • Appendix 40 4
Slide 5: 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, WRAPS, CONTAINERS • 7% CAT LITTER COUNTRY / 27% TERRITORY HOUSEHOLD • 8% GRILLING OPERATIONS 17% • 9% FOOD PRODUCTS • 4
Slide 6: 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 • Our products are in 9 out 10 US homes 6
Slide 7: Big Share Brands, Mid-Sized Categories
BIG SHARE BRANDS, MID-SIZED CATEGORIES Grilling 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 8: Operational Excellence
OPERATIONAL EXCELLENCE Our leading brands, world-class capabilities and deeply rooted discipline drive operational excellence Sales +175bps Low Growth Margin from Top-Tier Strong Selling & through Cost ROIC Cash Flows Admin Innovation Savings 8
Slide 9: Strong Financial Results
STRONG FINANCIAL RESULTS FY15 TO FY20 CAGR Sales EPS EP 3.5% 10.0% 7.5% 9 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 10: Strong Shareholder Returns
STRONG SHAREHOLDER RETURNS FY15 TO FY20 140% 66% 55% Clorox S&P 500 Peers 10 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 11: 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 12: Strong Results the Right Way
STRONG RESULTS THE RIGHT WAY 12
Slide 13: 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 13 Evolve our por
Slide 14: Financial Update
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Slide 15: FY21 Performance & Outlook
FY21 PERFORMANCE & OUTLOOK FY21 Outlook Q1 FY21 (As of Nov 2nd Earnings Call) Sales +27% +5% to +9% (vs year ago) (OSG +27%) (OSG +5% to +9%) Diluted EPS $3.22 $7.70 to $7.95 (vs year ago) (+103%) (+5% to +8%) Organic sales growth (OSG) is defined as GAAP net sales growth excluding the effect of for
Slide 16: 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 17: 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 18: 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, 2020Peers consist of 16 companies: CHD, CL, EL, GIS, HSY, K, KHC, KMB, KO, RB-GB, MDLZ, NESN, PEP, PG, REYN and ULV
Slide 19: 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 20: 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% • Raised our annual goal to 11% to 13% of net sales FY16 FY17 FY18 FY19 FY20 Free Cash Flow (a non-GAAP measure) represents Net Cash less C
Slide 21: 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 for the trailing four quarters. EBITDA is a non-GAAP measure. See reconciliation in the supplemental f
Slide 22: Long Track Record of Dividend Growth
LONG TRACK RECORD OF DIVIDEND GROWTH Dividend per share annualized $4.44 4.34 Dividend Yield 2.1% as of 9/30/2020 4.04 3.72 3.28 3.02 3.14 2.9 2.63 2.48 2.3 2.10 1.92 1.72 1.42 1.08 1.12 1.16 0.86 0.98 0.82 0.84 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-
Slide 23: Strong Cash Returned to Shareholders
STRONG CASH RETURNED TO SHAREHOLDERS NEARLY $4B RETURNED OVER THE PAST 5 YEARS $1,151 $781 $721 $652 $595 FY16 FY17 FY18 FY19 FY20 23 Cash returned to shareholders is defined as cash dividends paid plus treasury stock purchased as outlined in the statements of cash flows
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: Long Track Record of Delivering Value
LONG TRACK RECORD OF DELIVERING VALUE TOTAL SHAREHOLDER RETURN 20 YEAR (as of 9/30/2020) 804 CLOROX 247 S&P 500 Sep-00 Sep-05 Sep-10 Sep-15 Sep-20 25 SOURCE: FactSet, 20 Year Total Share Return as of September 30, 2020.
Slide 26: IGNITE Strategy
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Slide 27: 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 27
Slide 28: 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 29: 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 29
Slide 30: Sustainability Unlocks Cost Savings
SUSTAINABILITY UNLOCKS COST SAVINGS From: CARTON To: WRAP 30
Slide 31: IGNITE Strategy Choice: Innovate Experiences
IGNITE STRATEGY CHOICE • Purpose-driven, personalized brands Innovate • Frictionless shopping Experiences with retailers • Bigger, stickier innovation platforms 31
Slide 32: Driving Bigger, Stickier Platforms
DRIVING BIGGER, STICKIER PLATFORMS • Bigger ideas • Wider net • Longer focus 32
Slide 33: IGNITE Strategy Choice: Reimagine Work
IGNITE STRATEGY CHOICE • Inclusive Reimagine • Digital Work • Fast 33
Slide 34: Investing in Digital Capabilities
INVESTING IN DIGITAL CAPABILITIES BRAND BUILDING - DATA, ANALYTICS & HUMAN INSIGHT • Data science expertise • Predictive analytics • Data-savvy marketers 34
Slide 35: IGNITE Strategy Choice: Evolve Portfolio
IGNITE STRATEGY CHOICE • Grow the core Evolve • Accelerate International Portfolio profitable growth • M&A criteria largely unchanged 35
Slide 36: Accelerate the Core with Megatrends
ACCELERATE CORE WITH MEGATRENDS Health & Wellness Multicultural Accelerating Millennials the Core Personalization & Customization Responsibility 36
Slide 37: IGNITE Strategy Integrated Choices
IGNITE STRATEGY INTEGRATED CHOICES 37
Slide 38: 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 39: 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 40: Appendix
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Slide 41: 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 42: Debt to EBITDA Reconciliation
Debt to EBITDA 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 (1)(3) 18.5% 18.7% 18.5% 18.
Slide 43: 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 44: Reportable Segments (Unaudited)
REPORTABLE SEGMENTS (UNAUDITED) Dollars in Millions 44 (1) Percentages based on rounded numbers.
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 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 48: Cash Returned to Stockholders Reconciliation
CASH RETURNED TO STOCKHOLDERS RECONCILIATION(1) Dollars in Millions 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 Cash Returned to Stockholders $ 781 $ 1,
Slide 49: 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 50: Economic Profit Reconciliation: Average Capital Deployed
ECONOMIC PROFIT RECONCILIATION: AVERAGE CAPITAL DEPLOYED Dollars in Millions FY20 FY19 FY18 FY17(2) FY16(2) FY15(2) (6) Total assets $ 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