Clorox Company (the) · NYSE:CLX
Clorox Company (the) — The Clorox Company — 2016 dbAccess Global Consumer Conference
68 slides from Clorox Company (the)'s conference presentation, Jun 15, 2016
Slide 1: 2016 dbAccess Global Consumer Conference
2016 dbAccess Global Consumer Conference Benno Dorer Chief Executive Officer June 15th, 2016
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, foreign currencies, and foreign currency exchange rates, cash flows, plans, objectives, expectations, gr
Slide 3: Key Messages
Key Messages • Strategy 2020 is continuing to produce strong shareholder returns • Strong progress on Strategy Accelerators and investments in profitable growth • Long-term investment case remains solid
Slide 4: Advantaged Portfolio: Over 80% of Sales From #1 or #2 Share Brands
Advantaged Portfolio Over 80% of Sales From #1 or #2 Share Brands International: 19% FY15 Company Sales: $5.7B Cleaning : 32% Latin America – 12% Home Care – 17% Canada – 3% Laundry – 10% Australia / NZ – 2% International Professional – 5% Rest of World – 2% 19% Cleaning 32% Lifestyle: 17% Lifestyle
Slide 5: Advantaged Portfolio: Big Share Brands in Mid-Sized Categories
Advantaged Portfolio Big Share Brands in Mid-Sized Categories Clorox Smaller 23% Players 33% Clorox is ~3X Private the size of next Competitor E Label 3% 19% branded competitor Competitor D 4% Competitor C Competitor B Competitor A 5% 5% 8% Source: IRI Infoscan Data - Total U.S. Multi-Outlet (Food/D
Slide 6: Advantaged Portfolio: Supported by Consumer Megatrends
Advantaged Portfolio Supported by Consumer Megatrends Health & Wellness Sustainability MEGA TRENDS Fragmentation Affordability
Slide 7: Advantaged Portfolio: Driving Significant Synergies
Advantaged Portfolio Driving Significant Synergies Customer Supply Chain Brand Building Scaled teams, Common consumer Scale across Buy, capabilities, and Make, Ship trends, insights, 3D broker network demand creation Health & Wellness Sustainability Fragmentation Affordability Over 80% of sa
Slide 8: Strategic Continuity: 2020 Strategy
Strategic Continuity: 2020 Strategy Mission • We make everyday life better, every day • Maximize economic profit across categories, channels, and countries Objectives • Big-share brands in midsized categories and countries • Engage our people as business owners • Increase brand investment behind sup
Slide 9: Strong Long-Term Shareholder Return
Strong Long-Term Shareholder Return Total Shareholder Return TSR % 20 Year Ending 3/31/2016 1,000 900 CLOROX 869% 800 Peers 831 % 700 600 500 400 S&P 500 359% 300 200 100 0 Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar 96 98 00 02 04 06 08 10 12 14 16 CLX S&P 500 Peer Companies Average Peer includes 1
Slide 10: Leading Through Strategic Change in CPG
Leading Through Strategic Change in CPG Digital Consumer Challenging International Revolution Focus on Value Retail Macro Environment Headwinds
Slide 11: Increasing Investments in Profitable Growth
Increasing Investments in Profitable Growth Focus on Core: Increased Investments in Better Value Demand Innovation Investment
Slide 12: Strong Product & Commercial Innovation
Strong Product & Commercial Innovation Glad with Clorox Clothes Clorox Antimicrobial (International) Burt’s Natural Lipsticks Clorox Wipes with Micro-Scrubbers Fresh Step with Stephen Curry Brita Infinity Febreze Partnership “Connected” Pitcher Hidden Valley with Greek Yogurt Clorox Bleach Crystals
Slide 13: Strategy Accelerators Drive Profitable Growth
Strategy Accelerators → Drive Profitable Growth
Slide 14: Strong Progress Across Strategy Accelerators
Strong Progress Across Strategy Accelerators New, Digital-Led Cutting Speed to Market by 50% Creative Agency Partners Investing Behind Growth Record-High Brands to Accelerate Top-line Employee Engagement
Slide 15: Focus on Portfolio Momentum
Focus on Portfolio Momentum Portfolio Momentum
Slide 16: Portfolio Segmentation
Portfolio Segmentation High Fuel Growth Sales Growth Potential Low High
Slide 17: 1 Point of Household Penetration = $50M+ Sales
1 point of Household Penetration = $50M+ Sales Opportunity by Segment Cleaning Household Lifestyle $22M $20M $10M
Slide 18: New Usage Occasions → Household Penetration
New Usage Occasions → Household Penetration New Faces New Spaces New Places New Demographic or Consumes Product in a New Channel or Behavioral Group New Way Location in Store
Slide 19: Burt's Bees: Growth With New Faces, Spaces & Places
Burt’s Bees: Growth With New Faces, Spaces & Places Drive Expand into International Trial & Awareness Adjacencies Expansion on Core
Slide 20: Increasing Household Penetration
Increasing Household Penetration % Household Penetration vs YA +8% Increase vs YA Mar 2014 Mar 2015 Source: IRI Panel Data, Total U.S. All Outlets, NBD Weighted
Slide 21: Successful Expansion into Cosmetics: #5 Lipstick Brand
Successful Expansion into Cosmetics #5 Lipstick Brand 1 “Balmlike texture plus long- lasting pigment equals our favorite lipstick ever.” -Cosmopolitan Magazine +$25M - Year 1 Sales Source: IRI MULO Lip Cosmetics + Tinted Lip Balm 13 Weeks Ending 3/27/16
Slide 22: Renew Life Acquisition
Renew Life Acquisition • Closed May 2, 2016 • Purchase Price – $290M (2.5x Sales) • Calendar 2015 Sales – About $115M • #1 Brand in probiotics and herbal cleansing products in Natural Channel Source: SPINS with Vitamin Shoppe, IR MULO 52 weeks sending Nov 29, 2015, and Whole Foods 52 weeks ending No
Slide 23: Probiotics: An Attractive Category
Probiotics: An Attractive Category +15% expected category growth Two-thirds of US consumers experience digestive health issues 50% of purchases are based on a Doctor recommendation Source: Mintel Group, Ltd. (2015), Estimates based on Mintel (2015), Nutrition Business Journal (2014), and Euromonitor
Slide 24: Renew Life: Strong Strategic Fit
Renew Life: Strong Strategic Fit Health & US Centric Clear Plan for Wellness Value Creation
Slide 25: Focus on 3D Technology Transformation
Focus on 3D Technology Transformation
Slide 26: Leading the Industry in Digital Consumer Engagement
Leading the Industry in Digital Consumer Engagement Driving Consumer Engagement More More More Targeted Personal Real-Time
Slide 27: Accelerating Investments in Digital Media
Accelerating Investments in Digital Media Clorox now 41% invests over 40% 34% of our media in 22% 25% digital FY13 FY14 FY15 FY16 Source: Clorox Internal
Slide 28: Digital Improves ROI
Digital Improves ROI Enhanced More More Targeting Personalized Real Time Across Channels
Slide 29: We Leverage our Location for Innovative Partnerships
We Leverage our Location for Innovative Partnerships
Slide 30: Strong Momentum in eCommerce
Strong Momentum in eCommerce ~2x Sales Growth (FY16 vs FY13) FY13 FY14 FY15 FY16 Source: Clorox Internal
Slide 31: Brita: e-Commerce Enabled Innovation Driving Results
e-Commerce Enabled Innovation Driving Results +30% FY16 Projected Growth vs YA #4 Brita Customer Source: Clorox Internal
Slide 32: Strong U.S. Category Growth & Share Momentum
Strong U.S. Category Growth & Share Momentum 0.4 Clorox Share & Category Performance 4% 0.3 (Last 3 years) 3% 0.2 2% Category % Change 0.1 1% $ Share Chg - 0% (0.1) -1% (0.2) -2% (0.3) -3% (0.4) -4% (0.5) -5% Mar 13 Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16
Slide 33: Strong Results Are Recognized by Shareholders
Strong Results Are Recognized by Shareholders Total Shareholder Return 1 Year Ending 3/31/16 17% 3% 14% 3% 14% 11% 2% Clorox Peers SP500 Share Price Appreciation Dividend Paid Source: Factset
Slide 34: Strong Shareholder Return, The Right Way
Strong Shareholder Return, The Right Way
Slide 35: With a Highly Engaged Workforce
With a Highly Engaged Workforce “I am empowered to make the decisions 90% Top 5% needed to do my job well.” “Clorox has established a 80% climate where one can 86% 85% challenge our traditional 77% ways of doing things.” 70% 2015 CPG Norm Global High “I understand how my work contributes Clorox Perf
Slide 36: Key Messages
Key Messages • Strategy 2020 is continuing to produce strong shareholder returns • Strong progress on Strategy Accelerators and investments in profitable growth • Long-term investment case remains solid
Slide 37: Steve Robb, Chief Financial Officer
Steve Robb Chief Financial Officer
Slide 38: Key Messages
Key Messages • Strategy 2020 is continuing to produce strong shareholder returns • Strong progress on Strategy Accelerators and investments in profitable growth • Long-term investment case remains solid
Slide 39: FY16 YTD Performance (Q3)
FY16 YTD Performance (Q3) YTD FY16 Vs. Year Ago +2% Sales $4.2B (+5% FX Neutral) EBIT Margin 19.1% +190 bps Diluted EPS $3.67 +17% (cont. ops) EBIT (a non-GAAP measure) represents earnings from continuing operations before income taxes (a GAAP measure), excluding interest income & interest expense.
Slide 40: FY16 Outlook
FY16 Outlook Based on May 3rd Earnings Call • Categories: about +2% Sales • Innovation: +3pts +1% to +2% • FX: about -3pts • Trade: about -1pt • Gross Margin: about +150bps EBIT Margin • Selling & Admin: about 14% of Sales about +50bps • Advertising & Sales Promotion: about 10% of Sales Diluted EPS
Slide 41: Healthy U.S. Domestic Growth
Healthy U.S. Domestic Growth Domestic Sales Growth FYTD 6% 4% 4% 2% Q1 Q2 Q3 FYTD
Slide 42: International is a Key Component of our Portfolio
International is a Key Component of our Portfolio International: 19% FY15 Company Sales: $5.7B Cleaning : 32% Latin America – 12% Home Care – 17% Canada – 3% Laundry – 10% Australia / NZ – 2% International Professional – 5% Rest of World – 2% 19% Cleaning 32% Lifestyle: 17% Lifestyle 17% Household :
Slide 43: Why We Like International
Why We Like International Peru Leading Midsized Faster Strong Brands Countries Category Operational Growth Rates Performance
Slide 44: Strong Growth in Local Currency, However FX Weighs
Strong Growth in Local Currency, However FX Weighs Sales Growth 10% 10% Exchange Rate 7% 7% vs YAGO 5% 4% Canada -10% 2% Argentina -40% 0% -1% Australia -8% -5% -3% Chile -11% Colombia -24% -10% -8% Mexico -17% FY 2013 FY 2014 FY 2015 FYTD 2016 Currency Neutral As Reported Source: Foreign Exchange R
Slide 45: International: Go Lean Approach
International: “Go Lean” Approach Pricing Pricing Focus on Focus on Right-Size Right-Size Optimize Optimize Maximization Maximization Cost Savings Cost Savings Infrastructure Infrastructure Demand Demand Creation Creation 4 Pillars of Profitability
Slide 46: 2020 Strategy
2020 Strategy • Engage our people as business owners • Increase brand investment behind superior value and more targeted 3D plans Strategy • Keep the core healthy and grow into new categories, channels, and existing countries • Reduce waste in work, products, and supply chain to fund growth
Slide 47: Cost Savings Continue to Deliver
Cost Savings Continue to Deliver EBIT Margin Benefit from Cost Savings 300 bps 250 bps +150bps 200 bps Annual Goal 150 bps 100 bps 50 bps 0 bps FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16+
Slide 48: Opportunities Exist Within SG&A
Opportunities Exist Within SG&A 45% 35% % of Sales 25% Goal: < 14% Sales 15% 14.1% 5% KHC CHD KMB GIS CLX PG K HSY RB- NWL CL COTY KO DPS PEP EL GB SG&A % of Sales as of Latest Fiscal Year End CLX as of June 30th, 2015
Slide 49: Top-Tier ROIC
Top-Tier ROIC 40% 30% 28% 20% Peer Average: 15% 10% 0% CL CLX EL RB-GB HSY DPS CPB PEP CHD KO NWL KMB GIS PG COTY K KHC Return on invested capital (ROIC), a non-GAAP measure, is calculated as earnings from continuing operations before income taxes and interest expense, computed on an after-tax basis
Slide 50: Strong Free Cash Flow
Strong Free Cash Flow $858 10% - 12% $780 $786 of Sales $M $622 $733 $649 $590 $433 FY12 FY13 FY14 FY15 Goal Operating Cash Flow Free Cash Flow Free Cash Flow = Operating Cash Flow from Continuing Operations – Capital Expenditures
Slide 51: Use of Cash Priorities
Use of Cash Priorities Business Growth Support Dividend (includes targeted M&A) Free Cash Flow Debt Leverage1 Share Repurchases (Target: 2.0 – 2.5x) 1. Debt Leverage = Gross Debt / EBITDA
Slide 52: M&A Criteria
M&A Criteria • Target areas with tailwinds in categories, countries, and channels Categories: Health & Wellness, Food Enhancers, and Natural Personal Care Countries: US-Centric, with possible International expansion Channels: Current retail and professional markets • Strong fit with Clorox str
Slide 53: Nearly $2B Returned to Shareholders in the Last 4 Years
Nearly $2B Returned to Shareholders in the Last 4 Years FY15 Payout Ratio = 64% $733 $649 $590 $433 $M $532 $568 $454 $330 FY12 FY13 FY14 FY15 FCF Cash Returned to Shareholders
Slide 54: Healthy Dividend Growth…
Healthy Dividend Growth… Dividends Have Increased Each Year Since 1977 4% Dividend Yield as of Mar 31st, 2016 3% 2.4% Peer Average: 2.4% 2% 1% 0% PG KHC GIS KO PEP KMB K HSY CLX RB-GB CPB DPS CL NWL CHD EL
Slide 55: …and Long Track Record of Share Repurchases
…and Long Track Record of Share Repurchases $100 Repurchased Nearly 40% of Shares over last 10 Years $80 $60 $40 Shares Outstanding 214M 133M
Slide 56: Long-Term Investment Case Remains Solid
Long-Term Investment Case Remains Solid • Investing behind leading brands to grow categories and share − 3%+ annual growth from innovation − Advertising projected at about 10% of Sales in FY16 • Margin improvement opportunities continue to exist − Strong cost savings track record − Driving SG&A to b
Slide 57: Long-Term Growth Algorithm Remains Unchanged
Long-Term Growth Algorithm Remains Unchanged U.S. Domestic International ~80% of Clorox Sales ~20% of Clorox Sales +2-4% annual growth +5-7% annual growth 1.5 - 3.0 pts 1.0 - 1.5 pts = +3 to +5pts company company growth company growth growth Annual EBIT Margin Improvement: +25 to +50 bps Annual Free
Slide 58: Strong Shareholder Return
Strong Shareholder Return Total Shareholder Return TSR % 20 Year Ending 3/31/2016 1,000 900 CLOROX 869% 800 Peer 831% 700 600 500 400 S&P500 359% 300 200 100 0 Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar 96 98 00 02 04 06 08 10 12 14 16 CLX S&P 500 Peer Companies Average Peer includes 13 companies:
Slide 59: Areas We Are Watching Carefully
Areas We Are Watching Carefully • F/X is expected to improve slightly but still have a material impact of about -2pts on Sales in FY17 • Starting in Q4 FY16, we expect gross margins to expand at a slower rate due to less commodity benefit and continued trade investment • Consistent with Strategy 202
Slide 60: Key Messages
Key Messages • Strategy 2020 is continuing to produce strong shareholder returns • Strong progress on Strategy Accelerators and investments in profitable growth • Long-term investment case remains solid
Slide 61: Appendix
Appendix 2. & 2 Of ZI a
Slide 62: Strong Shareholder Return, The Right Way: #45 Newsweek
Strong Shareholder Return, The Right Way #45 Newsweek 2016 Green Rankings
Slide 63: Key Credit Metrics
Key Credit Metrics $ in B FY11 FY12 FY13 FY14 FY15 EBITDA $1.1 $1.1 $1.2 $1.1 $1.2 Total Debt / EBITDA 2.2x 2.5x 2.1x 2.0x 1.8x EBITDA Interest Coverage 9.3x 8.7x 9.5x 11.3x 11.9x EBIT / Interest 7.9x 7.3x 8.0x 9.6x 10.2x Free Cash Flow / Debt 18% 16% 25% 28% 33% FCF after Dividends / Debt 6% 4% 10%
Slide 64: Sales Growth Reconciliation
Sales Growth Reconciliation Third-Quarter & FYTD Sales Growth Reconciliation
Slide 65: Gross Margin Reconciliation
Gross Margin Reconciliation
Slide 66: Reportable Segments (unaudited)
Reportable Segments (unaudited) Dollars in Millions (1) Percentages based on rounded numbers.
Slide 67: EBIT and EBITDA (unaudited)
EBIT and EBITDA (unaudited) Dollars in Millions Footnotes in the next page
Slide 68: EBIT and EBITDA (unaudited)
EBIT and EBITDA (unaudited) (1) EBIT (a non-GAAP measure) represents earings from continuing operations before income taxes (a GAAP measure}, excluding interest income and interest expense, as reported above. EBIT margin is the ratio of EBIT to net sales. (2) EBITDA (a non-GAAP measure} represents e
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