Clorox Company (the) · NYSE:CLX
Clorox Company (the) — The Clorox Company — Q2 FY2019 Earnings Presentation
67 slides from Clorox Company (the)'s earnings presentation, Feb 4, 2019
Slide 1: FY19 Q2 Investor Presentation
FY19 Q2 Investor Presentation 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: Contents
Contents Key Sections Slide # • Who We Are 4 • Financial Performance 16 • 2020 Strategy 30 • Appendix 62 3
Slide 4: Who We Are
THE CLOROX COMPANY > Ze WHO WE ARE cpavialesie
Slide 5: aetihiire BRITA
aetihiire BRITA
Slide 6: Our Story
Our Story 1957 – 1969 1999 2006 – current Purchased by P&G, divested and Sales grew by ~40% through Expanded Health & Wellness portfolio once again independent First Brands acquisition through the acquisitions of Burt’s Bees, Developed world-class brand- Renew Life, and Nutranext bran building capab
Slide 7: How We Create Value
How We Create Value 7
Slide 8: Leading Brands
Leading Brands Over 80% of Global Sales from #1 or #2 Share Brands Selected Countries/Categories: 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 Cl
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 Personal Care 4% Charcoal 9% 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 *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 and
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: Our Efforts Are Broadly Recognized
Our Efforts Are Broadly Recognized 100 Most Sustainable Companies 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: Long-Term Growth Algorithm
Long-Term Growth Algorithm U.S. Domestic International Total Company ~80% of Clorox Sales ~20% of Clorox Sales +2-4% annual growth +5-7% annual growth annual growth 1.5 - 3.0 pts 1.0 - 1.5 pts = +3 to 5pts company growth company growth Annual EBIT Margin Improvement: +25 to +50 bps Annual Free Cash
Slide 15: Strong Shareholder Return
Strong Shareholder Return Total Shareholder Return - 3 Years Ending 12/31/2018 31% 30% 3% 15 Peers consist of 16 companies: CHD, CL, COTY, CPB, DPS, EL, GIS, HSY, K, KHC, KMB, KO, RB-GB, NWL, PEP, and PG
Slide 16: Financial Performance
THE CLOROX COMPANY Financial Performance | > Ze
Slide 17: YTD FY19 Performance & FY19 Outlook
YTD FY19 Performance & FY19 Outlook YTD FY19 FY19 FY Outlook (6 months) (Feb 4 earnings call) Innovation: ~ +3% $3.0B ~ 2% to 4% Nutranext Acq. & Sales (+4%) Aplicare Div.: ~ +3% (vs Year Ago) F/X: ~ -3% Gross Margin: about flat $3.02 $6.20 to $6.40 Diluted EPS Selling and Admin: ~14% of Sales (-7%)
Slide 18: Strong Track Record of Cost Savings
Strong Track Record of Cost Savings EBIT Margin Benefit from Cost Savings 300 bps 250 bps 200 bps +150bps 150 bps Annual Goal 100 bps 50 bps 0 bps FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19+ EBIT (a non-GAAP measure) represents earnings from continuing operations before income taxes
Slide 19: 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 SG&A % of Sales as of Latest Fiscal Year End, CLX as of June 30, 2018 19
Slide 20: 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 21: 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 Free Cash Flow (a non-GAAP measure
Slide 22: Impact of Recent Tax Reform
Impact of Recent Tax Reform • The passage of The Tax Cuts and Jobs Act in December 2017, is expected to meaningfully lower Clorox's long-term effective tax rate • FY18: Full year effective tax rate was 22% • FY19: Full year effective tax rate expected to be 22% to 23% • Long term: effective tax rate
Slide 23: 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) 23 1. Debt Leverage = Gross Debt / EBITDA. EBITDA is a non-GAAP measure. See reconciliation in the supplemental financial schedules located at: https:/
Slide 24: M&A Focus Unchanged
M&A Focus Unchanged Strong, US Fast Growing Centric Brands Strong Fit with Margin Accretive Strategy & Capabilities 24 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 25: Evolving our Portfolio with Nutranext Acquisition
Evolving our Portfolio with Nutranext Acquisition #2 in #1 in #1 in Leading Natural Natural All Channels DTC Brand • Fast growing sub-segments within vitamins, minerals and supplement category • Leading brands • Attractive margins • Leverages Clorox capabilities Notes: Share Source: SPINS Natural La
Slide 26: 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 $434 $271 $254 $183 $385 $398 $412 $450 FY15 FY16 FY17 FY18 Cash Dividends Paid Treasury Stock Purchased 26 Cash Returned to Shareholders is defined as Cash Dividends paid plu
Slide 27: Healthy Dividend Growth…
Healthy Dividend Growth… Dividends Have Increased Each Year Since 1977 Dividend Yield as of December 31, 2018 +14% Dividend 8% increase 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 27 Source: FactSet, Trailing Dividend Y
Slide 28: 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 − Healthy brand building investments, including digital/eCommerce • Margin improvement opportunities continue to exist − Leverage pricing power to mitigate input
Slide 29: Strong Shareholder Return
Strong Shareholder Return 29 Peer includes 14 companies: CPB, KMB, K, RB-GB, KO, GIS, NWL, EL, PEP, CHD, CL, PG KDP and HSY
Slide 30: 2020 Strategy
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Slide 31: 2020 Strategy: Drive Superior Consumer Value
2020 Strategy: Drive Superior Consumer Value 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 transformat
Slide 32: Driving Superior Consumer Value
Driving Superior Consumer Value PRODUCT • Value is an outcome of: EXPERIENCE - Great brand equity - Differentiated products - The right pricing CONSUMER VALUE • Executing with excellence by BRAND PRICING delivering seamless consumer EQUITY experience in-store and online 32
Slide 33: Building Brand Equity
Building Brand Equity Evolving how we build Brands Brand New Agency Marketing Studios Partners Technology Building Brands with Purpose Human Technology Purpose Centered Enabled Driven 33
Slide 34: We Continue to Lean Into Digital Engagement
We Continue to Lean Into Digital Engagement 55% FY19 Est: Over 50% 49% 45% 41% 34% Clorox expects to invest over 50% of our media in digital FY15 FY16 FY17 FY18 FY19 Est 34
Slide 35: Our Partners Help Build World-Class Digital
Our Partners Help Build World-Class Digital Select Partners: 35
Slide 36: Innovation: Strong Track Record
Innovation: Strong Track Record Incremental Sales Growth from Product Innovation (Last 12 months) Goal: +3% FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 36 Source: Clorox Internal
Slide 37: Solid Pipeline to Continue the Momentum
Solid Pipeline to Continue the Momentum FY18 FY19 FH Clorox Disinfecting Burt’s Bees Glad ForceFlex Plus Burt’s Bees Burt’s Bees Burt’s Bees ScentivaTM: Fresh Wipes: Ultra Strength Cosmetics Advanced Protection Charcoal Liquid Body Wash Brazilian Blossom & Easy to Pull Face Mask Lipstick FY19 BH Clo
Slide 38: Strategic Approach to Pricing Guided by Consumer Value
Strategic Approach to Pricing Guided by Consumer Value • Price for value, considering all PRODUCT elements of consumer value EXPERIENCE • Leverage value-added innovation as a pricing opportunity CONSUMER VALUE • Strong track record of price BRAND PRICING EQUITY increases over past 5 years 38
Slide 39: Driving Superior Consumer Value
Driving Superior Consumer Value PRODUCT PRODUCT • Value is an outcome of: EXPERIENCE EXPERIENCE - Great brand equity - Differentiated products - The right pricing CONSUMER CONSUMER VALUE VALUE • Executing with excellence BRAND BRAND PRICING PRICING by delivering seamless EQUITY EQUITY consumer exper
Slide 40: Capabilities are World Class and Adaptable
Strong Capabilities and Long History of Retail Success Mass eCommerce Merch Dollar Mass eCommerce Capabilities are World Class and Adaptable: Merch Club Dollar ●Insights ●Category management Home ●Shopper marketing ●Retail operations ●Supply chain Hardware ●Omni-channel retailing Club Home Hardware
Slide 41: eCommerce Sales Well Ahead of Goals
eCommerce Sales Well Ahead of Goals • Early investment paying off $500M 2020 Aspiration • ~6% of Company Sales in FY18 • +38% Sales CAGR (FY15 to FY18) 2020 Goal Actual Actual Actual Goal Goal Goal FY16 FY17 FY18 FY20 Goals 41 FY18 includes eCommerce sales from Nutranext
Slide 42: Tech Transformation 1.0 to 2.0
Tech Transformation 1.0 to 2.0 eCommerce TT2.0 Digital Marketing Next Generation Digital Commerce & Engagement 42
Slide 43: 2020 Strategy: Accelerate Portfolio Momentum
2020 Strategy: Accelerate Portfolio Momentum 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 transformat
Slide 44: Portfolio Segmentation
Portfolio Segmentation High FUEL GROWTH Profit Margin Potential Low High Sales Growth Potential 44
Slide 45: Fuel Brands Create Investment Dollars
Fuel Brands Create Investment Dollars Increasing demand spend Sales Advertising Promotion >+2pts since FY13 Trade Promotion 45
Slide 46: Investments Drive Household Penetration
Investments Drive Household Penetration % Sales with Growing/Stable HH Pen 65% 65% of portfolio has growing or stable 31% household penetration FY13 FY18 46 Source: IRI Panel Data, Total U.S. All Outlets, NBD Weighted
Slide 47: 2020 Strategy: Fuel Growth by Reducing Waste
2020 Strategy: Fuel Growth by Reducing Waste 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 transformat
Slide 48: Cost Savings in our DNA
Strong Pipelineis Cost Savings ofin Cost ourSavings DNA Over 10 years of +150bps EBIT Margin Benefit from Cost Savings (see slide 18) 3-Year Pipeline Bleach concentration +150bps Plant Consolidation World Class Manufacturing Supply chain optimization Resin Reduction Packaging Reduction Agile Enterpr
Slide 49: 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 Personal Care 4% Charcoal 9% Water Filtration 3% Cat Litter 7%
Slide 50: Leading Brands in International
Leading Brands in International >80% of our brands in International are #1 or #2 in their market Selected Countries/Categories: Country Share Position Country Share Position Argentina Bleach #1 Argentina #2 Argentina Laundry Additives #1 Chile #1 Hong Kong Bleach #2 Costa Rica Bleach #1 Canada Trash
Slide 51: International “Go Lean” Strategy is Working
International “Go Lean” Strategy is Working Pricing Focus on Right-Size Optimize Demand Maximization Cost Savings Infrastructure Creation 51
Slide 52: 2020 Strategy: Engage our People as Business Owners
2020 Strategy: Engage our People as Business Owners 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 tran
Slide 53: Clorox Growth Culture Enables our 2020 Strategy
Clorox Growth Culture Enables our 2020 Strategy 2018 Growth Culture index: 79 • Decisive • Consistent with Global High Performance Companies • Empowered • Well above Global Fast Moving Consumer • Accountable Goods Companies Source: Willis Towers Watson Global High Performing Companies (Growth Cultur
Slide 54: Employees Share in Rewards for Delivering Results
Employees Share in Rewards for Delivering Results Short-term Incentives Long-term Incentives NET 50% CUSTOMER SALES ECONOMIC PROFIT* NET GROSS 100% MARGIN INCOME* 30% 20% *Continuing operations *Metric for Performance Share Units 54
Slide 55: People Strategy Building a Competitive Advantage
People Strategy Building a Competitive Advantage Strong sustainable engagement results are generally associated with: • 3x higher operating margin1 • 6.5 fewer days lost1 • 41% lower retention risk1 Inclusion and diversity lead to better outcomes: • +6% greater revenue, +15% more customer wins, sign
Slide 56: Superior Employee Engagement
Superior Employee Engagement World Class Levels Higher than Peers +7* +2* 88% 88% Growing over time 87% 2018 2016 2017 Source: Willis Towers Watson FMCG Norm: Based on responses from more than 160,000 employees globally. Global High Performing Companies: Companies meeting two criteria: (a) superior
Slide 57: We Cultivate Diversity Broadly to Generate Value
We Cultivate Diversity Broadly to Generate Value 33% Female Clorox Executive Committee Members Board Executives 33% Female Board Members Employees Suppliers 33% Minority Board Members Clorox Employee Resource Groups 57
Slide 58: 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 58
Slide 59: Making Our Products More Sustainable
Making Our Products More Sustainable Sustainability improvements to 49% of the portfolio* On track to meet our goal of 50% product portfolio by 2020 Source: 2018 Clorox Integrated Annual Report Cumulative progress to date since 2011 base year to 2018
Slide 60: 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 Cumulative progress to date since 2011 base year
Slide 61: Safeguarding Families and Communities
Safeguarding Families and Communities $69 MILLION Total Cash Grants and Donations FY13 to FY18 $16 MILLION Cash Equivalent Volunteer Hours CY12 to CY17 Source: 2018 Clorox Integrated Annual Report
Slide 62: Appendix
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Slide 63: Key Credit Metrics
Key Credit Metrics $ in B FY13 FY14 FY15 FY16 FY17 FY18 EBITDA $1.2 $1.1 $1.2 $1.2 $1.3 $1.3 Total Debt / EBITDA 2.1x 2.0x 1.8x 1.9x 1.7x 1.9x EBITDA Interest Coverage 9.5x 11.3x 11.9x 14.0x 14.5x 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 64: Gross Margin Reconciliation
Gross Margin Reconciliation Gross Margin Change vs. Prior Year (basis points) Driver FY18 FY19 Q1 Q2 Q3 Q4 FY Q1 Q2 Cost Savings +160 +170 +140 +120 +140 +130 +140 Price Changes +40 +30 +50 +50 +40 +90 +220 Market Movement (commodities) -90 -110 -160 -130 -130 -130 -120 Manufacturing & Logistics -80
Slide 65: Reportable Segments (unaudited)
Reportable Segments (unaudited) Dollars in Millions 65
Slide 66: 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 67: 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 67