Clorox Company (the) · NYSE:CLX
Clorox Company (the) — The Clorox Company — Q1 FY2017 Earnings Presentation
76 slides from Clorox Company (the)'s earnings presentation, Nov 2, 2016
Slide 1: FY17 Q1 Investor Deck
FY17 Q1 Investor Deck
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: 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 : 17% FY16 Company Sales: $5.8B Cleaning : 33% Latin America 9% Home Care 18% Canada 3% Laundry 9% Australia / NZ 2% International 17% Professional 6% Rest of World 3% Cleaning 33% Lifestyle : 17% Household : 33% Lifesty
Slide 4: Advantaged Portfolio: Big Share Brands in Mid-Sized Categories
Advantaged Portfolio Big Share Brands in Mid-Sized Categories Clorox Smaller 23% Players 32% Clorox is Private ~3X Label the size of next Competitor E 4% 20% 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 5: Strong Position in Categories with Private Label Exposure
Advantaged Portfolio Strong Position in Categories with Private Label Exposure Bleach Charcoal Trash Bags Other Other Other 5% 8% 8% Private Hefty Glad* Private Label 16% 32% 17% Label Clorox 36% 59% Kingsford Private 75% Label 44% *Glad >50% Share of Premium Trash Source: IRI Infoscan Data - Total
Slide 6: 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: 2020 Strategy
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 superior value and more t
Slide 9: 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 10: 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 FY16 Record-High Engagement Brands to Accelerate Top-line
Slide 11: Increased Investments in Profitable Growth
Increased Investments in Profitable Growth Advertising Sales +2pts Promotion Trade Promotion Focus on Core Increased Investments in Demand Innovation Investment
Slide 12: 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 13: Focus on Portfolio Momentum
Focus on Portfolio Momentum Portfolio Momentum
Slide 14: Portfolio Segmentation
Portfolio Segmentation High Fuel Growth Sales Growth Potential Low High
Slide 15: 1 Point of Household Penetration = $50M+ Sales
1 point of Household Penetration = $50M+ Sales Opportunity by Segment Cleaning Household Lifestyle $22M $20M $10M
Slide 16: 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 17: Growth With New Faces, Spaces & Places
Growth With New Faces, Spaces & Places Drive Expand into International Trial & Awareness Adjacencies Expansion on Core
Slide 18: Growth With New Faces, Spaces & Places
Growth With New Faces, Spaces & Places Targeted Demand Drive New Expand Retail Spend Usage Distribution Occasions Margin Enhancement through Operational Excellence
Slide 19: Renew Life Acquisition
Renew Life Acquisition • Closed May 2, 2016 • Purchase Price – $290M (2.5x Sales) • Calendar 2015 Sales – About $115M • Leading brand in the natural channel Source: SPINS with Vitamin Shoppe, IR MULO 52 weeks ending 7/10/16, and Whole Foods 52 weeks ending 7/10/16
Slide 20: 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 21: Renew Life: Strong Strategic Fit
Renew Life: Strong Strategic Fit Health & US Centric Clear Plan for Wellness Value Creation
Slide 22: Focus on 3D Innovation
Focus on 3D Innovation 3D Innovation Bm THE CLOROX COMPANY 4
Slide 23: Broad-based Approach to Innovation
Broad-based Approach to Innovation KEEP THE CORE HEALTHY GROW MARKET SHARE Product & Product Marketing Superiority New Product Cost-o- Platforms EXPAND MARGIN vation* & ACCELERATE GROWTH Adjacency Expansion *Cost-o-vation is a term used at Clorox that describes innovation that improves product perfo
Slide 24: Innovation is Delivering Growth
Innovation is Delivering Growth 5% Incremental Sales Growth from Innovation (Last 12 months) 4% 3.3% 3.4% 3.0% 3.0% 2.9% 3% 2.7% 2% 1% 0% FY12 FY13 FY14 FY15 FY16 Goal Source: Clorox Internal
Slide 25: 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 26: Generating Long-Term Value From Innovation
Generating Long-Term Value From Innovation Advertising Sales +2pts Promotion Trade Promotion Increased Optimize the Internal Demand 3Ds 3-Year Metric Investment
Slide 27: 3-Year Metric to Improve Innovation Stickiness
3-Year Metric to Improve Innovation “Stickiness” • Increase year 2 & 3 spending on successful innovation • Leverage platforms to allow for “Blockbuster” introductions, followed by “Sequels” Internal • More “Adjust & Nurture” post-launch for 3-Year Metric slower building innovations
Slide 28: Blockbuster & Sequels
Blockbuster & Sequels Differentiated Technology Provides Staying Power
Slide 29: Faster Time to Market
Faster Time to Market Goal: Reduce time to market by 50% - Accelerate decision making - Right-sized testing Plans - Faster, more efficient development process
Slide 30: Improving Value via Consumer Value Measure (CVM)
Improving Value via Consumer Value Measure (CVM) To Date Process FY16 & Beyond Product Experience 60/40 Testing 60/40 Testing Perception Brand Equity Price Price Total Consumer Value
Slide 31: Consumer Value Measure
Consumer Value Measure Product Experience x Perception Total Consumer Price Value • Proprietary real-time data Superior Value • Correlates to change in market share Parity Value • Captures all value drivers Inferior Value
Slide 32: CVM: How Do We Use It?
CVM: How Do We Use It? Above 450 line, Product & Perception Index Benefit > Price Superior Value Category Average Below 450 line Price > Benefit Inferior Value Product x Perception Price Price Index Based on Marn, Roegner, Zawada (McKinsey) pricing work published in “The Pricing Advantage” (April 20
Slide 33: Focus on 3D Technology Transformation
Focus on 3D Technology Transformation
Slide 34: Technology Reshapes Consumer Journeys
Technology Reshapes Consumer Journeys
Slide 35: 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 36: 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
Slide 37: Technology Enables One-to-One Communication
Technology Enables One-to-One Communication RECIPES Right Message, Right Context, Right Medium
Slide 38: Digital Improves ROI
Digital Improves ROI Enhanced More More Targeting Personalized Real Time Across Channels
Slide 39: We Leverage our Location for Innovative Partnerships
We Leverage our Location for Innovative Partnerships
Slide 40: Strong Momentum in eCommerce
Strong Momentum in eCommerce ~2x Sales Growth (FY16 vs FY13) FY13 FY14 FY15 FY16 Source: Clorox Internal
Slide 41: eCommerce-Enabled Innovation
eCommerce-Enabled Innovation
Slide 42: eCommerce-Enabled Innovation
eCommerce-Enabled Innovation Infinity Pitcher
Slide 43: Focus on Growth Culture
Focus on Growth Culture > Bm, THE CLOROX COMPANY NSF
Slide 44: Strong Organizational Culture is a Solid Foundation
Strong Organizational Culture is a Solid Foundation Strong Values People Centric Operational Excellence
Slide 45: Winning the Right Way
Winning the Right Way 2015 Manufacturing Safety Excellence Award, Rockwell Automation PLACES TO WORK 2016 | for LGBT Equality 100% CORPORATE EQUALITY INDEX
Slide 46: Corporate Responsibility at Clorox
Corporate Responsibility at Clorox <A> Reviewed by Ernst & Young LLP Footnotes: http://annualreport.thecloroxcompany.com/_pdf/CLX-012_2016_Integrated_Report.pdf page 27
Slide 47: Clorox Engagement Exceeds Global Benchmarks
Clorox Engagement Exceeds Global Benchmarks <A> Reviewed by Ernst & Young LLP Footnotes: http://annualreport.thecloroxcompany.com/_pdf/CLX-012_2016_Integrated_Report.pdf page 26
Slide 48: International is a Key Component of our Portfolio
International is a Key Component of our Portfolio International : 17% FY16 Company Sales: $5.8B Cleaning : 33% Latin America 9% Home Care 18% Canada 3% Laundry 9% Australia / NZ 2% International 17% Professional 6% Rest of World 3% Cleaning 33% Lifestyle : 17% Household : 33% Lifestyle 17% 9% 15% 4%
Slide 49: Why We Like International
Why We Like International Peru Leading Midsized Faster Strong Brands Countries Category Operational Growth Rates Performance
Slide 50: 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 51: We Have Strong Leading Brands Across International
We Have Strong Leading Brands Across International 45 Brands Hold #1 or #2 Market Share Source: Nielsen Retail Measurement for International geographies except; IRI for Australia, Horwath for Dominican Republic and IDRetail for Uruguay ending FY16
Slide 52: FY17 Outlook
FY17 Outlook Based on Nov 2nd Earnings Call • Categories: about 1% • Mix/Other: about -1pt Sales • Innovation: +3pts • FX: -2pts +2% to +4% • Renew Life: +2pts • Gross Margin: Down Modestly EBIT Margin • Selling & Admin: <14% of Sales +25 to +50bps • Advertising & Sales Promotion: about 10% of Sales
Slide 53: FY17 Q1 Performance
FY17 Q1 Performance FY17 Q1 Vs. Year Ago +4% Sales $1.4B (+6% FX Neutral) EBIT Margin 19.8% -80 bps Diluted EPS $1.36 +3% (cont. ops) EBIT (a non-GAAP measure) represents earnings from continuing operations before income taxes (a GAAP measure), excluding interest income & interest expense. EBIT marg
Slide 54: 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 FY17 • Margin improvement opportunities continue to exist − Strong cost savings track record − Driving SG&A to b
Slide 55: Cost Savings Continue to Deliver
Cost Savings Continue to Deliver EBIT Margin Benefit from Cost Savings 250 bps 200 bps +150bps Annual Goal 150 bps 100 bps 50 bps 0 bps FY12 FY13 FY14 FY15 FY16 FY17+ EBIT (a non-GAAP measure) represents earnings from continuing operations before income taxes (a GAAP measure), excluding interest inc
Slide 56: Opportunities Exist Within SG&A
Opportunities Exist Within SG&A 45% 35% % of Sales 25% Goal: < 14% Sales 15% 14.0% 5% CHD KHC KMB GIS CLX TAP K PG EPC HSY RB- CL KO PEP EL GB SG&A % of Sales as of Latest Fiscal Year End CLX as of June 30th, 2016
Slide 57: Top-Tier ROIC
Top-Tier ROIC 30% 29% 20% Peer Average: 15% 10% 0% CLX KMB CL HSY EL RB-GB DPS CHD CPB GIS PEP PG KO K COTY KHC NWL 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 as
Slide 58: Strong Free Cash Flow
Strong Free Cash Flow % of Sales 11% 12% 13% 10% $858 $780 $786 $768 10% - 12% of Sales $M $733 $649 $590 $596 FY13 FY14 FY15 FY16 Goal Operating Cash Flow Free Cash Flow Free Cash Flow (a non-GAAP measure) represents Operating Cash Flow from Continuing Operations less Capital Expenditures. See reco
Slide 59: 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 60: M&A Focus
M&A Focus • 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 strate
Slide 61: Nearly $2B Returned to Shareholders in the Last 4 Years
Nearly $2B Returned to Shareholders FY16 in the Last 4 Years Dividend Payout Ratio = 61% $733 $649 $590 $596 $M $532 $568 $442 $330 FY13 FY14 FY15 FY16 Free Cash Flow Cash Returned to Shareholders Free Cash Flow (a non-GAAP measure) represents Operating Cash Flow from Continuing Operations less Capi
Slide 62: Healthy Dividend Growth
Healthy Dividend Growth… Dividends Have Increased Each Year Since 1977 4% Dividend Yield as of Sept 30th, 2016 3% 2.5% Peer Average: 2.3% 2% 1% 0% KO PG KMB GIS PEP K KHC CLX HSY CPB DPS CL RB-GB CHD EL NWL COTY
Slide 63: 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 64: Strong Shareholder Return
Strong Shareholder Return Peer includes 13 companies: CPB, KMB, K, RB-GB, KO, GIS, NWL, EL, PEP, CHD, CL, PG and HSY
Slide 65: Appendix
Appendix ‘ax & 2 fe! x! fal
Slide 66: Key Credit Metrics
Key Credit Metrics $ in B FY12 FY13 FY14 FY15 FY16 EBITDA $1.1 $1.2 $1.1 $1.2 $1.2 Total Debt / EBITDA 2.5x 2.1x 2.0x 1.8x 1.9x EBITDA Interest Coverage 8.7x 9.5x 11.3x 11.9x 14.0x EBIT / Interest 7.3x 8.0x 9.6x 10.2x 12.1x Free Cash Flow / Debt 16% 25% 28% 33% 26% FCF after Dividends / Debt 4% 10%
Slide 67: Sales Growth Reconciliation
Sales Growth Reconciliation First Quarter Sales Growth Reconciliation Q1 Q1 Fiscal Fiscal 2017 2016 Total Sales Growth – GAAP 3.8% 2.8% Less: Foreign exchange -1.9% -2.8% Currency Neutral Sales Growth - non-GAAP 5.7% 5.6%
Slide 68: Gross Margin Reconciliation
Gross Margin Reconciliation
Slide 69: Reportable Segments (unaudited)
Reportable Segments (unaudited) Dollars in Millions (1) Percentages based on rounded numbers.
Slide 70: EBIT and EBITDA (unaudited)
EBIT and EBITDA (unaudited) Dollars in Millions Footnotes on Slide 72
Slide 71: EBIT and EBITDA (unaudited)
EBIT and EBITDA (unaudited) Dollars in Millions Footnotes on Slide 72
Slide 72: 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
Slide 73: Free Cash Flow (FCF) Reconciliation
Free Cash Flow (FCF) Reconciliation Dollars in Millions (1) In accordance with the SEC's Regulation G, this schedule provides the definition of certain non-GAAP measures and the reconciliation to the most closely related GAAP measure. Management uses free cash flow and free cash flow as a percent of
Slide 74: Free Cash Flow (FCF) Reconciliation
Free Cash Flow (FCF) Reconciliation Dollars in Millions (1) In accordance with the SEC's Regulation G, this schedule provides the definition of certain non-GAAP measures and the reconciliation to the most closely related GAAP measure. Management uses free cash flow and free cash flow as a percent of
Slide 75: Return on Invested Capital (ROIC) Reconciliation
Return on Invested Capital (ROIC) Reconciliation Dollars in millions and all calculations based on rounded numbers FY16 Earnings from continuing operations before income taxes $ 983 Interest expense 88 Earnings from continuing operations before income taxes and interest expense $ 1,071 Income taxes
Slide 76: Return on Invested Capital (ROIC) Reconciliation
(1) In accordance with SEC's Regulation G, this schedule provides the definition of a non-GAAP measure and the reconcilia Return on invested capital (ROIC), a non-GAAP measure, is calculated as earnings from continuing operations before inc Return on Invested Capital (ROIC) Reconciliation an after-t