Clorox Company (the) · NYSE:CLX
Clorox Company (the) — The Clorox Company — Q3 FY2019 Earnings Presentation
67 slides from Clorox Company (the)'s earnings presentation, May 1, 2019
Slide 1: FY19 Q3 Investor Presentation
FY19 Q3 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 33 • Appendix 67 3
Slide 4: Who We Are
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Slide 6: A Foundation and Future in Health and Wellness
A Foundation and Future in Health and Wellness 1957 – 1969 1999 2006 – current Acquired then divested by P&G, First Brands acquisition Expanded Health and Wellness portfolio through acquisitions 1913 1970s & 1980s Launched household bleach Diversification and international expansion Recognized for c
Slide 7: A Proven Value Creation Model
A Proven Value Creation Model 7
Slide 8: Leading Brands
Leading Brands Over 80% of Global Sales from #1 or #2 Share Brands 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 Cleaners #1 Hong Kong Wipes #1 Dr
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 Charcoal 9% Personal Care 4% 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 10 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 an
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 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 to 4pts +5 to 7pts +3 to 5pts annual growth annual growth annual growth Annual EBIT Margin Improvement: +25 to +50 bps Annual Free Cash Flow % of Sales: 11% to 13% EBIT (a non-GAAP m
Slide 15: Consistent Track Record of Strong Shareholder Return
Consistent Track Record of Strong Shareholder Return 1 Year 3 Year 5 Year 20 Year Top Tertile CLX 24 S&P 500 CLX 109 CLX 36 S&P 500 Mid Tertile CLX 361 S&P 500 Bottom Tertile S&P 500 (50) - 50 100 (100) - 100 200 (200) - 200 400 (1,000) - 1,000 2,000 3,000 15 Source: FactSet, Total Share Return as o
Slide 16: Financial Performance
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Slide 17: YTD FY19 Performance & FY19 Outlook
YTD FY19 Performance & FY19 Outlook YTD FY19 FY19 FY Outlook (9 months) (May 1 earnings call) Innovation: ~ +3% $4.6B ~ 2% to 3% Nutranext Acq. & Sales (+3%) Aplicare Div.: ~ +3% (vs Year Ago) F/X: ~ -3% Gross Margin: about flat $4.45 $6.25 to $6.35 Diluted EPS Selling and Admin: ~14% of Sales (-3%)
Slide 18: Strong Track Record of Cost Savings
Strong Track Record of Cost Savings EBIT Margin Benefit from Cost Savings 250 bps 200 bps +150bps Annual Goal 150 bps 100 bps 50 bps 0 bps FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19+ EBIT (a non-GAAP measure) represents earnings from continuing operations before income taxes (a GAAP measure), excl
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 CLX PG HSY NWL CL COTY DPS PEP EL 19 SG&A % of Sales as of latest fiscal year end for CLX as of June 30, 2018. Peers consist of 16 companies: CHD, CL, COTY,
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 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 taxe
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: 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) 22 1. Debt Leverage = Gross Debt / EBITDA. EBITDA is a non-GAAP measure. See reconciliation in the supplemental financial schedules located at: https:/
Slide 23: M&A Focus Unchanged
M&A Focus Unchanged Strong Fit with Strong, US Strategy & Capabilities Centric Brands Fast Growing Margin Accretive 23 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 24: 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 25: Healthy Dividend Growth
Healthy Dividend Growth… Dividends Have Increased Each Year Since 1977 Dividend Yield as of March 31, 2019 8% 7% 6% 5% 4% Peer Average: 3.4% 3% 2.4% 2% 1% 0% KHC NWL COTY K GIS CPB KO KMB PEP PG RB-GB HSY CL CLX CLX CHD EL 25 Source: FactSet, Trailing dividend yield as of December 31, 2018. Peers co
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 $819 $721 $652 $595 FY15 FY16 FY17 FY18 Cash Returned to Shareholders* 26 *Cash returned to shareholders is defined as cash dividends paid plus treasury stock purchased as out
Slide 27: 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 28: 2020 Strategy
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Slide 29: 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 30: Driving Superior Consumer Value
Driving Superior Consumer Value DIFFERENTIATED • Value is an outcome of: PRODUCTS - The right pricing CONSUMER - Differentiated products VALUE BRAND - Great brand equity PRICING EQUITY 30
Slide 31: FY19 Pricing Executed and Generally On Track
FY19 Pricing Executed and Generally On Track DIFFERENTIATED • Price for value, considering all PRODUCTS elements of consumer value CONSUMER • FY19 pricing on ~50% of portfolio VALUE BRAND PRICING EQUITY • Drove gross margin expansion to fuel innovation investments 31
Slide 32: Investing in Differentiated Products
Investing in Differentiated Products DIFFERENTIATED • Value is an outcome of: PRODUCTS - The right pricing CONSUMER - Differentiated products VALUE BRAND - Great brand equity PRICING EQUITY 32
Slide 33: Innovation Built Into Our DNA
Innovation Built Into Our DNA 3-Year Pipeline High R&D Investment Product External Partnerships Marketing White Space 3% Agile Culture Cost Growth* Speed to Market 33 * Incremental annual sales
Slide 34: 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 34 Source: Clorox Internal
Slide 35: 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 36: Driving Superior Consumer Value
Driving Superior Consumer Value PRODUCT EXPERIENCE • Value is an outcome of: - The right pricing CONSUMER - Differentiated products VALUE BRAND - Great brand equity PRICING EQUITY 36
Slide 37: 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 37
Slide 38: Technology Enabled: Leaning Into Digital
Technology Enabled: Leaning Into Digital 55% >50% 49% 45% 41% Expect to invest 34% over 50% of media in digital FY15 FY16 FY17 FY18 FY19 Est 38
Slide 39: Our Partners Help Build World-Class Digital
Our Partners Help Build World-Class Digital Select Partners: 39
Slide 40: Strong Capabilities and Long History of Retail Success
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 2020 Goals
eCommerce Sales Well Ahead of 2020 Goals • Early investment paying off $500M 2020 Aspiration • +38% Sales CAGR (FY15 to FY18) • On track for ~8% of Company Sales in FY19 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 3-Year Pipeline Bleach concentration +150bps Plant Consolidation World Class Manufacturing Supply chain optimization Resin Reduction Packaging Reduction Agile Enterprise Every Year
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: 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 53
Slide 54: 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 55: Superior Employee Engagement
Superior Employee Engagement World class levels Higher than peers +7* +2* *Statistically Significant Source: Willis Towers Watson FMCG Norm: Based on responses from more than 160,000 employees globally. 55 Global High Performing Companies: Companies meeting two criteria: (a) superior financial perfo
Slide 56: 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 56
Slide 57: 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 57
Slide 58: 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 59: 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 59 Source: 2018 Clorox Integrated Annual Report Cumulative progress to date since 2011 base ye
Slide 60: 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 61: Appendix
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Slide 62: 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 63: Gross Margin Reconciliation
Gross Margin Reconciliation Gross Margin Change vs. Prior Year (basis points) Driver FY18 FY19 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Cost Savings +160 +170 +140 +120 +140 +130 +140 +170 Price Changes +40 +30 +50 +50 +40 +90 +220 +240 Market Movement (commodities) -90 -110 -160 -130 -130 -130 -120 -50 Manufacturin
Slide 64: Reportable Segments (unaudited)
Reportable Segments (unaudited) Dollars in Millions 64
Slide 65: 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 66: 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 66
Slide 67: Cash Returned to Stockholders Reconciliation
Cash Returned to Stockholders Reconciliation Cash Returned to Stockholders is defined as Cash Dividends paid plus Treasury Stock Purchased as outlined in the Statement of Cash Flows Dollars in millions FY 2018 FY 2017 FY 2016 FY 2015 Treasury stock purchased * $271 $183 $254 $434 Cash dividends paid