Clorox Company (the) · NYSE:CLX
Clorox Company (the) — The Clorox Company — FY2019 Earnings Presentation
66 slides from Clorox Company (the)'s earnings presentation, Aug 1, 2019
Slide 1: FY19 Q4 Investor Presentation
FY19 Q4 Investor Presentation 1
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, costs, cost savings, earnings, earnings per share, diluted earnings per share, margins, foreign currencies, foreign currency exchange r
Slide 3: Contents
Contents Key Sections Slide # • Who We Are 4 • Financial Performance 16 • 2020 Strategy 27 • Appendix 60 3
Slide 4: Who We Are
WAN THE CLOROX COMPANY NZ
Slide 5: pLUM Frage
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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 Nearly 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 #2 Hong Kong Wipes #1
Slide 9: Mid-Sized Categories $6.2B
Mid-Sized Categories International: 16% Cleaning: 34% Latin America 7% Home Care 19% Canada 4% Laundry 9% Rest of World 5% FY19 Professional 6% Lifestyle: 20% $6.2B Household: 30% in Sales Food 9% Bags/Wraps 13% Natural Charcoal 8% Personal Care 5% Water Filtration 3% Cat Litter 7% Dietary Supplemen
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 For fiscal year ended June 30th, 2019, Clorox’s S&A/Sales was ~13.8% vs. peer average of 18% . This number does not include R&D or marketin
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: Strong Shareholder Return
Strong Shareholder Return Total Shareholder Return – 1, 3, and 5 Years Ending 6/30/2019 100 90 80 91 70 60 66 50 40 49 50 30 20 10 16 20 14 10 9 0 1 Yr 3 Yr 5 Yr CLX Peers S&P 500 15 Source: FactSet, Total Share Return as of June 30, 2019. Peers consist of 16 companies: CHD, CL, COTY, CPB, DPS, EL,
Slide 16: Financial Performance
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Slide 17: FY19 Performance & FY20 Outlook
FY19 Performance & FY20 Outlook FY19 FY20 FY Outlook (Aug 1 earnings call) $6.2B flat to +2% Organic Sales* +1% to +3% Sales (+1%) F/X: ~ -1% (vs Year Ago) Gross Margin: Flat to down slightly $6.32 $6.30 to $6.50 Diluted EPS Selling and Admin: ~14% of Sales (+1%) (flat to ~+3%) from cont. ops Adv &
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 FY20+ EBIT (a non-GAAP measure) represents earnings from continuing operations before income taxes (a GAAP measure),
Slide 19: Continued Discipline on SG&A
Continued Discipline on SG&A As of Fiscal Year Ending June 30, 2019 30% Goal: % of Sales 20% < 14% Sales 13.8% 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, 2019. 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, 2019 40% 30% 28% 20% Peer Average: 18% 10% 0% CL PEP CLX KMB HSY RB-GB EL CHD KO PG K GIS KDP CLX Return on invested capital (ROIC), a non-GAAP measure, is calculated as earnings from continuing operations before income taxes (a GAAP measure
Slide 21: Strong Free Cash Flow
Strong Free Cash Flow Annual Free Cash Flow Goal 11%-13% of Sales Free Cash Flow % of Sales: 11% 12% 13% 10% 11% 13% 13% $976 $992 $858 $868 $780 $786 $768 $590 $649 $733 $596 $637 $782 $786 FY13 FY14 FY15 FY16 FY17* FY18* FY19 $ in Millions Operating Cash Flow Free Cash Flow *Adjusted to reflect th
Slide 22: Use of Cash Priorities
Use of Cash Priorities Business Growth Support Dividend (includes targeted M&A) Free Cash Flow Debt Leverage1 Stock 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: Long History of Increasing Dividend
Long History of Increasing Dividend Dividend Yield as of June 30, 2019 Recent Dividend increases: FY19: +10% 7% FY18: +14% 6% 5% 4% Peer Average: 3.2% 3% 2.6% 2% 1% 0% KHC NWL K GIS CPB KO KMB PEP RB‐GB PG CLX CL HSY KDP CHD EL 24 Source: FactSet, Trailing dividend yield as of June 30, 2019. Peers c
Slide 25: Nearly $4B Returned to Stockholders in the Last 5 Years
Nearly $4B Returned to Stockholders in the Last 5 Years Initiated up to $2B open market stock program in May 2018 1151 $819 $721 $652 $595 FY15 FY16 FY17 FY18 FY19 $ in Millions Cash Returned to Stockholders* 25 *Cash returned to stock holders is defined as cash dividends paid plus treasury stock pu
Slide 26: 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/e-Commerce • Margin improvement opportunities continue to exist − Leverage pricing power to mitigate inpu
Slide 27: 2020 Strategy
WAN THE CLOROX COMPANY NZ
Slide 28: 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 29: Driving Superior Consumer Value
Driving Superior Consumer Value DIFFERENTIATED • Value is an outcome of: PRODUCTS - The right pricing CONSUMER - Differentiated products VALUE BRAND PRICING - Great brand equity EQUITY 29
Slide 30: 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 • Gross margin expansion enabled increase investment to brand and categories 30
Slide 31: Investing in Differentiated Products
Investing in Differentiated Products DIFFERENTIATED • Value is an outcome of: PRODUCTS - The right pricing CONSUMER - Differentiated products VALUE BRAND PRICING - Great brand equity EQUITY 31
Slide 32: Innovation Built Into Our DNA
Innovation Built Into Our DNA 3-Year Pipeline High R&D Investment Product 3% External Partnerships Marketing White Space Agile Culture Cost Growth* Speed to Market 32 * Incremental annual sales
Slide 33: 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 FY19 33 Source: Clorox Internal
Slide 34: Solid Pipeline to Continue the Momentum
Solid Pipeline to Continue the Momentum FY18 FY19 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 Clorox Perform
Slide 35: Driving Superior Consumer Value
Driving Superior Consumer Value PRODUCT EXPERIENCE • Value is an outcome of: - The right pricing CONSUMER - Differentiated products VALUE BRAND PRICING - Great brand equity EQUITY 35
Slide 36: 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 36
Slide 37: Technology Enabled: Leaning Into Digital
Technology Enabled: Leaning Into Digital 58% 49% 45% Investing 41% 34% over 50% of media in digital FY15 FY16 FY17 FY18 FY19 37
Slide 38: Our Partners Help Build World-Class Digital
Our Partners Help Build World-Class Digital Select Partners: 38
Slide 39: Capabilities are World Class and Adaptable
Strong Capabilities and Long History of Retail Success Mass eCommerce Merch Dollar Capabilities are World Class and Adaptable: ●Insights ●Category management ●Shopper marketing ●Retail operations ●Supply chain ●Omni-channel retailing Club Home Hardware 39
Slide 40: 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) • FY19 on track for ~8% of Company Sales 300 2020 Goals 2020 Goal Projected Actual Actual Actual Goal Goal Goal Goal FY16 FY17 FY18 FY19 FY20 Goals 40
Slide 41: Tech Transformation 1.0 to 2.0
Tech Transformation 1.0 to 2.0 eCommerce TT2.0 Digital Marketing Next Generation Digital Commerce & Engagement 41
Slide 42: 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 43: Portfolio Segmentation
Portfolio Segmentation High FUEL GROWTH Profit Margin Potential Low High Sales Growth Potential 43
Slide 44: Fuel Brands Create Investment Dollars
Fuel Brands Create Investment Dollars Increasing demand spend Sales Advertising Promotion >+2pts since FY14 Trade Promotion 44
Slide 45: Investments in Brands Drive Superior Consumer Value
Investments in Brands Drive Superior Consumer Value % Sales with Superior Consumer Value 54% 54% of portfolio has 34% superior consumer value FY14 FY19 Note: Consumer Value Measure for US Brands only
Slide 46: 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 47: 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 48: Mid-Sized Categories $6.2B
Mid-Sized Categories International: 16% Cleaning: 34% Latin America 8% Home Care 19% Canada 4% Laundry 9% Rest of World 4% FY19 Professional 6% Lifestyle: 20% $6.2B Household: 30% in Sales Food 9% Bags/Wraps 13% Natural Personal Care 5% Charcoal 8% Water Filtration 3% Cat Litter 7% Dietary Supplemen
Slide 49: 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 #1 Argentina Laundry Additives #1 Chile #1 Hong Kong Bleach #2 Costa Rica Bleach #1 Canada Trash
Slide 50: International “Go-Lean” Strategy is Working
International “Go-Lean” Strategy is Working Pricing Focus on Right-Size Optimize Demand Maximization Cost Savings Infrastructure Creation 50
Slide 51: 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 52: 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% EARNING* MARGIN 30% 20% *Continuing operations **Metric for Performance Share Units 52
Slide 53: 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 54: Superior Employee Engagement
Superior Employee Engagement World class levels Higher than peers +6* +1* *Statistically Significant Source: Willis Towers Watson FMCG Norm: Based on responses from more than 160,000 employees globally. 54 Global High Performing Companies: Companies meeting two criteria: (a) superior financial perfo
Slide 55: 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 55
Slide 56: 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 56
Slide 57: 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 58: 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 58 Source: 2018 Clorox Integrated Annual Report Cumulative progress to date since 2011 base ye
Slide 59: 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 60: Appendix
WAN THE CLOROX COMPANY NZ
Slide 61: Key Credit Metrics
Key Credit Metrics $ in B FY14 FY15 FY16 FY17 FY18 FY19 EBITDA $1.1 $1.2 $1.2 $1.3 $1.3 $1.3 Total Debt / EBITDA 2.0x 1.8x 1.9x 1.7x 1.9x 2.1x EBITDA Interest Coverage 9.5x 11.3x 11.9x 14.0x 14.8x 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 62: Gross Margin Reconciliation
Gross Margin Reconciliation 62
Slide 63: Reportable Segments (unaudited)
Reportable Segments (unaudited) Dollars in Millions 63
Slide 64: Return on Invested Capital (ROIC) Reconciliation
Return on Invested Capital (ROIC) Reconciliation Dollars in millions and all calculations based on rounded numbers FY19 FY18 Earnings from continuing Earnings from continuingoperations operations before before income income taxes taxes $$ 1,024 1,054 (GAAP measure) Interest expense 85 Interest Earni
Slide 65: 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) FY19 Total assets $ 5,094 Less: non-interest bearing liabilities (1,825) Average invested capital $ 3,269 65
Slide 66: 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 2019 FY 2018 FY 2017 FY 2016 FY 2015 Treasury Stock purchased* $ 661 $ 271 $ 183 $ 254 $ 434 Ca