Clorox Company (the) · NYSE:CLX
Clorox Company (the) — The Clorox Company — Q3 FY2018 Earnings Presentation
64 slides from Clorox Company (the)'s earnings presentation, May 2, 2018
Slide 1: FY18 Q3 Investor Presentation
FY18 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 31 • Appendix 59 3
Slide 4: Who We Are
THE CLOROX COMPANY > Ze WHO WE ARE cpavialesie
Slide 5: natiftine BRITA
natiftine BRITA
Slide 6: Our Story
Our Story 1957 – 1969 1999 2006 – current Purchased by P&G; then sold Sales grew by ~40% through Expanded Health & Wellness portfolio Developed world-class brand- First Brands acquisition through the acquisitions of Burt’s Bees, building capabilities Renew Life, and Nutranext bran Recognized for cor
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 Korea Bleach #1 Toilet Bowl Cleaner #1 Malaysia Bleach #1 Hong Kong Bleach #2 Dilutable Clea
Slide 9: Mid-Sized Categories
Mid-Sized Categories International : 17% Cleaning : 34% Latin America 9% Home Care 19% Canada 3% Laundry 9% Australia / NZ 2% Rest of World 3% FY17 Professional 6% Lifestyle : 16% $6B Household : 33% 9% in Sales 14% 4% 10% 7% 3% 2% 9
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, 2017, Clorox’s S&A/Sales was ~13.6% vs. peer average of 19% . This number does not include R&D or marketing expenses and
Slide 11: Good Growth
Good Growth PERFORMANCE Commitment to PEOPLE Environment, 2020 Good Social, Strategy Growth & Corporate Governance PRODUCTS (ESG) PLANET PURPOSE 11 Profitable, Sustainable, Responsible
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 3/31/2018 50% 36% 30% 8% 30% 10% 13% 28% 10% 21% 9% 4% Clorox Peers S&P 500 -10% Share Price Appreciation Dividend Paid 15 Peers consist of 16 companies: CHD, CL, COTY, CPB, DPS, EL, GIS, HSY, K, KHC, KMB, KO, RB-GB, NWL, PEP, and P
Slide 16: Financial Performance
THE CLOROX COMPANY Financial Performance | > Ze
Slide 17: FY18 Year-to-Date Performance & FY18 Outlook
FY18 Year-to-Date Performance & FY18 Outlook FY18 YTD FY18 FY Outlook (9 months) (Feb 2 earnings call) $4.4B Innovation: ~ +3pts Sales (+2%) ~ +3% Aplicare Divestiture: ~ -1pt (vs Year Ago) Nutranext Acquisition: ~ +1pt Diluted EPS $4.60 $6.15 to $6.30 Gross Margin: -100 to -150bps from cont. ops (+
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+ EBIT (a non-GAAP measure) represents earnings from continuing operations before income taxes (a G
Slide 19: Continued Discipline on SG&A
Continued Discipline on SG&A As of Fiscal Year Ending June 30, 2017 45% 35% % of Sales 25% Goal: < 14% Sales 15% 13.6% 5% KHC CHD GIS KMB CLX PG K HSY NWL COTY CL DPS PEP EL SG&A % of Sales as of Latest Fiscal Year End, CLX as of June 30, 2017 19
Slide 20: Delivering Top-Tier ROIC
Delivering Top-Tier ROIC As of Fiscal Year Ending June 30, 2017 40% 30% 28% 20% Peer Average: 16% 10% 0% CL KMB CLX EL RB-GB HSY PEP CHD DPS GIS PG CPB K NWL KO KHC Return on invested capital (ROIC), a non-GAAP measure, is calculated as earnings from continuing operations before income taxes and int
Slide 21: Strong Free Cash Flow
Strong Free Cash Flow Annual Free Cash Flow Goal: 11%-13% of Sales $ in Millions Free Cash Flow % of Sales 11% 12% 13% 10% 11% $858 $871 $780 $786 $768 $590 $649 $733 $596 $640 FY13 FY14 FY15 FY16 FY17 Operating Cash Flow Free Cash Flow Free Cash Flow (a non-GAAP measure) represents Operating Cash F
Slide 22: Impact of Recent Tax Reform
Impact of Recent Tax Reform • The passage of The Tax Cuts and Jobs Act in December 22, 2017, is expected to meaningfully lower Clorox's long-term effective tax rate • Long-term: effective tax rate expected to be in mid-twenties range (vs previous range of low to mid thirties) • FY18: Full year effec
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 • Areas with tailwinds in categories, countries, and channels • Strong fit with Clorox strategy and capabilities • Brands with good market positions • Attractive margins Please note that this slide refers to general goals for Clorox’s M&A focus – each element may not be relevant
Slide 25: Evolving our Portfolio
Evolving our Portfolio RenewLife® - Strong First Year • Transaction closed in May 2016 • About 2% of total company sales • Purchase Price: $290M (2.5x Sales) • Integration is on track • Distribution wins in Food, Drug, Mass and Club Aplicare - Sale Completed • Transaction closed in August 2017 • No
Slide 26: Evolving our Portfolio with Nutranext Acquisition
Evolving our Portfolio with Nutranext Acquisition • Transaction closed April 2018, purchase price $700M (~3.5x Sales) • About 3% of company sales • Attractive mid-sized categories in Health and Wellness space with strong tailwinds • Leading brands in natural channels1 (Natural Vitality #1, Rainbow L
Slide 27: Over $2B Returned to Shareholders in the Last 4 Years
Over $2B Returned to Shareholders in the Last 4 Years $ in Millions $532 $568 $442 $520 FY14 FY15 FY16 FY17 Cash Returned to Shareholders 27 Cash Returned to Shareholders is defined as Dividends Paid plus Share Repurchased less Options Exercised
Slide 28: Healthy Dividend Growth…
Healthy Dividend Growth… Dividends Have Increased Each Year Since 1977 Dividend Yield as of March 31, 2017 +14% Dividend increase in Feb 2018 increases yield to 4% 2.9%1 3% 2.4% Peer Average: 2.9% 2% 1% 0% GIS KHC KMB NWL PG KO K CPB PEP COTY RB-GB HSY CLX CL DPS CHD EL 1. As of March 31, 2018, divi
Slide 29: 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 − Maintain healthy brand building investments • Margin improvement opportunities continue to exist − Leverage our brands pricing power to mitigate input cost − S
Slide 30: Strong Shareholder Return
Strong Shareholder Return Total Shareholder Return - 20 Year ending 3/31/2018 TSR % 600 Peers 500 494 CLOROX 400 415 300 S&P500 249 200 100 0 - Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Slide 31: 2020 Strategy
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Slide 32: 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 33: 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 33
Slide 34: 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 34
Slide 35: We Continue to Lean Into Digital Engagement
We Continue to Lean Into Digital Engagement 51% 45% 41% 34% Clorox invests over 50% of our media in digital FY15 FY16 FY17 FY18 Estimate 35
Slide 36: Our Partners Help Build World-Class Digital
Our Partners Help Build World-Class Digital Select Partners: 36
Slide 37: Innovation: Strong Track Record
Innovation: Strong Track Record Incremental Sales Growth from Product Innovation (Last 12 months) Goal: +3% 3.1% 2.7% 2.2% 2.8% 3.3% 3.4% 3.0% 3.0% 2.7% 2.9% FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 37 Source: Clorox Internal
Slide 38: Solid Pipeline to Continue the Momentum
Solid Pipeline to Continue the Momentum FY18 FY18 Front Half Back Half Glad ForceFlex Plus Advanced Protection Clean Paws Low Track Litter Burt’s Bees Cosmetics Clorox Performance Clorox Disinfecting Wipes: Scentiva Bathroom Bleach with Cloromax Ultra Strength & Easy to Pull Cleaners Renew Life non-
Slide 39: 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 39
Slide 40: 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 41: 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 42: eCommerce Sales Well Ahead of Goals
eCommerce Sales Well Ahead of Goals • Early investment in eCommerce is paying off • ~4% of Total Company Sales • 37% Sales CAGR (FY15 to FY17) Actual Actual Actual Goal Goal Goal FY15 FY16 FY17 42 FY17 include eCommerce sales from RenewLife acquisition
Slide 43: Tech Transformation 1.0 to 2.0
Tech Transformation 1.0 to 2.0 eCommerce TT2.0 Digital Marketing Next Generation Digital Commerce & Engagement 43
Slide 44: 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 45: Portfolio Segmentation
Portfolio Segmentation High FUEL GROWTH Profit Margin Potential Low High Sales Growth Potential 45
Slide 46: Fuel Brands Create Investment Dollars
Fuel Brands Create Investment Dollars Investing in A&SP . . . . . . and across all demand spend 10% 9% Sales Advertising Promotion >+2pts since FY15 FY13 FY17 Trade Promotion AS&P as a % of Sales 46
Slide 47: Investments Drive Household Penetration
Investments Drive Household Penetration % Sales with Growing/Stable HH Pen 72% 72% of portfolio has growing or stable 31% household penetration FY13 FY17 47 Source: IRI Panel Data, Total U.S. All Outlets, NBD Weighted
Slide 48: 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 49: 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 50: Fueling Growth in International
Fueling Growth in International International : 17% Cleaning : 34% Latin America 9% Home Care 19% Canada 3% Laundry 9% Australia / NZ 2% Rest of World 3% FY17 Professional 6% Lifestyle : 16% $6B Household : 33% 9% in Sales 14% 4% 10% 7% 3% 2% 50
Slide 51: 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 Hong Kong Wipes #1 Chile #1 Hong Kong Bleach #2 Korea Bleach #1 Canada Trash Bags #1 Canada F
Slide 52: International “Go Lean” Strategy is Working
International “Go Lean” Strategy is Working Pricing Focus on Right-Size Optimize Demand Maximization Cost Savings Infrastructure Creation 52
Slide 53: 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 54: Clorox Growth Culture Enables our 2020 Strategy
Clorox Growth Culture Enables our 2020 Strategy 80 78 75 75 70 71 • Decisive 65 • Empowered Growth Culture Index • Accountable Fast-Moving Consumer Goods Global High Performing Companies Clorox 54
Slide 55: 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 55
Slide 56: People Strategy Building a Competitive Advantage
People Strategy Building a Competitive Advantage Strong sustainable engagement results are 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, significantly
Slide 57: Strong Engagement Distinguishes Us from Peers
Strong Engagement Distinguishes Us from Peers Strong Absolute Results Strong Relative to Peers 87% 88% Stronger Results Over Time 86% 2017 2015 2016 Source: Willis Towers Watson FMCG Norm: Based on responses from more than 160,000 employees globally. Global High Performing Companies: Companies meeti
Slide 58: We Cultivate Diversity Broadly to Generate Value
We Cultivate Diversity Broadly to Generate Value 36% Female Clorox Executive Committee Members Board Executives 33% Female Board Members Employees Suppliers 33% Minority Board Members Clorox Employee Resource Groups 58
Slide 59: Appendix
THE CLOROX COMPANY > Ze Appendix cpavialesie
Slide 60: Key Credit Metrics
Key Credit Metrics $ in B FY13 FY14 FY15 FY16 FY17FY1 EBITDA $1.2 $1.1 $1.2 $1.2 $1.3 Total Debt / EBITDA 2.1x 2.0x 1.8x 1.9x 1.7x EBITDA Interest Coverage 9.5x 11.3x 11.9x 14.0x 14.5x EBIT / Interest 8.0x 9.6x 10.2x 12.1x 12.7x Free Cash Flow / Debt 25% 28% 33% 26% 29% FCF after Dividends / Debt 10
Slide 61: Gross Margin Reconciliation
Gross Margin Reconciliation (1) In Q1 of fiscal year 2017, “All other” includes about -60bps of unfavorable mix and -50bps of unfavorable foreign exchange impact. In Q3 of fiscal year 2017, “All other” includes about -100bps of unfavorable mix (negative mix in charcoal business and strong sales in c
Slide 62: Reportable Segments (unaudited)
Reportable Segments (unaudited) Dollars in Millions 62
Slide 63: Return on Invested Capital (ROIC) Reconciliation
Return on Invested Capital (ROIC) Reconciliation 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 (Amounts shown below are five quarter averages) FY17 Total assets $ 4,549 Less: non-interest bearing liabilities (1,805) Average invested capital $ 2,744 64