Clorox Company (the) · NYSE:CLX
Clorox Company (the) — The Clorox Company — FY2018 Earnings Presentation
67 slides from Clorox Company (the)'s earnings presentation, Aug 2, 2018
Slide 1: FY18 Q4 Investor Presentation
FY18 Q4 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
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Slide 5: Brand logos
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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% FY18 Professional 6% Rest of World 3% $6.1B Lifestyle : 17% in Sales Household : 32% 9% 14% 4% 9% 3% 7% 1%* 2% 9 * Note: Reflects results following April 2018 acquisition. Ex
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 6/30/2018 60% 41% 40% 40% 11% 8% 20% 30% 13% 32% 9% 0% 4% Clorox Peers S&P 500 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 PG
Slide 16: Financial Performance
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Slide 17: FY18 Performance & FY19 Outlook
FY18 Performance & FY19 Outlook FY18 FY19 FY Outlook (12 months) (Aug 2 earnings call) $6.1B Innovation: ~ +3pts Sales (+3%) ~ 2% to 4% Nutranext Acquisition & Aplicare (vs Year Ago) Divestiture: ~ +2.5pt FX: ~-2pt Diluted EPS $6.26 $6.32 to $6.52 Gross Margin: flat to up modestly from cont. ops (+1
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 21.8% • FY19: Full year effective tax rate expected to be 23% to 24% • Long term: effective tax ra
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 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 26: Over $2B Returned to Shareholders in the Last 4 Years
Over $2B Returned to Shareholders in the Last 4 Years Initiated up to $2B share repurchase $ in Millions program in May 2018 $568 $442 $520 $676 FY15 FY16 FY17 FY18 Cash Returned to Shareholders 26 Cash Returned to Shareholders is defined as Dividends Paid plus Share Repurchased less Options Exercis
Slide 27: Healthy Dividend Growth
Healthy Dividend Growth… Dividends Have Increased Each Year Since 1977 Dividend Yield as of June 30, 2018 +14% Dividend increase in Feb 2018 increases yield to 4% 2.9%1 3% 2.7% Peer Average: 3.1% 2% 1% 0% GIS KHC KMB NWL PG COTY CPB KO K PEP HSY CLX RB-GB CL CHD EL 1. As of June 30, 2018, 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 TSR % 600 Total Shareholder Return 20 Year ending 6/30/2018 Peers 500 490 400 CLOROX 372 300 S&P500 250 200 100 0 - Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- Jun- 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
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 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 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 in eCommerce is paying off Increased 2020 eCommerce Goal from $300M to $500M • ~6% of Total Company Sales • 38% Sales CAGR (FY15 to FY18) Actual Goal Actual Actual Actual Goal Goal Goal FY15 FY16 FY17 FY18 41 FY18 includes eCommerce sales from N
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: Strong Pipeline of 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: Fueling Growth in International
Fueling Growth in International 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% 9% in Sales 14% 4% 9% 7% 3% 2% 1%* 49 * Note: Reflects results following April 2018 acq
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: Strong Engagement Distinguishes Us from Peers
Strong Engagement Distinguishes Us from Peers Strong Absolute Results Strong Relative to Peers +7* +2* 88% 88% Stronger Results 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: Compani
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 34% of the portfolio* On track to meet our goal of 50% product portfolio by 2020 Cumulative progress since 2011 base year to 2017
Slide 60: Reducing Our Environmental Footprint
Reducing Our Environmental Footprint 2020 GOAL 20% WASTE TO LANDFILL 41% WATER CONSUMPTION 21% GREENHOUSE GAS EMISSIONS 18% ENERGY CONSUMPTION 15% On track to meet or beat our goal of 20% reduction by 2020 Cumulative progress to date since 2011 base year to 2017
Slide 61: Safeguarding Families and Communities
Safeguarding Families and Communities $83 MILLION! TOTAL VALUE OF CONTRIBUTIONS AND VOLUNTEER HOURS 2014 - 2017
Slide 62: Appendix
THE CLOROX COMPANY > Ze Appendix cpavialesie
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 FY17 FY18 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Cost Savings +140 +140 +150 +150 +150 +160 +170 +140 +120 +140 Price Changes +70 +70 +60 +50 +60 +40 +30 +50 +50 +40 Market Movement (commodities) +90 +10 -70 -90 -20 -90 -110
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