Clorox Company (the) · NYSE:CLX
Clorox Company (the) — The Clorox Company — FY2017 Earnings Presentation
72 slides from Clorox Company (the)'s earnings presentation, Aug 3, 2017
Slide 1: FY17 Q4 Investor Deck
FY17 Q4 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, earnings per share, diluted earnings per share, margins, foreign currencies, and foreign currency exchan
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% FY17 Company Sales: $6.0B Cleaning : 34% Latin America 9% Home Care 19% Canada 3% Laundry 9% Australia / NZ 2% International 17% Professional 6% Rest of World 3% Cleaning 34% Lifestyle : 16% Lifestyle 16% Household
Slide 4: Advantaged Portfolio: #1 or #2 Market Share
Advantaged Portfolio: #1 or #2 Market Share Compete Well in Categories with Branded Players Home Care Salad Dressing Cat Litter #1 Clorox 20% #1 Hidden Valley 23% #1 Nestle 36% #2 P&G 15% #2 Kraft 13% #2 Clorox 23% #3 Reckitt 14% #3 Private Label 12% #3 Church & Dwight 20% Sales from select business
Slide 5: Advantaged Portfolio: #1 or #2 Market Share
Advantaged Portfolio: #1 or #2 Market Share Compete Well in Categories with Private Label Charcoal Bleach Trash Bags #1 Kingsford 74% #1 Clorox 60% #1 Private Label 45% #2 Private Label 17% #2 Private Label 35% #2 Glad* 30% #3 All Other 9% #3 All Other 5% #3 Reynolds 17% *Glad >50% Share of Premium
Slide 6: Advantaged Portfolio 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 COMMON CORE CAPABILITIES Brand Customer Supply Building Chain COMMON MEGA TRENDS Big Share Brands ● Low SG&A* (% of Sales) ● Top-tier ROIC ● Strong Cash Flows *As of June 30, 2017, Clorox’s S&A/Sales was ~14% vs. peer average of 19% . This number do
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 Agencies Cutting Speed to Market by up to 50% Investing in Growth Brands FY17 Record-High Engagement
Slide 11: Increased Investments in Profitable Growth
Increased Investments in Profitable Growth 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 5 & 3 ‘Of
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 Segment Segment Segment $22M $20M $10M *Dollar Opportunity of 1pt of HH Pen based on 1 purchase per year Source: IRI Panel Data, Total U.S. All Outlets, NBD Weighted
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: RenewLife: Strong First Year
RenewLife®: Strong First Year • Integration is on track, ahead of valuation in year 1 • Distribution wins in Food, Drug and Mass • New marketing campaign
Slide 20: Focus on 3D Innovation
Focus on 3D Innovation 3D Innovation Be THE CLOROX COMPANY RZ
Slide 21: 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 22: Innovation is Delivering Growth
Innovation is Delivering Growth 5% Incremental Sales Growth from Innovation (Last 12 months) 4% 3.4% 2.9% 3.0% 2.9% 3.0% 3% 2.7% 2% 1% 0% FY13 FY14 FY15 FY16 FY17 Goal Source: Clorox Internal
Slide 23: 2017 Innovation: Broad-Based Across the Portfolio
2017 Innovation: Broad-Based Across the Portfolio Glad Kitchen Pro with Leakguard Lip Balm with Clorox Healthcare Flavor Crystals Scentiva Cleaning Platform Fuzion Fresh Step with Febreze Long-Burning Charcoal Hawaiian Aloha Brita Stream Hidden Valley Simply Ranch
Slide 24: Generating Long-Term Value from Innovation
Generating Long-Term Value from Innovation Increased Optimize the Internal Demand 3Ds 3-Year Metric Investment
Slide 25: 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 26: Blockbuster & Sequels
Blockbuster & Sequels Differentiated Technology Provides Staying Power
Slide 27: 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 28: Improving Value via Consumer Value Measure (CVM)
Improving Value via Consumer Value Measure (CVM) FY15 & Prior FY16 & Beyond Product Experience 60/40 Testing 60/40 Testing Perception Brand Equity Price Price Total Consumer Value
Slide 29: 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 30: CVM: How Do We Use It?
CVM: How Do We Use It? o Above 45 line, Product & Perception Index Benefit > Price Superior Value Category Average o Below 45 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
Slide 31: Focus on 3D Technology Transformation
Focus on 3D Technology Transformation
Slide 32: Technology Reshapes Consumer Journeys
Technology Reshapes Consumer Journeys
Slide 33: 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 34: Accelerating Investments in Digital Media
Accelerating Investments in Digital Media 45% Clorox invested ~45% of our media in digital FY14 FY15 FY16 FY17 Source: Clorox Internal
Slide 35: Technology Enables One-to-One Communication
Technology Enables One-to-One Communication RECIPES Right Message, Right Context, Right Medium
Slide 36: Digital Improves ROI
Digital Improves ROI Enhanced More More Targeting Personalized Real-Time Across Channels
Slide 37: We Leverage our Location for Innovative Partnerships
We Leverage our Location for Innovative Partnerships
Slide 38: Strong Momentum in eCommerce
Strong Momentum in eCommerce Sales more than doubled (FY17 vs FY14) FY14 FY15 FY16 FY17 Source: Clorox Internal
Slide 39: eCommerce-Enabled Innovation
eCommerce-Enabled Innovation
Slide 40: eCommerce-Enabled Innovation
eCommerce-Enabled Innovation Infinity Pitcher
Slide 41: Focus on Growth Culture
Focus on Growth Culture > Bm, THE CLOROX COMPANY NSF
Slide 42: Strong Organizational Culture is a Solid Foundation
Strong Organizational Culture is a Solid Foundation Strong Values People Centric Operational Excellence
Slide 43: Winning the Right Way
Winning the Right Way United Nations Global Compact 4NN Rac 100 Best cates” PLACES TO WORK 2017 | for LGBT Equality 100% CORPORATE EQUALITY INDEX
Slide 44: Corporate Responsibility at Clorox
Corporate Responsibility at Clorox <A> Reviewed by Ernst & Young LLP Footnotes: Data as of June 30, 2016, refer to http://annualreport.thecloroxcompany.com/_pdf/CLX-012_2016_Integrated_Report.pdf page 27
Slide 45: Clorox Engagement Exceeds Global Benchmarks
Clorox Engagement Exceeds Global Benchmarks <A> Reviewed by Ernst & Young LLP Footnotes: Data as of June 30, 2016, refer to http://annualreport.thecloroxcompany.com/_pdf/CLX-012_2016_Integrated_Report.pdf page 26
Slide 46: International is a Key Component of our Portfolio
International is a Key Component of our Portfolio International : 17% FY17 Company Sales: $6.0B Cleaning : 34% Latin America 9% Home Care 19% Canada 3% Laundry 9% Australia / NZ 2% International 17% Professional 6% Rest of World 3% Cleaning 34% Lifestyle : 16% Lifestyle 16% Household : 33% 9% 14% 4%
Slide 47: Why We Like International
Why We Like International Peru Leading Midsized Faster Strong Brands Countries Category Operational Growth Rates Performance
Slide 48: 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 49: 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 and IDRetail for Uruguay ending FY17
Slide 50: FY18 Outlook
FY18 Outlook Based on August 3rd Earnings Call • Innovation: ~ +3pts Sales • Pricing: ~1% +2% to +4% • F/X: ~ -1pt • Gross Margin: up slightly Diluted EPS • Selling & Admin: <14% of Sales $5.52 to $5.72 (+3 to +7%) • EBIT: modest expansion • Tax rate: 32% to 33% EBIT (a non-GAAP measure) represents
Slide 51: FY17 Performance
FY17 Performance FY17 Vs. Year Ago Sales +4% $6.0B Diluted EPS $5.35 +9% (cont. ops)
Slide 52: 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 − Strong cost savings track record − Driving SG&A to below 14%
Slide 53: Cost Savings Continue to Deliver
Cost Savings Continue to Deliver EBIT Margin Benefit from Cost Savings 250 bps 200 bps +150bps Annual 150 bps Goal 100 bps 50 bps 0 bps FY13 FY14 FY15 FY16 FY17 FY18+ EBIT (a non-GAAP measure) represents earnings from continuing operations before income taxes (a GAAP measure), excluding interest inc
Slide 54: Opportunities Exist Within SG&A
Opportunities Exist Within SG&A 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
Slide 55: Top-Tier ROIC
Top-Tier ROIC 40% 30% 28% 20% Peer Average: 16% 10% 0% CL KMB CLX RB-GB HSY EL PEP CHD DPS GIS PG CPB K NWL KO 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
Slide 56: Strong Free Cash Flow
Strong Free Cash Flow % of Sales 11% 12% 13% 10% 11% $858 $871 10% - 12% $780 $786 $768 of Sales $M $733 $640 $649 $590 $596 FY13 FY14 FY15 FY16 FY17 Goal Operating Cash Flow Free Cash Flow Free Cash Flow (a non-GAAP measure) represents Operating Cash Flow from Continuing Operations less Capital Exp
Slide 57: 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 58: M&A Focus
M&A Focus • Areas with Tailwinds in Categories, Countries, and Channels • Strong Fit with Clorox Strategy and Capabilities • Brands with Good Market Positions • Attractive Margins • Balance Sheet Flexibility Gross Debt/EBITA as of 6/30/17 is 1.7x (targeted range of 2.0x to 2.5x) Please note that t
Slide 59: Over $2B Returned to Shareholders in the Last 4 Years
Over $2B Returned to Shareholders FY17 in the Last 4 Years Dividend Payout Ratio = 59% $733 $649 $640 $596 $M $532 $568 $520 $442 FY14 FY15 FY16 FY17 Free Cash Flow Cash Returned to Shareholders Free Cash Flow (a non-GAAP measure) represents Operating Cash Flow from Continuing Operations less Capita
Slide 60: Healthy Dividend Growth…
Healthy Dividend Growth… Dividends Have Increased Each Year Since 1977 4% Dividend Yield as of June 30, 2017 3% 2.4% Peer Average: 2.5% 2% 1% 0% GIS COTY KO PG K KMB KHC PEP CPB DPS CLX HSY CL RB-GB NWL EL CHD
Slide 61: 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 62: Appendix
Appendix ‘ax & 2 fe! x! fal
Slide 63: 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 64: Gross Margin Reconciliation
Gross Margin Reconciliation Gross Margin Change vs. Prior Year (basis points) Driver FY16 FY17 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Cost Savings +140 +130 +120 +110 +130 +140 +140 +150 +150 +150 Price Changes +110 +110 +100 +60 +90 +70 +70 +60 +50 +60 Market Movement (commodities) +100 +180 +180 +90 +140 +
Slide 65: Reportable Segments (unaudited)
Reportable Segments (unaudited) Dollars in Millions (1) Percentages based on rounded numbers.
Slide 66: EBIT and EBITDA (unaudited)
EBIT and EBITDA (unaudited) Dollars in Millions Footnotes on Slide 68
Slide 67: EBIT and EBITDA (unaudited)
EBIT and EBITDA (unaudited) Dollars in Millions Footnotes on Slide 68
Slide 68: EBIT and EBITDA (unaudited)
EBIT and EBITDA (unaudited) (1) EBIT (a non-GAAP measure) represents earnings 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
Slide 69: 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 70: 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 71: Return on Invested Capital (ROIC) Reconciliation
Return on Invested Capital (ROIC) Reconciliation
Slide 72: 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