Clorox Company (the) · NYSE:CLX
Clorox Company (the) — The Clorox Company — Barclays Global Consumer Staples Conference 2016
74 slides from Clorox Company (the)'s conference presentation, Sep 8, 2016
Slide 1: Barclays Global Consumer Conference
Barclays Global Consumer Conference Benno Dorer Chairman of the Board and Chief Executive Officer
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, foreign currencies, and foreign currency exchange rates, cash flows, plans, objectives, expectations, gr
Slide 3: Key Messages
Key Messages • Strategy 2020 is continuing to produce strong shareholder returns • FY17 Outlook reflects strong progress on Strategy Accelerators in a difficult macro economic environment • Long-term investment case remains solid
Slide 4: Advantaged Portfolio: Over 80% of Sales From #1 or #2 Share Brands
Advantaged Portfolio Over 80% of Sales From #1 or #2 Share Brands FY16 Company Sales: $5.8B International: 17% Cleaning : 33% Latin America 9% Home Care 18% Canada 3% Laundry 9% Australia / NZ 2% Professional 6% Rest of World 3% Lifestyle: 16% Household : 34% 9% 15% 11% 4% 6% 3% 2%* Note: Renew Life
Slide 5: Advantaged Portfolio: Big Share Brands in Mid-Sized Categories
Advantaged Portfolio Big Share Brands in Mid-Sized Categories Source: IRI Infoscan Data - Total U.S. Multi-Outlet (Food/Drug/Mass + Walmart + Sam's + BJ's + Family Dollar + Dollar General + Fred's + DeCA.) for 52 weeks ending 6/19/2016
Slide 6: Advantaged Portfolio Supported by Consumer Megatrends
Advantaged Portfolio Supported by Consumer Megatrends Health & Wellness Sustainability MEGA TRENDS Fragmentation Affordability
Slide 7: Strong Long-Term Shareholder Return
Strong Long-Term Shareholder Return
Slide 8: Leading Through Strategic Change in CPG
Leading Through Strategic Change in CPG Digital Consumer Challenging International Revolution Focus on Retail Macro Value Environment Headwinds
Slide 9: Strategy Accelerators Drive Profitable Growth
Strategy Accelerators → Drive Profitable Growth
Slide 10: Strong Progress Across Strategy Accelerators
Strong Progress Across Strategy Accelerators New, Digital-Led Cutting Speed to Market Creative Agency Partners by 50% Investing Behind Growth Record-High Brands to Accelerate Top-line Employee Engagement
Slide 11: Focus on Portfolio Momentum
Focus on Portfolio Momentum Portfolio Momentum ran & 3 Of g a
Slide 12: Portfolio Segmentation
Portfolio Segmentation Fuel Brands Growth Brands High Sales Growth Potential Low High
Slide 13: Investments Behind Growth Brands are Working
Investments Behind Growth Brands are Working Fuel Brands Growth Brands FY16 Sales FY16 Profit Key: Double Arrows equals growth above Company average. Single arrow is growth below Company average. Source: Clorox Internal. Domestic Only.
Slide 14: 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 15: Burt's Bees: Growth With New Faces, Spaces & Places
Burt’s Bees: Growth With New Faces, Spaces & Places Drive Expand into International Trial & Awareness Adjacencies Expansion on Core
Slide 16: New Places: Growth in Non-Traditional Channels
New Places → Growth in Non-Traditional Channels ~$10M Annual Sales Distribution in 940 stores
Slide 17: Increasing Household Penetration
Increasing Household Penetration +12% Increase vs YA +11% Sales vs YA Source: IRI Panel Data, Total U.S. All Outlets, NBD Weighted, IRI Market Advantage 52 weeks ending 6/19/16
Slide 18: Kingsford: Fuel With New Faces, Spaces & Places
Kingsford: Fuel With New Faces, Spaces & Places Targeted Drive New Usage Expand Retail Demand Spend Occasions Distribution Margin Enhancement through Operational Excellence
Slide 19: Kingsford: More Consumers, +1.1 Share Points
Kingsford: Fuel With New Faces, Spaces & Places More consumers +1.1 Share Points 6 in 10 plan to buy a Americans are Charcoal Grill in active grillers the next year than a Gas Grill Kingsford Charcoal +9% Household Penetration vs FY15 Source: 2015 Hearth, Patio & Barbecue Association Survey; (HPBA)
Slide 20: United We Grill
United We Grill Onicina,
Slide 21: Renew Life Acquisition
Renew Life Acquisition • Closed May 2, 2016 • Purchase Price – $290M (2.5x Sales) • Calendar 2015 Sales – about $115M • Leading brand in the natural channel Source: SPINS with Vitamin Shoppe, IR MULO 52 weeks ending 7/10/16, and Whole Foods 52 weeks ending 7/10/16
Slide 22: Probiotics: An Attractive Category
Probiotics: An Attractive Category +15% expected category growth Two-thirds of US consumers experience digestive health issues 50% of purchases are based on a Doctor recommendation Source: Mintel Group, Ltd. (2015), Estimates based on Mintel (2015), Nutrition Business Journal (2014), and Euromonitor
Slide 23: Renew Life: Strong Strategic Fit
Renew Life: Strong Strategic Fit Health & US Centric Clear Plan for Wellness Value Creation
Slide 24: Opportunity to Grow Behind Core Capabilities
Opportunity to Grow Behind Core Capabilities Natural Retailer Mass Retailer Category > 20% vs YA Category > 15% vs YA Source: SPINS and Whole Foods 52 weeks ending 7/10/16. IRI MULO 52 weeks ending 7/10/16
Slide 25: Focus on 3D Innovation
Focus on 3D Innovation 3D Innovation . 5) 5 Zi A
Slide 26: Increased Investments in Profitable Growth
Increased Investments in Profitable Growth Advertising Sales +2pts Promotion Trade Promotion Focus on Core: Increased Investments in Better Value Demand Innovation Investment
Slide 27: Strong Product & Commercial Innovation
Strong Product & Commercial Innovation Glad with Clorox Clothes Clorox Antimicrobial (International) Burt’s Natural Lipsticks Clorox Wipes with Micro-Scrubbers Fresh Step with Stephen Curry Disney Licensed Hidden Valley with Febreze Partnership Food Bags Greek Yogurt
Slide 28: Expanding the Versatility of Ranch
Expanding the Versatility of Ranch Initial Launch – Q3 FY15 2.0 Expansion – Q3 FY16 12 Flavors plus 4 more in FY17 +4% Sales vs FY15 Total Salad Dressing +0.6 Share Pts Total Salad Dressing Source: IRI Infoscan Data - Total U.S. Multi-Outlet (Food/Drug/Mass + Walmart + Sam's + BJ's + Family Dollar +
Slide 29: Setting the Odor Control Gold Standard in Cat Litter
Setting the Odor Control Gold Standard in Cat Litter Initial Launch – Q3 FY16 Additional Innovation in FY17 +6% Q4 Sales vs FY15 +0.4 Share Pts Q4 vs FY15 Source: IRI Infoscan Data - Total U.S. Multi-Outlet (Food/Drug/Mass + Walmart + Sam's + BJ's + Family Dollar + Dollar General + Fred's + DeCA.) f
Slide 30: New Faces & Places: Low Out Of Pocket (LOOP)
New Faces & Places: Low Out Of Pocket (LOOP) Focus on Value 22ct Sandwich Bag 16oz Coming Soon Bleach 9ct Wipes 9.75oz/10.75oz 5ct Glad with Pine-Sol Odorshield
Slide 31: Strong Product & Commercial Innovation
Strong Product & Commercial Innovation Glad with Clorox Clothes Clorox Antimicrobial (International) Burt’s Natural Lipsticks Clorox Wipes with Micro-Scrubbers Fresh Step with Stephen Curry Disney Licensed Hidden Valley with Febreze Partnership Food Bags Greek Yogurt
Slide 32: Focus on 3D Technology Transformation
Focus on 3D Technology Transformation
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 Clorox now invests more than 40% 41% 34% of our media in digital 25% 22% FY13 FY14 FY15 FY16 Source: Clorox Internal
Slide 35: Strong Momentum in eCommerce
Strong Momentum in eCommerce ~2x Sales Growth (FY16 vs FY13) Source: Clorox Internal
Slide 36: We Leverage our Location for Innovative Partnerships
We Leverage our Location for Innovative Partnerships
Slide 37: FY16 Strong Business Results
FY16 Strong Business Results… FY16 Vs. Year Ago Sales $5.8B +2% (+5% FX Neutral) EBIT Margin 18.5% +50 bps Diluted EPS (cont. ops) $4.92 +8% EBIT (a non-GAAP measure) represents earnings from continuing operations before income taxes (a GAAP measure), excluding interest income & interest expense. EB
Slide 38: Recognized by Shareholders
Recognized by Shareholders… Total Shareholder Return 1 Year Ending 6/30/16 36% 3% 22% 3% 33% 19% 4% Clorox Peers S&P 500 Share Price Appreciation Dividend Paid Source: Factset
Slide 39: With a Highly Engaged Workforce
With a Highly Engaged Workforce “I am empowered to make the Top 5% decisions needed to do my job well.” “Clorox has established a climate where one can challenge our traditional ways of doing things.” “I understand how my work contributes to Clorox's strategy.” CPG Norm: The Towers Watson global fas
Slide 40: Key Messages
Key Messages • Strategy 2020 is continuing to produce strong shareholder returns • FY17 Outlook reflects strong progress on Strategy Accelerators in a difficult macro economic environment • Long-term investment case remains solid
Slide 41: Barclays Global Consumer Conference
Barclays Global Consumer Conference Steve Robb Chief Financial Officer
Slide 42: Key Messages
Key Messages • Strategy 2020 is continuing to produce strong shareholder returns • FY17 Outlook reflects strong progress on Strategy Accelerators in a difficult macro economic environment • Long-term investment case remains solid
Slide 43: 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 growth company growth company growth Annual EBIT Margin Improvement: +25 to +50 bps Annual Free
Slide 44: FY17 Outlook
FY17 Outlook Based on Aug 3rd Earnings Call • Categories: about 1% • Mix/Other: about -1pt Sales • Innovation: +3pts • FX: -2pts +2% to +4% • Renew Life: +2pts • Gross Margin: about Flat EBIT Margin • Selling & Admin: <14% of Sales +25 to +50bps • Advertising & Sales Promotion: about 10% of Sales •
Slide 45: EBIT Margin on Track with Long-Term Goals
EBIT Margin on Track with Long-Term Goals • Expect EBIT Margin Expansion of +25bps to +50bps • Gross Margin anticipated to be about Flat Deceleration of Reduced Pricing Increased Commodity (Domestic) Supply Chain Benefits Investments • Continued reduction in SG&A to <14% of sales EBIT (a non-GAAP me
Slide 46: International is a Key Component of our Portfolio
International is a Key Component of our Portfolio FY16 Company Sales: $5.8B International: 17% Cleaning : 33% Latin America 9% Home Care 18% Canada 3% Laundry 9% Australia / NZ 2% Professional 6% Rest of World 3% Lifestyle: 16% Household : 34% 9% 15% 11% 4% 6% 3% 2%* Note: Renew Life 2% of Sales is
Slide 47: Why We Like International
Why We Like International Peru Leading Midsized Faster Strong Brands Countries Category Operational Growth Rates Performance
Slide 48: Strong Growth in Local Currency, However FX Weighs
Strong Growth in Local Currency, However FX Weighs Exchange Rate vs YAGO Argentina -37% Colombia -17% Mexico -15% Chile -9% Canada -5% Australia -4% Source: Foreign Exchange Rates based on FY16Q4 Avg Rates vs FY15Q4 Avg Rates
Slide 49: International: Go Lean Approach
International: “Go Lean” Approach Pricing Focus on Right-Size Optimize Maximization Cost Savings Infrastructure Demand Creation 4 Pillars of Profitability
Slide 50: Strong Free Cash Flow
Strong Free Cash Flow % of Sales 11% 12% 13% 10% 10% - 12% of Sales Free Cash Flow (a non-GAAP measure) represents Operating Cash Flow from Continuing Operations less Capital Expenditures. See reconciliation on our website (http://investors.thecloroxcompany.com/results.cfm?q=4) and on slide 73.
Slide 51: Top-Tier ROIC
Top-Tier ROIC Peer Average: 15% 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 as a percentage of average invested capital. Average invested capital represents a five
Slide 52: Use of Cash Priorities
Use of Cash Priorities Business Growth Support Dividend (includes targeted M&A) Free Cash Flow Debt Leverage1 Share (Target: 2.0 – 2.5x) Repurchases 1. Debt Leverage = Gross Debt / EBITDA
Slide 53: M&A Criteria
M&A Criteria • Target areas with tailwinds in categories, countries, and channels Categories: Health & Wellness, Food Enhancers, and Natural Personal Care Countries: US-Centric, with possible International expansion Channels: Current retail and professional markets • Strong fit with Clorox str
Slide 54: Strong Long-Term Shareholder Return
Strong Long-Term Shareholder Return
Slide 55: Areas We Are Watching Carefully
Areas We Are Watching Carefully Consumer & Foreign Tax Rate Economy Exchange Uncertainty and Headwinds Volatility from (ASU) Adoption
Slide 56: Key Messages
Key Messages • Strategy 2020 is continuing to produce strong shareholder returns • FY17 Outlook reflects strong progress on Strategy Accelerators in a difficult macro economic environment • Long-term investment case remains solid
Slide 57: Appendix
Appendix ran & 3 Of g a
Slide 58: Advantaged Portfolio Supported by Consumer Megatrends
Advantaged Portfolio Supported by Consumer Megatrends Customer Supply Chain Brand Building Scaled teams, Common consumer Scale across Buy, capabilities, and trends, insights, 3D Make, Ship broker network demand creation Health & Wellness Sustainability Fragmentation Affordability Over 80% of
Slide 59: Strategic Continuity: 2020 Strategy
Strategic Continuity: 2020 Strategy Mission • We make everyday life better, every day • Maximize economic profit across categories, channels, and Objectives countries • Big-share brands in midsized categories and countries • Engage our people as business owners • Increase brand investment behind sup
Slide 60: 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 & vation* Adjacency Expansion EXPAND MARGIN ACCELERATE GROWTH *Cost-o-vation is a term used at Clorox that describes innovation that improves product perfo
Slide 61: Innovation is Delivering Growth
Innovation is Delivering Growth Incremental Sales Growth from Innovation 5% (Last 12 months) 4% 3.3% 3.4% 2.9% 3.0% 3.0% 3% 2.7% 2% 1% 0% FY12 FY13 FY14 FY15 FY16 Goal Source: Clorox Internal
Slide 62: Cost Savings: Key Component of 2020 Strategy
Cost Savings: Key Component of 2020 Strategy • Engage our people as business owners • Increase brand investment behind superior value and more targeted 3D plans Strategy • Keep the core healthy and grow into new categories, channels, and existing countries • Reduce waste in work, products, and suppl
Slide 63: Cost Savings Continue to Deliver
Cost Savings Continue to Deliver +150bps Annual Goal EBIT (a non-GAAP measure) represents earnings from continuing operations before income taxes (a GAAP measure), excluding interest income & interest expense. EBIT margin is a measure of EBIT as a percentage of sales.
Slide 64: Opportunities Exist Within SG&A
Opportunities Exist Within SG&A Goal: < 14% Sales SG&A % of Sales as of Latest Fiscal Year End CLX as of June 30th, 2016
Slide 65: Nearly $2B Returned to Shareholders in the Last 4 Years
Nearly $2B Returned to Shareholders in the Last 4 Years FY16 Dividend Payout Ratio $733 = 61% $649 $590 $596 $M $532 $568 $442 $330 FY13 FY14 FY15 FY16 Free Cash Flow Cash Returned to Shareholders Free Cash Flow (a non-GAAP measure) represents Operating Cash Flow from Continuing Operations less Capi
Slide 66: Healthy Dividend Growth
Healthy Dividend Growth… Dividends Have Increased Each Year Since 1977 Dividend Yield as of Jun 30th, 2016 Peer Average: 2.2%
Slide 67: Strong Shareholder Return, The Right Way
Strong Shareholder Return, The Right Way
Slide 68: Sales Growth Reconciliation
Sales Growth Reconciliation Full Full Q4 Q4 Year Year Fiscal Fiscal Fiscal Fiscal 2016 2015 2016 2015 Total Sales Growth – GAAP 2.8% 4.0% 1.9% 2.6% Less: Foreign exchange -2.3% -2.0% -2.7% -2.1% Currency Neutral Sales Growth - Non-GAAP 5.1% 6.0% 4.6% 4.7%
Slide 69: Gross Margin Reconciliation
Gross Margin Reconciliation
Slide 70: Reportable Segments (unaudited)
Reportable Segm ent Inform ation Reportable Segments (unaudited) (Unaudited) Dollars in millions Earnings (losses) from continuing operations Net sales before incom e taxes Three Months Ended Three Months Ended 6/30/2016 6/30/2015 % Change (1) 6/30/2016 6/30/2015 % Change (1) Cleaning $ 493 $ 465 6%
Slide 71: EBIT and EBITDA Reconciliation (unaudited)
EBIT and EBITDA Reconciliation (unaudited) FY 2015 FY 2016 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY 9/30/14 12/31/14 3/31/15 6/30/15 6/30/15 9/30/15 12/31/15 3/31/16 6/30/16 6/30/16 Earnings from continuing operations $218 $197 $217 $289 $921 $264 $230 $237 $ 252 $ 983 before income taxes Interest income -$1 -
Slide 72: EBIT and EBITDA Reconciliation (unaudited)
EBIT and EBITDA Reconciliation (unaudited)
Slide 73: Free Cash Flow (FCF) Reconciliation
Free Cash Flow (FCF) Reconciliation (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 sales to help asses
Slide 74: Return on Invested Capital (ROIC) Reconciliation
Return on Invested Capital (ROIC) Reconciliation Dollars in millions and all calculations based on rounded numbers FY16 Earnings from continuing operations before income taxes $ 983 Interest expense 88 Earnings from continuing operations before income taxes and interest expense $ 1,071 Income taxes
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