Clorox Company (the) · NYSE:CLX
Clorox Company (the) — The Clorox Company — Q4 2021 Earnings Presentation
57 slides from Clorox Company (the)'s earnings presentation, Aug 3, 2021
Slide 1: FY21 Q4 Investor Presentation
FY21 Q4 Investor Presentation
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 growth, costs, cost savings, earnings, earnings attributable to the Company, earnings per share, diluted earnings per share, margins, fo
Slide 3: Contents
CONTENTS Key Sections Slide # • Who We Are 4 • Financial Performance 15 • IGNITE Strategy 25 • Accelerating Growth 39 • Appendix 45 3
Slide 4: Who We Are
eo The Clorox Company
Slide 5: Choiceful, Disciplined Playbook
CHOICEFUL, DISCIPLINED PLAYBOOK Leading brands Purposeful & targeted loved by consumers in where we play ECONOMIC PROFIT Deeply rooted Purpose-driven growth: discipline sustains ESG integration as a operational excellence competitive advantage 5
Slide 6: Diverse, U.S.-Centric Portfolio
DIVERSE, U.S.-CENTRIC PORTFOLIO FY21 RESULTS 41% • 30% CLEANING • 7% PROFESSIONAL PRODUCTS $7.3B Health & NET SALES Wellness • 4% VITAMINS, MINERALS and SUPPLEMENTS 26+ • 11% BAGS AND WRAPS • 7% CAT LITTER COUNTRY / 27% TERRITORY HOUSEHOLD • 9% GRILLING OPERATIONS 16% • 9% FOOD PRODUCTS • 3% WATER F
Slide 7: Leading Brands Loved by Our Consumers
LEADING BRANDS LOVED BY OUR CONSUMERS • Over 80% of our global portfolio from #1 and #2 share brands • Majority of our portfolio has superior consumer value • Accelerating growth with purpose-driven brands 7
Slide 8: Big-Share Brands, Mid-Sized Categories
BIG-SHARE BRANDS, MID-SIZED CATEGORIES Grilling CLX #1 • Categories that are more rational Bleach CLX #1 and less crowded with multinationals Water Filtration CLX #1 Wipes CLX #1 • Grow categories with deep Premium Trash CLX #1 consumer insights & world-class capabilities Salad Dressing CLX #1 Cat L
Slide 9: Operational Excellence
OPERATIONAL EXCELLENCE Our leading brands, world-class capabilities and deeply rooted discipline drive operational excellence Sales +175bps Low Growth Margin Top-Tier Strong Selling & Through From Cost ROIC Cash Flows Admin Innovation Savings 9 Cost Savings Target is +175 bps EBIT Margin. EBIT (a no
Slide 10: Strong Financial Results
STRONG FINANCIAL RESULTS FY16 TO FY21 CAGR Sales EPS EP 5.0% 8.1% 6.5% 10 NOTE: CAGR refers to Compounded Annual Growth Rate. Earnings per share is from from continuing operations. EP refers to Economic Profit and reconciliation can be found in the appendix.
Slide 11: Total Shareholder Returns
TOTAL SHAREHOLDER RETURNS FY16 TO FY21 125% 51% 47% S&P 500 Peers Clorox 11 SOURCE: FactSet, Total Share Return as of June 30, 2021. Peers consist of 16 companies: CHD, CL, EL, GIS, HSY, K, KHC, KMB, KO, RB-GB, MDLZ, NESN, PEP, PG, REYN and ULVR.
Slide 12: Strong Value for Society
STRONG VALUE FOR SOCIETY PERFORMANCE PEOPLE PRODUCTS PLANET PURPOSE +5% Sales 87% Employee 76% to goal of 100% 100% Renewable $12M in cash CAGR FY16-21 engagement packaging recyclable, energy in US and grants and cause reusable, compostable Canada achieved Jan marketing donations +8.1% EPS by 2025 2
Slide 13: Strong Results the Right Way
STRONG RESULTS THE RIGHT WAY 13
Slide 14: IGNITE Strategy
IGNITE STRATEGY Purpose We champion people to be well & thrive every single day Vision Exceptional innovators who earn people’s enduring loyalty Maximize economic profit Objectives Purpose-driven growth — profitable, sustainable, and responsible Fuel growth in our brands Strategy Innovate brand and
Slide 15: Financial Performance
Financial Performance
Slide 16: FY21 Performance & Outlook
FY21 PERFORMANCE & OUTLOOK FY21 FY22 Outlook (As of August 3 Earnings Call) Sales 9% -6% to -2% (vs year ago) (OSG +9%) (OSG -6% to -2%) Adjusted EPS $7.25 $5.40 to $5.70 (vs year ago) (-2%) (-26% to -21%) Organic sales growth (OSG) is defined as GAAP net sales growth excluding the effect of foreign
Slide 17: IGNITE Strategy Financial Goals
IGNITE STRATEGY FINANCIAL GOALS Original IGNITE NEW Annual Goals Annual Goals* Sales Growth +2% to 4% +3% to 5% EBIT Margin Improvement +25 to 50 bps +25 to 50 bps Free Cash Flow % of Sales 11% to 13% 11% to 13% *Raised annual sales growth goal in February 2021 EBIT (a non-GAAP measure) represents b
Slide 18: Strong Track Record of Cost Savings
STRONG TRACK RECORD OF COST SAVINGS COST SAVINGS TARGET +175BPS EBIT Margin Benefit From Cost Savings 150 bps 0 bps FY17 FY18 FY19 FY20 FY21 EBIT (a non-GAAP measure) represents earnings before income taxes (a GAAP measure), excluding interest income & interest expense. EBIT margin is a measure of E
Slide 19: More Opportunity to Drive S&A Productivity
MORE OPPORTUNITY TO DRIVE S&A PRODUCTIVITY REIMAGINING HOW WE WORK TO CREATE FUEL FOR GROWTH S&A % of Sales 13.7% CLX S&A % of Sales as of latest fiscal year end for CLX as of June 30, 2021. 19 Peers consist of 16 companies: CHD, CL, EL, GIS, HSY, K, KHC, KMB, KO, RB-GB, MDLZ, NESN, PEP, PG, REYN an
Slide 20: Relentless Focus on Economic Profit Drives Top-Tier ROIC
RELENTLESS FOCUS ON ECONOMIC PROFIT DRIVES TOP-TIER ROIC Return on Invested Capital (ROIC) 26% Peer average: 18% CLX ROIC as of Fiscal Year Ending June 30, 2021 Return on invested capital (ROIC), a non-GAAP measure, is calculated as earnings before income taxes (a GAAP measure) and interest expense,
Slide 21: Delivered Strong Free Cash Flow
DELIVERED STRONG FREE CASH FLOW 19% 13% • Company generates consistent 13% 13% strong free cash flow 11% • +10% CAGR (FY17-FY21) FY17 FY18 FY19 FY20 FY21 Free Cash Flow (a non-GAAP measure) represents Net Cash less Capital Expenditures. 21 See reconciliation in the supplemental financial schedules l
Slide 22: Disciplined Uses of Cash
DISCIPLINED USES OF CASH Business Growth Support Dividend (Strong reinvestments in FY21) (Average annual dividend increase FY18-FY21) CLX 8% A&P CAPEX +80bps +70bps Peer Average 4% STRONG CASH Cash Returned to Shareholders FLOW Debt Leverage* (More than $4B in last 5 years) (Target: 2.0 – 2.5x) $558
Slide 23: Long Track Record of Delivering Value
LONG TRACK RECORD OF DELIVERING VALUE TOTAL SHAREHOLDER RETURN 20 YEAR (as of 6/30/2021) 803 CLOROX 422 S&P 500 Jun-01 Jun-06 Jun-11 Jun-16 Jun-21 23 SOURCE: FactSet, 20 Year Total Share Return as of June 30, 2021.
Slide 24: Long-Term Investment Case Remains Solid
LONG-TERM INVESTMENT CASE REMAINS SOLID Investing behind leading brands to grow categories and share • Increasing expected value from innovation • Healthy category and brand building investments, including digital/E-Commerce Fueled by cost savings and admin productivity • Pursuing margin accretive i
Slide 25: IGNITE Strategy
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Slide 26: Innovating Where We Have Advantage
INNOVATING WHERE WE HAVE ADVANTAGE Leading brands Purposeful & loved by targeted in where consumers we play ECONOMIC PROFIT Deeply rooted discipline Purpose-driven growth: sustains operational ESG integration as excellence competitive advantage 26
Slide 27: IGNITE Strategy
IGNITE STRATEGY Purpose We champion people to be well & thrive every single day Vision Exceptional innovators who earn people’s enduring loyalty Maximize economic profit Objectives Purpose-driven growth Fuel growth in our brands Strategy Innovate brand and shopping experiences of the future Reimagin
Slide 28: IGNITE Strategy Choice: Fuel Growth
IGNITE STRATEGY CHOICE • Increase cost savings target to +175bps Fuel • Widening the cost savings Growth funnel, leveraging – Digital – Integrated design – Sustainability 28
Slide 29: Sustainability Unlocks Cost Savings
SUSTAINABILITY UNLOCKS COST SAVINGS From: CARTON To: WRAP 29
Slide 30: IGNITE Strategy Choice: Innovate Experiences
IGNITE STRATEGY CHOICE • Purpose-driven, personalized brands Innovate • Frictionless shopping Experiences with retailers • Bigger, stickier innovation platforms 30
Slide 31: Driving Bigger, Stickier Platforms
DRIVING BIGGER, STICKIER PLATFORMS • Bigger ideas • Wider net • Longer focus 31
Slide 32: IGNITE Strategy Choice: Reimagine Work
IGNITE STRATEGY CHOICE • Inclusive Reimagine • Digital Work • Fast 32
Slide 33: Investing in Digital Capabilities
INVESTING IN DIGITAL CAPABILITIES BRAND BUILDING - DATA, ANALYTICS & HUMAN INSIGHT • Data science expertise • Predictive analytics • Data-savvy marketers 33
Slide 34: IGNITE Strategy Choice: Evolve Portfolio
IGNITE STRATEGY CHOICE • Grow the core Evolve • Accelerate International profitable growth Portfolio • M&A criteria largely unchanged 34
Slide 35: Accelerate Core with Megatrends
ACCELERATE CORE WITH MEGATRENDS Health & Wellness Multicultural Accelerating Millennials the Core Personalization & Customization Responsibility 35
Slide 36: IGNITE Strategy Integrated Choices
IGNITE STRATEGY INTEGRATED CHOICES 36
Slide 37: IGNITE Strategy ESG Leadership Areas
IGNITE STRATEGY ESG LEADERSHIP AREAS PLANET Plastic and other waste reduction; science-based climate action PRODUCTS Responsible product stewardship; enhance industry best practices PEOPLE Enhance people’s lives through choices that promote well-being GOVERNANCE Executive compensation tied to ESG go
Slide 38: Pursuing Bold 2030 Environmental Goals
PURSUING BOLD 2030 ENVIRONMENTAL GOALS 50% Reduction Science-based targets in virgin packaging on green gas emission across our operations & value chain 100% Recyclable, reusable 100% Renewable electricity or compostable packaging in US & Canada by 2025 achieved January 2021 Comprehensive IGNITE ESG
Slide 39: Accelerating Growth
ACCELERATING GROWTH
Slide 40: Lasting Shifts in Consumer Behavior
LASTING SHIFTS IN CONSUMER BEHAVIOR CREATES NEW GROWTH OPPORTUNITIES GREATER THE ROLE OF HIGHER FOCUS PREFERENCE HOME HAS ON HEALTH & FOR TRUSTED CHANGED HYGIENE BRANDS 40
Slide 41: Doubling Down on Our Strengths
DOUBLING DOWN ON OUR STRENGTHS BUILDING A GLOBAL CLEANING & DISINFECTING BRAND • Leading and trusted brand • Established capabilities and relationships • Scaling up to meet growing demand across channels and markets In Home • Building a strong ecosystem and Out of Home more growth runways (strategic
Slide 42: Building a Global Disinfecting & Cleaning Brand: Out-of-Home
BUILDING A GLOBAL DISINFECTING & CLEANING BRAND GROWING CLOROX OUT-OF-HOME BUSINESS New Forms & New Applications Technologies Strategic New Channels Partners 42
Slide 43: Collaborative Relationships
COLLABORATIVE RELATIONSHIPS GROWING CLOROX OUT-OF-HOME BUSINESS 43
Slide 44: Building a Global Brand: Growing Clorox International
BUILDING A GLOBAL DISINFECTING & CLEANING BRAND GROWING CLOROX INTERNATIONAL Dedicated New Forms & Supply Chain Applications Localized Trade Up, Insights New Markets 44
Slide 45: Appendix
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Slide 46: Key Credit Metrics
KEY CREDIT METRICS FY17 FY18 FY19 FY20 FY21 S&P Credit Rating A- A- A- A- A- Moody’s Credit Rating Baa1 Baa1 Baa1 Baa1 Baa1 (1) Debt/ Adjusted EBITDA 1.7x 1.9x 2.1x 1.9x 1.9x Free Cash Flows as % of Sales 10% 11% 13% 19% 13% Note: FCF is a Non-GAAP measure with reconciliations available in the suppl
Slide 47: Debt to Adjusted EBITDA Reconciliation (Debt Leverage)
Debt to Adjusted EBITDA Reconciliation (Debt Leverage) FY 6/30/17 FY 6/30/18 FY 6/30/19 FY 6/30/20 FY 6/30/21 Earnings before income taxes $ 1,033 $ 1,054 $ 1,024 $ 1,185 $ 900 Interest income -$4 -$6 -$3 -$2 -$5 Interest expense $88 $85 $97 $99 $99 EBIT (1)(5) $1,117 $1,133 $1,118 $1,282 $994 EBIT
Slide 48: Gross Margin Reconciliation
GROSS MARGIN RECONCILIATION The table below provides details on the drivers of gross margin change versus the prior year. (1) In Q4 of fiscal year 2020, ‘All other” includes the positive impact from volume growth and mix and assortment. In Q1 of fiscal year 2020, “All other” includes about -180bps o
Slide 49: Reportable Segments (Unaudited)
REPORTABLE SEGMENTS (UNAUDITED) Dollars in Millions (1) Percentages based on rounded numbers (2) During the quarter ended June 30, 2021, noncash charges of $28 ($21 after tax) were recorded in connection with investments and related arrangements made with a Professional Products SBU supplier. (3) Th
Slide 50: Net Sales Drivers
NET SALES DRIVERS (1) This represents the net impact on net sales growth/ (decrease) from pricing action, mix and other factors. (2) Organic sales growth/ (decrease) is defined as net sales growth/ (decrease) excluding the effect of any acquisitions and divestitures and foreign exchange rate changes
Slide 51: Organic Sales Reconciliation
ORGANIC SALES RECONCILIATION Reconciliation of organic sales growth/(decrease) (non-GAAP) to net sales growth/(decrease) (GAAP), the most comparable GAAP measure: Non-GAAP Financial Information Management believes that the presentation of organic sales growth / (decrease) is useful to investors beca
Slide 52: Adjusted Earnings Per Share
Adjusted Earnings Per Share Dollars in millions except per share data; shares in thousands (a) During the quarter ended June 30, 2021, noncash charges of $28 ($21 after tax) were recorded on investments and related arrangements made with a Professional Products SBU supplier. (b) During the year ende
Slide 53: Adjusted Earnings Per Share Outlook
Adjusted Earnings Per Share Outlook Dollars in millions except per share data; shares in thousands (d) In FY22, the company expects to incur approximately $55 ($42 after tax) of operating expenses related to its digital capabilities and productivity enhancements investment. 53
Slide 54: Return on Invested Capital Reconciliation
RETURN ON INVESTED CAPITAL RECONCILIATION FY21 Dollars in Millions Earnings before income taxes (GAAP measure) $ 900 Add back: Noncash U.S. GAAP charges(2)(3) $ 357 Interest expense $ 99 Less: Saudi JV acquisition gain(4) (82) Earnings before income taxes and interest expense $ 1,274 Income taxes be
Slide 55: Cash Returned to Stockholders Reconciliation
CASH RETURNED TO STOCKHOLDERS RECONCILIATION(1) Dollars in Millions FY2021 FY2020 FY2019 FY2018 FY2017 Treasury Stock purchased(2) $ 905 $ 248 $ 661 $ 271 $ 182 Cash dividends paid(2) $ 558 $ 533 $ 490 $ 450 $ 412 (1) Cash Returned to Stockholders (1) $ 1,463 $ 781 $ 1,151 $ 721 $ 595 (1) Cash retur
Slide 56: Economic Profit Reconciliation
ECONOMIC PROFIT RECONCILIATION Dollars in Millions FY21 FY20 FY19 FY18 FY17 (2) FY16 (2) Earnings before income taxes $ 900 $ 1,185 $ 1,024 $ 1,054 $ 1,033 $ 983 Add back: Noncash U.S. GAAP charges (3)(4) 357 2 2 2 4 9 Interest expense 99 99 97 85 88 88 Less: Saudi JV acquisition gain(5) (82) - - -
Slide 57: Economic Profit Reconciliation: Average Capital Deployed
ECONOMIC PROFIT RECONCILIATION: AVERAGE CAPITAL DEPLOYED Dollars in Millions FY21 FY20 FY19 FY18 FY17 (2) FY16 (2) (8) Total assets $ 6,334 $ 6,213 $ 5,116 $ 5,060 $ 4,573 $ 4,510 Less: Accounts payable and accrued liabilities (10) 1,670 1,327 1,033 1,000 1,002 1,032 Current operating lease liabilit