Clorox Company (the) · NYSE:CLX
Clorox Company (the) — The Clorox Company — Q2 2021 Earnings Presentation
51 slides from Clorox Company (the)'s earnings presentation, Feb 4, 2021
Slide 1: FY21 Q2 Investor Presentation
FY21 Q2 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 27 • Appendix 41 3
Slide 4: Who We Are
THE CLOROX COMPANY RZ
Slide 5: Choiceful, Disciplined Playbook
CHOICEFUL, DISCIPLINED PLAYBOOK Leading brands loved Purposeful & targeted 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 FY20 RESULTS 41% • 30% CLEANING • 7% PROFESSIONAL PRODUCTS $6.7B Health & NET SALES Wellness • 4% VITAMINS, MINERALS and SUPPLEMENTS 26+ • 12% BAGS AND WRAPS • 7% CAT LITTER COUNTRY / 27% TERRITORY HOUSEHOLD • 8% GRILLING OPERATIONS 17% • 9% FOOD PRODUCTS • 4% 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 • Our products are in 9 out 10 US homes 7
Slide 8: Big-Share Brands, Mid-Sized Categories
BIG-SHARE BRANDS, MID-SIZED CATEGORIES Grilling CLX #1 • Categories that are more rational and Bleach CLX #1 less crowded with multinationals Water Filtration CLX #1 • Grow categories with deep consumer Wipes CLX #1 insights & world-class capabilities Premium Trash CLX #1 • Drive profitable growth f
Slide 9: Operational Excellence
OPERATIONAL EXCELLENCE Our leading brands, world-class capabilities and deeply rooted discipline drive operational excellence +175bps Sales Growth Low Margin From Top-Tier Strong Through Selling & Cost ROIC Cash Flows Innovation Admin Savings 9 Cost Savings Target is +175 bps EBIT Margin. EBIT (a no
Slide 10: Strong Financial Results
STRONG FINANCIAL RESULTS FY15 TO FY20 CAGR Sales EPS EP 3.5% 10.0% 7.5% 10 NOTE: CAGR refers to Compounded Annual Growth Rate. Earnings per share is from from continuing operation. EP refers to Economic Profit and reconciliation can be found in the appendix.
Slide 11: Strong Shareholder Returns
STRONG SHAREHOLDER RETURNS FY15 TO FY20 140% 66% 55% Clorox S&P 500 Peers 11 SOURCE: FactSet, Total Share Return as of June 30, 2020. 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 +3% Sales from 87% Employee 58% Products 20% reduction by $13M Product innovation engagement with sustainability 2020 on track: donations improvements • Waste to landfill +7.5% EP CAGR Top-tier diversity $3M in employee • Water (FY1
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 Q2 YTD FY21 Outlook FY21 (As of Feb 4th Earnings Call) Sales +27% +10% to +13% (vs year ago) (OSG +26%) (OSG +10% to +13%) Diluted EPS $5.25 $8.05 to $8.25 (vs year ago) (+72%) (+9% to +12%) Organic sales growth (OSG) is defined as GAAP net sales growth excluding the effec
Slide 17: IGNITE Strategy Financial Goals
IGNITE STRATEGY FINANCIAL GOALS Annual Goals US (~85% of Clorox sales) +2% to 4% Sales International +1% to 4% Growth (~15% of Clorox sales) Total Company +2% to 4% EBIT Margin Improvement +25 to 50 bps Free Cash Flow % of Sales 11% to 13% EBIT (a non-GAAP measure) represents before income taxes (a
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 FY16 FY17 FY18 FY19 FY20 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 14.4% CLX S&A % of Sales as of latest fiscal year end for CLX as of June 30, 2020. 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) 30% Peer average: 17% CLX ROIC as of Fiscal Year Ending June 30, 2020 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% • Company generates consistent strong free cash flow • Increased annual free cash flow in 13% 13% FY20 by +64% vs YA 11% 10% FY16 FY17 FY18 FY19 FY20 Free Cash Flow (a non-GAAP measure) represents Net Cash less Capital Expenditures. 21 See reconciliation in the su
Slide 22: Disciplined Uses of Cash
DISCIPLINED USES OF CASH 1 2 Business Growth Support Dividend (includes targeted M&A) FREE CASH FLOW 3 4 Debt Leverage1 Stock Repurchases (Target: 2.0 – 2.5x) 1. Debt Leverage = Gross Debt / EBITDA for the trailing four quarters. EBITDA is a non-GAAP measure. See reconciliation in the supplemental f
Slide 23: Long Track Record of Dividend Growth
LONG TRACK RECORD OF DIVIDEND GROWTH 3-yr 5-yr 10-yr 20-yr 4.39 4.14 Dividends per Share CAGR¹ 10% 8% 7% 9% 3.84 3.32 3.05 3.17 2.93 2.7 2.52 2.35 2.15 1.96 1.78 1.51 1.09 1.13 1.18 1.03 0.83 0.84 0.87 Dec-18 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12
Slide 24: Strong Cash Returned to Shareholders
STRONG CASH RETURNED TO SHAREHOLDERS NEARLY $4B RETURNED OVER THE PAST 5 YEARS $1,151 $781 $721 $652 $595 FY16 FY17 FY18 FY19 FY20 24 Cash returned to shareholders is defined as cash dividends paid to Clorox stockholders plus treasury stock purchased as outlined in the statements of cash flows
Slide 25: Long Track Record of Delivering Value
LONG TRACK RECORD OF DELIVERING VALUE TOTAL SHAREHOLDER RETURN 20 YEAR (as of 12/31/2020) 868 CLOROX 322 S&P 500 Dec-00 Dec-05 Dec-10 Dec-15 Dec-20 25 SOURCE: FactSet, 20 Year Total Share Return as of December 31, 2020.
Slide 26: 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 27: IGNITE Strategy
BAe. THE CLOROX COMPANY RZ
Slide 28: 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 28
Slide 29: 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 30: 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 30
Slide 31: Sustainability Unlocks Cost Savings
SUSTAINABILITY UNLOCKS COST SAVINGS From: CARTON To: WRAP 31
Slide 32: IGNITE Strategy Choice: Innovate Experiences
IGNITE STRATEGY CHOICE • Purpose-driven, personalized brands Innovate • Frictionless shopping Experiences with retailers • Bigger, stickier innovation platforms 32
Slide 33: Driving Bigger, Stickier Platforms
DRIVING BIGGER, STICKIER PLATFORMS • Bigger ideas • Wider net • Longer focus 33
Slide 34: IGNITE Strategy Choice: Reimagine Work
IGNITE STRATEGY CHOICE • Inclusive Reimagine • Digital Work • Fast 34
Slide 35: Investing in Digital Capabilities
INVESTING IN DIGITAL CAPABILITIES BRAND BUILDING - DATA, ANALYTICS & HUMAN INSIGHT • Data science expertise • Predictive analytics • Data-savvy marketers 35
Slide 36: IGNITE Strategy Choice: Evolve Portfolio
IGNITE STRATEGY CHOICE • Grow the core Evolve • Accelerate International Portfolio profitable growth • M&A criteria largely unchanged 36
Slide 37: Accelerate Core with Megatrends
ACCELERATE CORE WITH MEGATRENDS Health & Wellness Multicultural Accelerating Millennials the Core Personalization & Customization Responsibility 37
Slide 38: IGNITE Strategy Integrated Choices
IGNITE STRATEGY INTEGRATED CHOICES 38
Slide 39: 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 40: 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 41: Appendix
BP. THE CLOROX COMPANY WF
Slide 42: Key Credit Metrics
KEY CREDIT METRICS FY16 FY17 FY18 FY19 FY20 S&P Credit Rating BBB+ A- A- A- A- Moody’s Credit Rating Baa1 Baa1 Baa1 Baa1 Baa1 Debt/ EBITDA 1.9x 1.7x 1.9x 2.1x 1.9x Free Cash Flows as % of Sales 13% 10% 11% 13% 19% Note: FCF is a Non-GAAP measure with reconciliations available in the supplemental fin
Slide 43: Debt to EBITDA Reconciliation
Debt to EBITDA Reconciliation FY FY FY FY FY 6/30/16 6/30/17 6/30/18 6/30/19 6/30/20 Earnings before income taxes $ 983 $ 1,033 $ 1,054 $ 1,024 $ 1,185 Interest income -$5 -$4 -$6 -$3 -$2 Interest expense $88 $88 $85 $97 $99 EBIT (1)(3) $1,066 $1,117 $1,133 $1,118 $1,282 EBIT margin (1)(3) 18.5% 18.
Slide 44: 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 45: Reportable Segments (Unaudited)
REPORTABLE SEGMENTS (UNAUDITED) Dollars in Millions Net sales Earnings (losses) before income taxes Three Months Ended Three Months Ended 12/31/2020 12/31/2019 % Change(1) 12/31/2020 12/31/2019 % Change(1) Health and Wellness $ 817 $ 575 42% $ 247 $ 134 84% Household 411 342 20% 60 44 36% Lifestyle
Slide 46: 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 47: 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: 47
Slide 48: Return on Invested Capital Reconciliation
RETURN ON INVESTED CAPITAL RECONCILIATION Dollars in Millions FY20 Earnings before income taxes (GAAP measure) $ 1,185 Interest expense 99 Earnings before income taxes and interest expense $ 1,284 (2) Income taxes before income taxes and interest expense $ (267) Adjusted after-tax profit $ 1,017 (3)
Slide 49: Cash Returned to Stockholders Reconciliation
CASH RETURNED TO STOCKHOLDERS RECONCILIATION(1) Dollars in Millions FY 2020 FY 2019 FY 2018 FY 2017 FY 2016 FY 2015 (2) Treasury Stock purchased $ 248 $ 661 $ 271 $ 183 $ 254 $ 434 Cash dividends paid(2) $ 533 $ 490 $ 450 $ 412 $ 398 $ 385 Cash Returned to Stockholders $ 781 $ 1,151 $ 721 $ 595 $ 65
Slide 50: Economic Profit Reconciliation
ECONOMIC PROFIT RECONCILIATION Dollars in Millions FY20 FY19 FY18 FY17(2) FY16(2) FY15(2) Earnings before income taxes $ 1,185 $ 1,024 $ 1,054 $ 1,033 $ 983 $ 921 Add back: Noncash U.S. GAAP restructuring and intangible asset impairment charges 2 2 2 4 9 1 Interest expense 99 97 85 88 88 100 Earning
Slide 51: Economic Profit Reconciliation: Average Capital Deployed
ECONOMIC PROFIT RECONCILIATION: AVERAGE CAPITAL DEPLOYED Dollars in Millions FY20 FY19 FY18 FY17(2) FY16(2) FY15(2) Total assets (6) $ 6,213 $ 5,116 $ 5,060 $ 4,573 $ 4,510 $ 4,154 Less: Accounts payable and accrued liabilities (7) 1,327 1,033 1,000 1,002 1,032 976 Current operating lease liabilitie