Clorox Investor Presentation (FY18Q4) Final
Clorox Investor Presentation (FY18Q4) Final
1
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, margins, foreign currencies, foreign currency exchange rates, tax
rates, cash flows, plans, objectives, expectations, growth or profitability, are forward-looking statements based on
management’s estimates, assumptions and projections. Important factors that could affect performance and cause
results to differ materially from management’s expectations are described in the Company’s most recent Form 10-K
filed with the SEC, as updated from time to time in the Company's SEC filings. Those factors include, but are not
limited to, risks related to competition in the Company’s markets; volatility and increases in commodity, energy,
transportation and other costs; the Company’s ability to drive sales growth and increase market share; dependence
on key customers; increase in sales of consumer products through alternative retail channels; information technology
security breaches or cyber attacks; government regulations; political, legal and tax risks; risks relating to acquisitions,
including as a result of the Nutanext acquisition, new ventures and divestitures; changes in U.S. tax, immigration or
trade policies, including tariffs, and financial market conditions; international operations and international trade,
including price controls, foreign currency fluctuations and devaluations and foreign currency exchange rate controls,
labor claims and labor unrest, and potential harm and liabilities from use, storage and transportation of chlorine in
certain markets; the ability of the Company to innovate, to develop commercially successful products and to
implement cost savings; the success of the Company’s business strategies; the Company’s business reputation; the
effects of the Tax Cuts and Jobs Act; the venture agreement with P&G related to the Company’s Glad® business;
supply disruptions; product liability claims, labor claims and other legal proceedings; the Company’s ability to attract
and retain key personnel; environmental matters; the Company’s ability to assert and defend its intellectual property
rights; and the impacts of potential stockholder activism.
2
Contents
• Who We Are 4
• Financial Performance 16
• 2020 Strategy 30
• Appendix 62
3
WHO WE ARE
1913
2018
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 capabilities
6
How We Create Value
7
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 Cleaners #1 Hong Kong Wipes #1
Charcoal #1 Canada #1
Canada #1
Salad Dressing #1 Australia #1
9% 14%
4% 9%
3% 7%
1%* 2%
9 * Note: Reflects results following April 2018 acquisition. Expect Nutranext to contribute ~3pts of sales in FY19.
Operational Excellence
Leading Brands
*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 excludes peers that do not disclose S&A separately from SG&A in their reported financial statements
(Coca-Cola, Reckitt-Benckiser). Peer group consists of CHD, CL, PG, NWL, CPB, GIS, HSY, K, KHC, DPS, KO, PEP, COTY, EL, KMB, RB-GB.
10
Good Growth: Profitable, Sustainable, Responsible
PERFORMANCE
PEOPLE
Commitment to
Environment,
2020 Good Social,
Strategy Growth & Corporate PRODUCTS
Governance
(ESG)
PLANET
PURPOSE
11
Our Efforts Are Broadly Recognized
100
Most Sustainable
Companies
12
2020 Strategy
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
Financial Performance
FY18 Performance & FY19 Outlook
FY18 FY19 FY Outlook
(12 months) (Aug 2 earnings call)
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 (a GAAP measure), excluding interest income & interest expense. EBIT margin is a measure of EBIT as a
18 percentage of sales. See reconciliation in the supplemental financial schedules locatedat: https://investors.thecloroxcompany.com/investors/financial-information/quarterly-results/default.aspx
Continued Discipline on SG&A
As of Fiscal Year Ending June 30, 2018
30%
Goal:
% of Sales
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
Delivering Top-Tier ROIC
As of Fiscal Year Ending June 30, 2018
40%
30%
29%
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 and interest expense, computed on an after-tax basis as a percentage of average
invested capital. Average invested capital represents a five quarter average of total assets less non-interest bearing liabilities. ROIC is a measure of how effectively the company allocates capital. Information on the Peer
ROIC is based on latest publically available fiscal-end data from FactSet . Data pulled on 8/1/18. See reconciliation on 66 and 67.
20
Strong Free Cash Flow
Annual Free Cash Flow Goal raised to 11%-13% of Sales
$974
$858 $871
$780 $786 $768
• The passage of The Tax Cuts and Jobs Act in December 2017, is
expected to meaningfully lower Clorox's long-term effective tax rate
• Long term: effective tax rate expected to be mid twenties range (vs
previous range of low to mid thirties pre-tax reform)
22
Use of Cash Priorities
Free
Cash
Flow
23 1. Debt Leverage = Gross Debt / EBITDA. EBITDA is a non-GAAP measure. See reconciliation in the supplemental financial schedules located at: https://investors.thecloroxcompany.com/investors/financial-
information/quarterly-results/default.aspx
M&A Focus Unchanged
Please note that this slide refers to general goals for Clorox’s M&A focus – each element may not be relevant
or applicable to each potential M&A transaction.
24
Evolving our Portfolio with Nutranext Acquisition
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 yield of 2.9 % is calculated by taking prospective annual dividends per share ($0.96/quarter x 4 = $3.84) divided by the closing stock price ($134.62).
27
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
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 16 17 18
-100
29 Peer includes 13 companies: CPB, KMB, K, RB-GB, KO, GIS, NWL, EL, PEP, CHD, CL, PG and HSY
2020 Strategy
2020 Strategy: Drive Superior Consumer Value
32
Building Brand Equity
Evolving how we build Brands
55%
FY19 Est:
Over 50%
49%
45%
41%
34%
Clorox expects to invest
over 50%
of our media in digital
34
Our Partners Help Build World-Class Digital
Select Partners:
35
Innovation: Strong Track Record
Goal:
+3%
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
• Leverage value-added
innovation as a pricing
opportunity CONSUMER
VALUE
• Strong track record of price BRAND
PRICING
EQUITY
increases over past 5 years
38
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 experience
in-store and online
EXECUTION
EXECUTION
39
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
40
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
Actual
Goal
Actual
Actual
Actual
Goal
Goal
Goal
eCommerce
TT2.0
Digital Marketing
Next Generation Digital
Commerce &
Engagement
42
2020 Strategy: Accelerate Portfolio Momentum
Low High
Sales Growth Potential
44
Fuel Brands Create Investment Dollars
Sales
Advertising
Promotion
>+2pts
since FY13
Trade
Promotion
45
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
2020 Strategy: Fuel Growth by Reducing Waste
Bleach
concentration +150bps
Plant Consolidation
World Class Manufacturing
Supply chain optimization Resin Reduction
Packaging Reduction
Agile
Enterprise
Every Year
9% in Sales 14%
4% 9%
7%
3%
2%
1%*
49 * Note: Reflects results following April 2018 acquisition. Expect Nutranext to contribute ~3pts of sales in FY19.
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 Bags #2
Canada Food Wraps #1
Malaysia Bleach #1
New Zealand Food Protection #1
Saudi Arabia Bleach #1 China* Food Protection #1
Mexico Bleach #2 Hong Kong Food Protection #1
Peru Bleach #1
Colombia Bleach #2 Canada #1
Canada #1
Chile #1 Australia #1
Source: Dollar Market share, 52 weeks ending March 2018. Nielsen Retail Measurement for International geographies except; IRI for Australia, IDRetail for Uruguay
50
*Guanzhou markets
International “Go Lean” Strategy is Working
51
2020 Strategy: Engage our People as Business Owners
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 Culture Index 80): Companies meeting two criteria: (a) superior financial performance,
defined by a net profit margin and/or return on invested capital that exceeds industry averages; and (b) superior human resource practices,
defined by employee opinion scores near the top among the most financially successful companies surveyed by Willis Towers Watson.
Includes responses from over 140,000 employees at dozens of global organizations.
FMCG Norm (Growth Culture Index 73): Based on responses from more than 160,000 employees globally.
53
Employees Share in Rewards for Delivering Results
NET 50%
CUSTOMER
SALES
ECONOMIC PROFIT*
NET GROSS 100%
MARGIN
INCOME*
30% 20%
55
Strong Engagement Distinguishes Us from Peers
2017
33%
Female Clorox Executive Committee Members
Board Executives
33%
Female Board Members
Employees Suppliers
33%
Minority Board Members
57
Good Growth: Profitable, Sustainable, Responsible
PERFORMANCE
PEOPLE
Commitment to
Environment,
2020 Good Social,
Strategy Growth & Corporate PRODUCTS
Governance
(ESG)
PLANET
PURPOSE
58
Making Our Products More Sustainable
$83
MILLION!
TOTAL VALUE OF
CONTRIBUTIONS
AND
VOLUNTEER HOURS
2014 - 2017
Appendix
Key Credit Metrics
$ in B FY13 FY14 FY15 FY16 FY17 FY18
EBITDA $1.2 $1.1 $1.2 $1.2 $1.3 $1.3
Free Cash Flow / Debt 25% 28% 33% 26% 29% 31%
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 -160 -130 -130
Manufacturing & Logistics -220 -210 -130 -130 -170 -80 -240 -220 -110 -160
(1)
All other -140 0 -140 +50 -60 +20 -20 +70 -100 +10
Change vs prior year -60 +10 -130 +30 -40 +50 -170 -120 -170 -100
Gross Margin (%) 44.4% 44.7% 44.0% 45.7% 44.7% 44.9% 43.0% 42.8% 44.0% 43.7%
(1) In Q1 of fiscal year 2017, “All other” includes about -60bps of unfavorable mix and -50bps of unfavorable foreign exchange impact.
In Q3 of fiscal year 2017, “All other” includes about -100bps of unfavorable mix (negative mix in charcoal business and strong sales in club channel across multiple businesses) and -60bps of higher trade
promotion spending.
In Q4 of fiscal year 2018, “All other” includes about -60bps of negative impact from costs related to the Nutranext acquisition.
64
Reportable Segments (unaudited)
Dollars in Millions
65
Return on Invested Capital (ROIC) Reconciliation
Dollars in millions and all calculations based on rounded numbers
FY18
Interest expense 85
(1) In accordance with SEC's Regulation G, this schedule provides the definition of a non-GAAP measure and the reconciliation to the most closely related GAAP measure.
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. Management believes ROIC provides additional information to investors about current trends in the
business. ROIC is a measure of how effectively the company allocates capital. ROIC should not be considered in isolation or as a substitute for the comparable GAAP
measures and should be read in connection with the company’s consolidated financial statements presented in accordance with GAAP.
(2) The tax rate applied is the effective tax rate on continuing operations, which was 31.9%.
(3) Average invested capital represents a five quarter average of total assets less non-interest bearing liabilities.
66
Return on Invested Capital (ROIC) Reconciliation
Dollars in millions and all calculations based on rounded numbers
67