Clorox

  • Cleaning products giant Clorox reported first quarter results which beat expectations   on both the top and bottom lines. It posted its strongest quarterly sales growth   in 20 years as demand for disinfectants and hygiene products remained robust   through September.

  • Net Sales rose 27% to $1.9 billion as the company experienced   double-digit growth across eight of 10 business units. Consumers used more   Glad trash bags, installed more water filtration systems and barbequed more   often as charcoal sales doubled.

  • Group sales were buoyed by the two biggest segments, household, and   health and wellness, which account for nearly 70% of sales and which saw   sales growth of 39% and 28% respectively in the period .

  • The Lifestyle segment (comprised of Food, Water Filtration and Natural   Personal Care) as well as the International segment (Sales outside the US)   made up the remaining 30% of group sales, with each of those segments growing   17% and 18% respectively.

  • Gross profits rose 38% to $920 million with gross margins improving   from 46.8% in Q4 2020 to 48% in Q1 2021. Improved pre-tax profits were driven   by higher volumes and gross margin expansion, and were partially offset by   manufacturing and logistics costs. Despite running factories round the clock,   using more third-party suppliers and even air-shipping products, the company   has been unable to keep up with consumer demand - and only expects shelves to be fully stocked next year. Advertising costs rose 30% in the period to $179   million, the third double-digit increase in 2020 as it it seeks to maintain   and expand market share. Clorox expects advertising and sales promotion   spending to come in at about 11% of sales.

  • EBIT climbed 94% to $550 million with EBIT margins rising to 28.7%.   Net income was up 104% to $415 million, or $3.22 per share.

  • The Return on Invested Capital (ROIC) rose to an impressive 30% in   the period. Clorox had cash and equivalents of $860 million at the end of Q1   2021 with the debt to EBITDA metrics improving to 1.9x from 2.1x previously.   Free cash flows (FCF) are up 45% year-on-year to $314 million. Management   says it will continue to return value to shareholders via share buy-backs, dividend growth,  lowering debt, and targeted M&A activity.

  • Clorox predicts full-year sales to grow in the range of 5% to 9% and earnings per share to grow between 5% and 8%. New CEO Linda Rendle said “We’re seeing broad-based demand as we continue to support people as they stay and work at home, eating more meals and of course cleaning and disinfecting more too”. Clorox's products are found in most US homes. The share has rewarded investors having risen 40% this year. The current work-from-home lockdown environment remains supportive of demand for the company's products. New waves of the virus and the associated lockdowns will reinforce these buying patterns. However there is potential downside risk for the stock should a cure become widely available.

Clorox