) posted fourth-quarter 2012 earnings per share of $1.36 compared
with $1.29 earned in the prior-year quarter, up 5.4% year over
year. Quarterly earnings also beat the Zacks Consensus Estimate of
On a reported basis, including one-time items, the company
reported earnings per share of $1.32 versus $1.26 reported in the
During the quarter, the company's earnings benefited from
ongoing cost-saving initiatives, price increases, higher volume,
reduced advertising costs and lower tax rate, while higher employee
incentive compensation, inflationary pressure in manufacturing and
logistics, as well as increased commodity costs were minor
For the full year, the company reported earnings of $4.24 per
share, surpassing the year-ago earnings of $4.16 and the Zacks
Consensus Estimate of $4.05.
Clorox's net sales during the quarter grew 4% year over year to
$1,541 million from $1,482 million in the year-ago quarter, driven
by volume growth, price increases and contributions from new
businesses acquired earlier in the year. Total revenue also
surpassed the Zacks Consensus Estimate of $1,534 million.
Full-year sales increased 4.5% year over year to $5,468 million,
slightly above the Zacks Consensus Estimate of $5,461 million.
Total volumes bolstered 2% year over year for both periods --
fourth quarter and fiscal 2012 -- mainly due to the strengthening
of the company's three reportable segments.
Revenue by Segment
Sales in the
segment grew 7% primarily due to 5% volume growth and higher
prices, offset by an unfavorable product mix. During the quarter,
the segment witnessed volume growth in its Professional Products
and Home Care units, offset by lower shipments in the Laundry
segment sales increased 3% on the back of increased prices, despite
a 2% decline in volumes. Lower volumes resulted from a decline in
shipments in the Bags and Wraps as well as Cat Litter units.
segment recorded a 3% sales jump in the quarter compared with the
base period a year ago, driven by 2% volume growth and increased
pricing, partly offset by higher trade-promotion spending. The
volume growth was primarily driven by double-digit shipments growth
in the U.S. Natural Personal Care business and high single-digit
growth in the Water Filtration business.
business segment, Clorox's sales rose 3%, benefiting from volume
and sales growth in Latin America - the company's largest
international region, offset by declines in the company's non-core
export business and a double-digit volume decrease in Venezuela.
Overall, sales growth in the quarter reflected a 3% rise in volumes
and price increases, offset by negative foreign currency
Clorox's gross margin contracted 80 basis points (bps) to 42.7%
from 43.5% in the year-ago quarter. Increased commodity costs,
inflationary pressure-related costs in the manufacturing and
logistics and employee incentive compensation more than offset the
benefits from price increases and prudent cost savings, and thus
drove the dip in margins.
Advertising costs, as percentage of sales, was nearly 8%, lower
than the company's forecast of 9%-10%. The decline is primarily
attributable to lesser expenses in its International business, due
to the economic challenges as well as the uncertainty surrounding
the impact of government price controls in Venezuela and
Balance Sheet and Cash Flow
Clorox ended the year with cash and cash equivalents of $267
million and long-term debt of $1,571 million. During the year, the
company generated $620 million net cash from operations, exhibiting
a decline of $70 million from the year-ago period.
In the quarter, Clorox bought back about 1 million shares for
approximately $68million. Full year share repurchases summed to 3.4
million shares for about $225 million.
Looking ahead, Clorox projects sales growth in the 2%-4% range
for fiscal 2013, driven by better categories growth, market share
gains and further product innovation across its brands. The company
expects operating income margin to increase by 25 to 50 basis
points in fiscal 2013, on the back of improved forecasts for
Further, Clorox guided expenditures toward systems and
facilities development and other restructuring initiatives to be in
the range of $50-$55 million in fiscal 2013. The company
anticipates annual earnings of $4.20 to $4.35 per share in fiscal
2013. The Zacks Consensus Estimate for fiscal 2013 stands at $4.27
per share, which lies within the company's guidance range.
Clorox is making intensive capital investments in information
technology systems and capabilities, particularly in the
international market and R&D facilities to boost productivity
while providing platforms for growth, product innovation and cost
savings. The company believes that these initiatives will begin
delivering benefits later in fiscal 2014 and beyond.
Clorox faces intense competition from other well-established
consumer product companies, both in the U.S. and international
markets. Most of the company's products compete with other widely
advertised brands within each product category and private label
brands and generic non-branded products of grocery chains and
wholesale cooperatives in certain categories, which are typically
sold at lower prices. The main competitors of Clorox are
Procter and Gamble Company
Currently, Clorox has a Zacks #3 Rank, implying a short-term
Hold rating. We have a long-term Neutral recommendation on the
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