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Clorox Reinforces Market Position with Strategic Divestiture

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Leo Gonzalez

March 21, 2024 - 13:20 pm

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Clorox Embarks on Portfolio Evolution with Sale of South American Subsidiaries

OAKLAND, Calif., March 21, 2024 /PRNewswire/ -- In a strategic move poised to bolster its long-term profitable growth, The Clorox Company (NYSE: CLX), widely recognized for its commitment to hygiene and sanitation products, announced today its decision to divest specific subsidiaries operating under the purview of Clorox Argentina to Apex Capital and an investment group steered by Diego Barral. Such a move comes as part of Clorox's IGNITE strategy, signaling the company's intention to focus on areas that amplify core business strengths and promise consistent, profitable expansion.

Apex Capital, a private equity fund, collaborates with Grupo Mariposa—a distinguished entity in the food and beverage sector with a legacy spanning 139 years and presence in 16 nations. Diego Barral, steering the investment group, brings insider perspective as the former senior vice president and general manager of International at Clorox. The financial details behind the sale, however, have not been publicly disclosed.

A Strategic Sale

The transaction includes Clorox Argentina's twin production plants and the rights to an array of esteemed Clorox brands in Argentina, Uruguay, and Paraguay, in addition to shared intellectual property connected to these brands. However, the deal explicitly excludes Clorox's Latin American research and development as well as corporate hubs situated in Argentina, which are set to continue supporting other Latin American markets and will also provide transitional services to the divested entities under their fresh stewardship. The proposed new brand for Clorox Argentina under the new ownership is "Grupo Ayudin".

A particularly noteworthy aspect of the sale is the retention of Clorox Argentina's employees, ensuring job security for production staff under the new entity banner. However, employees linked to the R&D and corporate hubs will remain integrated within Clorox's restructured corporate entity in Argentina.

Reinforcing the Core

Linda Rendle, Chair and CEO of Clorox, noted that the divestiture is perfectly aligned with their IGNITE strategy and the commitment to escalate the focus on the company's fundamental business, thereby propelling consistent and profitable growth. She takes this opportunity to express gratitude to their Argentinian colleagues for their adept management through the dynamic operational environment. Rendle believes that the new ownership which aligns with their values and operational expertise, will steer the business toward a trajectory of amplified growth that is set to benefit both consumers and employees alike.

Fiscal Implications and Impact

The sale of Clorox Argentina is expected to make a minor dent in Clorox's overall financial forecasts, representing only about 2% of the company’s fiscal year 2024 net sales outlook as per the most recent earnings release in February 2024. Consequentially, the transaction will result in a one-time, after-tax charge of approximately $233 million in the third quarter of fiscal year 2024, which equates to roughly a $1.87 decrement in earnings per share. A significant portion of this charge, around $222 million, stems from non-cash adjustments related to the accumulated currency translation previously included in equity. Clorox anticipates the transaction to shave off about half a percentage point from its fiscal year 2024 net sales growth and to minimally impact adjusted earnings per share by $0.00 to $0.02 cents. Nonetheless, the company underscored that it is not revising any of its previously issued guidance.

About The Clorox Company

Founded in 1913 and headquartered in Oakland, California, The Clorox Company (NYSE: CLX) has emerged as a purveyor of wellness, allowing individuals to thrive every day through its portfolio of trust-rich brands. An impressive lineup, including Brita®, Burt's Bees®, Clorox®, and others, solidifies Clorox's presence in nearly nine out of ten American homes, as well as an expanding international reach through brands such as Ayudin®, Chux®, and several more. Clorox has been a pioneer in incorporating Environmental, Social, and Governance (ESG) factors into its business narrative. A testament to its sustainable practices, Clorox was esteemed with the No. 1 spot on Barron's 100 Most Sustainable Companies list in back-to-back years (2023 and 2024). For those looking to delve deeper into Clorox’s rich history and its array of esteemed brands, the company's website offers an informative gateway.

Forward-Looking Statements

This proclamation from Clorox carries "forward-looking statements" that are speculative by nature and encompass expectations about the potential impacts of a recent cyberattack among other operational challenges. Such statements are inherently subject to a multitude of risks, uncertainties, and presuppositions that may lead actual outcomes to deviate significantly from these anticipations. The estimates of future sales, margins, costs, and financial performance, to name a few metrics, are deeply entrenched in these forward-looking comments and hinge on the management's current understanding and future projections.

The company wishes to underscore that these forward-looking statements are rooted in the management's beliefs and assumptions as per the latest assessments and pertain only to current expectations, relevant up to the date of this press release. The Clorox Company does not obligate itself to any public updates or revisions to these statements in the face of new information or emerging events unless mandated by the federal securities laws.

A Cautionary Note on Risks and Operational Hurdles

Management's outlook reflects a comprehensive understanding of potential risks which are meticulously detailed in sections like "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Clorox's persuasive annual and quarterly financial reports. The capriciousness of the global economy, driven by factors such as supply chain disruptions, natural disasters, political instability, rigorous competition, and legal or regulatory shifts, could all render significant pressures on Clorox's performance.

Acknowledging the specific challenges faced in markets such as Argentina, where high inflation levels are a concern, Clorox remains cognizant of the various factors that may influence its business environment. This includes geopolitical issues, such as tensions in the Middle East, Ukraine, and between China and Taiwan, as well as the impact of macroeconomic instability triggered by changes in trading relationships, notably with China.

Looking Ahead: The Non-GAAP Financial Information

In an effort to present a clearer financial narrative, Clorox provides non-GAAP financial information, such as adjusted EPS (earnings per share), which omits significant non-recurring or unusual items. The intention behind this adjusted reporting is to furnish both investors and management with a more consistent and comparable overview of the company's financial performance over time. It navigates around disparate elements like cyberattack costs, asset impairments, or significant acquisition losses/gains to offer a distilled perspective of the company's enduring operational efficacy.

However, Clorox cautions that this adjusted EPS may not align precisely with similar measures outlined by other entities due to variations in calculation methodologies or the differing inclusion of certain adjustments. Despite these potential discrepancies, Clorox upholds its confidence in the utility of such financial reconfigurations for the sake of sounder financial analysis and forecasting.

The passage of this deal marks a significant shift for Clorox as it repositions its global portfolio in line with strategic priorities. While announcing this corporate realignment, Clorox confidently retains its commitment to its shareholders and customers. Through deliberate restructuring and sustained innovation, Clorox aspires to hold steadfast to its legacy as a trusted household name, even as it adapts to the ever-evolving market landscapes both domestically and internationally.

For additional information and insights, interested parties may explore The Clorox Company's filings with the Securities and Exchange Commission, which provide a thorough glance at the fluctuations and intricacies of the company's operational accomplishments—serving as an indispensable resource for stakeholders.

Conclusion

Clorox, in reshaping its portfolio, has not only foregrounded strategic agility but also exhibited its capacity to make decisive moves in sync with broader economic horizons. With the divestment of its subsidiaries in Argentina, Uruguay, and Paraguay, Clorox pivots towards a more consolidated and refined approach to growth, one that preserves its competitive edge while fostering a sustainable trajectory for the future. As investors and consumers alike watch this transition unfold, Clorox continues to emphasize its foundational commitment to enhancing daily life through its time-honored and emerging brands.

On the corporate horizon, as Clorox reshapes its global footprint, the company remains unwavering in its drive towards an enriched portfolio that holds promise for a more focused and robust growth narrative—one that not only resonates with its steadfast vision but also aligns with the shifting dynamics of consumerism and international commerce.

Innovation, brand loyalty, and a strategic refocus define this pivotal chapter for The Clorox Company. Through the disposal of select subsidiaries to organizations possessing local operational acumen, Clorox charts a path forward that potentially heightens its core business’s vitality. This business realignment, under the IGNITE strategy, reaffirms Clorox’s vibrant legacy and beckons an era of renewed enterprise, perpetuating its dedication to quality, sustainability, and community well-being.

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