Clorox Q2 Profit Declines, Misses Estimates; Cuts FY14 Profit View - Quick Facts

(RTTNews) - Consumer products company Clorox Co. (CLX) reported that its second-quarter net earnings dropped to $115.00 million or $0.87 per share, from $123.00 million or $0.93 per share in the same quarter last year.

Earnings from continuing operations for the quarter declined to $116 million, or $0.88 per share, from $123 million, or $0.93 per share, in the year-ago quarter. Analysts polled by Thomson Reuters expected the company to report earnings of $0.91 per share for the quarter. Analysts' estimates typically exclude special items.

The latest-quarter results reflected a comparison to the company's prior-year earnings per share increase of 18 percent. The recent -quarter results also reflected higher commodity costs, an increase in manufacturing and logistics costs, the impact of unfavorable foreign currency exchange rates and higher advertising and sales promotion expenses.

In addition, a higher effective tax rate of 35.6 percent compared to 34.3 percent in the year-ago quarter resulted in a negative impact of 2 cents earnings per share. These factors were partially offset by the benefits of strong cost savings and price increases, as well as higher volume.

Net sales for the quarter were $1.330 billion compared to $1.325 billion in the prior year quarter. Thirteen analysts had consensus revenue estimate of $1.31 billion for the quarter.

In the second quarter, Clorox delivered 1 percent volume growth, primarily driven by gains in the company's Professional Products, Home Care and International businesses, partially offset by declines in the Charcoal and Brita businesses. Sales grew about half a percentage point, reflecting the benefit of price increases and higher volume, largely offset by the impact of unfavorable foreign currency exchange rates, as well as unfavorable mix. Excluding the impact of foreign currencies, sales grew 2.3 percent.

Clorox now anticipates fiscal 2014 earnings per share from continuing operations in the range of $4.40 to $4.55, compared to prior estimate of $4.45 to $4.60. This 5-cent reduction versus the previous outlook reflects the company's new foreign currency assumption primarily for Argentina.

Clorox now anticipates sales growth for fiscal 2014 to be in the range of 1 to 2 percent, reflecting a greater impact from unfavorable foreign currencies in Argentina and other countries, which are now expected to negatively affect fiscal year sales by more than 2 percentage points. This range reflects up to 3 percentage points of negative impact from foreign currency declines in the second half of the fiscal year. On a currency-neutral basis, the company's fiscal year sales outlook is about 3 to 4 percent growth.

Earlier, the company anticipated sales growth for the year in a range of 2 percent to 3 percent. This reflects a greater impact from unfavorable foreign currencies in Argentina and other countries, which was expected to hurt sales by up to 2 percentage points, versus a previous assumption of 1 percentage point.

"We've updated our outlook to reflect even more pressure from unfavorable foreign currency exchange rates, particularly in light of the significant devaluation of the Argentine peso that took place in January. In addition, our outlook reflects continued impact from sluggish category growth and higher commodity costs," said Chief Financial Officer Steve Robb.

Clorox continues to anticipate EBIT margin to be in the range of flat to up 25 basis points, driven by lower selling and administrative expense as a percentage of sales, partially offset by higher commodity costs, which are expected to negatively impact margins by more than 100 basis points, as well as continued inflation in some international markets. The company continues to anticipate offsetting these factors by delivering cost savings of about 150 basis points.