Church & Dwight: 2016 Results

Church & Dwight hat Umsatz und Gewinn im Geschäftsjahr 2016 gesteigert und weiteres Wachstum für 2017 angekündigt. Wir veröffentlichen die Mitteilung des Konsumgüterherstellers aus New Jersey mit den Zahlen im Wortlaut.  Die Aktie von Church & Dwight (Link entfernt)  ist eine  grüne Mittelklasse-Aktie (Link entfernt)  aus der  Reihe der ECOreporter-Favoriten-Aktien (Link entfernt).

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Q4 Reported EPS of $0.42; Adjusted EPS of $0.44 Exceeds Outlook
2017 EPS Outlook: Reported $1.72 to $1.74; Adjusted $1.89, up 7%

EWING, New Jersey - Church & Dwight Co., Inc. (NYSE:CHD) announced that full year 2016 reported EPS increased 13.6% to $1.75 per share. Adjusted EPS increased 9.3% from $1.62 to $1.77 per share, exceeding the Company’s outlook. Adjusted EPS excludes a charge ($0.02 per share) related to the pending sale of the Brazilian Specialty Products business.

Full year 2016 reported sales grew 2.9% to $3,493 million. Organic sales grew 3.2% driven by the global Consumer Products business which grew by 4.2%.

Matthew Farrell, Chief Executive Officer, commented, “We again delivered top tier performance within the consumer packaged goods industry including full year organic sales growth of 3.2%, double digit international organic sales growth, adjusted gross margin expansion of 120 basis points and adjusted earnings growth of 9.3%. We overcame the year-long cyclical weakness in our Specialty Products business to deliver on our commitment to shareholders. Finally, we concluded the year with a strong fourth quarter.”

Fourth Quarter Review

Reported net sales increased $22.4 million or 2.6% to $896.0. Organic sales growth of 2.7% exceeded the Company’s outlook of 1 to 2% driven by the global Consumer Products business. Global Consumer reported sales grew 3.2% (3.5% organic) driven by 4.1% volume growth. Specialty Products reported sales declined 4.3% (-5.2% organic). Total organic sales growth was driven by volume growth of 3.2% partially offset by 0.5% from unfavorable product mix and pricing. Reported EPS increased $0.01 to $0.42 a share. When adjusted to exclude the Brazilian charge, EPS increased $0.03 to $0.44 or 7% per share, exceeding the Company’s outlook.

Consumer Domestic reported net sales were $695.4 million, a $23.1 million or 3.4% increase. Organic sales increased by 2.7% primarily due to A&H liquid and unit dose laundry detergent, A&H cat litter, BATISTE dry shampoo, VITAFUSION and L’IL CRITTERS gummy vitamins and OXICLEAN additives, partially offset by a decline in sales of A&H powder laundry detergent and SPINBRUSH toothbrushes. Volume growth contributed 3.5% to organic sales partially offset by a decrease of 0.8% attributable to product mix and pricing. ARM & HAMMER unit dose laundry detergent grew at twice the category consumption growth for the third consecutive quarter while also increasing share. Sales in unmeasured channels continue to grow, especially online retailers which recorded its highest quarterly growth of 2016. In particular, online vitamin and litter sales more than doubled versus last year. Growth in non-measured channels accounted for approximately 300 basis points of organic growth.

Consumer International reported net sales were $127.6 million, a $2.6 million or 2.1% increase. Organic sales increased by 7.4%, driven largely by BATISTE, OXICLEAN AND A&H baking soda in the export business and STERIMAR, A&H liquid laundry detergent and baking soda in Mexico. Volume increased 7.2%, while favorable product mix and pricing contributed 0.2%.

Specialty Products reported net sales were $73.0 million, a $3.3 million or 4.3% decrease. Organic sales decreased 5.2% due to lower volumes in the specialty chemical sector of the business. The animal nutrition business was down slightly, but saw improved demand from the USA dairy industry as milk prices and dairy farm profitability improved.

Gross margin was flat at 45.5% on a reported basis. On an adjusted basis, excluding the Brazilian charge, gross margin increased 60 basis points. The increase was due to productivity programs and the impact of a higher margin acquired business, offset by higher raw material costs.

Marketing expense was $116.3 million, a decrease of $3.8 million or 3.2%. Marketing expense as a percentage of net sales decreased 70 basis points to 13.0% in-line with the Company’s outlook.

Selling, general, and administrative expense (SG&A) was $118.3 million or 13.2% of net sales, an 80 basis point increase primarily due to higher costs associated with acquisitions, incentive compensation and higher R&D spending.

Income from Operations on a reported basis was $173.4 million or 19.3% of net sales, a 10 basis point decrease. On an adjusted basis, excluding the Brazilian charge, operating margin increased 50 basis points to 19.9% of net sales.

The reported effective tax rate was 34.9%, compared to 33.8% last year. On an adjusted basis, excluding the Brazilian charge, the effective rate was 33.9%.

Operating Cash Flow

For the full year 2016, net cash from operating activities was $655.3 million, a $49.2 million increase from the prior year due to a decrease in working capital and higher cash earnings. Capital expenditures for the full year 2016 were $49.8 million, a $12.0 million decrease from the prior year when the Company was completing the York vitamin plant expansion.

At December 31, 2016, cash on hand was $187.8 million, while total debt was $1,120.1 million. The Company continues to have significant financial flexibility for acquisitions.

7% Dividend Increase

The Company’s Board of Directors today declared a 7% increase in the regular quarterly dividend from $0.1775 to $0.19 per share, equivalent to an annual dividend of $0.76 per share. This raises the dividend payout from $183 million to approximately $195 million to maintain a 40% targeted payout ratio. The quarterly dividend will be payable March 1, 2017 to stockholders of record at the close of business on February 21, 2017. This is the 21st consecutive year in which the Company has increased the dividend. The Company has paid a regular consecutive quarterly dividend for 116 years.

Mr. Farrell commented, “This action reflects the Company’s desire for stockholders to benefit from our continued strong growth and is an indication of our confidence in the Company’s performance. The Company expects to generate over $1.8 billion in free cash flow over the next three years. Our robust cash flow enables us to deliver higher value directly to our stockholders while maintaining significant financial flexibility.”


On December 22, 2016, the Company acquired the ANUSOL and RECTINOL brands from Johnson & Johnson, Inc. for $130 million. These are the #1 or #2 hemorrhoid care brands mainly sold in the U.K., Canada, Australia and South Africa with 2016 annual sales of $24 million. The acquisition adds scale to our growing international division.

On January 17, 2017, the Company acquired the VIVISCAL business from Lifes2Good Holdings Limited for $160 million. Viviscal is the #1 non-drug hair care supplement brand mainly sold in the U.S. and the U.K. with annual 2016 sales of $44 million. This brand is complementary to the Company’s global BATISTE dry shampoo and TOPPIK hair care business.

Both acquisitions were financed with debt and are expected to be slightly dilutive to EPS ($0.01 per share) in 2017 due to transition costs. In 2018, we expect the two acquisitions to be accretive to EPS. Both acquisitions add high gross margin, asset-light brands to the Company’s portfolio. The Company intends to continue to aggressively pursue acquisitions.

2017 New Products

Mr. Farrell commented, “Innovation continues to be a big driver of our success. In support of our long term strategy to drive revenue and earnings growth, we are pleased to announce 2017 new product launches in several categories. We are launching ARM & HAMMER CLUMP & SEAL SLIDE cat litter, a revolutionary new litter that doesn’t stick to the litter box and ARM & HAMMER unit dose 3-in-1 POWER PAKS laundry detergent. We are introducing a new VITAFUSION energy variant that supports everyday energy needs and alertness. TROJAN is launching a new XOXO upscale condom targeting both men and women with a soft touch, aloe lubricated latex in a unique portable carrying case. We are expanding offerings and distribution of the BATISTE brand leveraging its 2016 growth and #1 U.S. share position.“

Pension Settlement

The Company plans to settle its U.K defined benefit pension plans in the second quarter of 2017 for an expected cash outlay (net of tax) of $14-$19 million. The Company estimates it will incur a one-time pre-tax expense of approximately $49 to $55 million upon settlement in 2017 ($0.16 to $0.18). The Company’s U.S. and Canadian plans were settled in previous years. The U.K. settlements will mark the completion of the Company’s plan to eliminate pension expense as a source of future earnings volatility.

Sale of Brazilian Chemical Business

In the fourth quarter, the Company decided to sell its chemical business (2016 net sales $22 million) in Brazil in order to focus on its Brazilian consumer business, resulting in a $4.9 million ($0.02) charge. The Company expects to close the sale of the business in the first quarter of 2017, resulting in an additional charge of approximately $5 million ($0.02).

Outlook for 2017

Mr. Farrell stated, “We expect the 2017 business environment to have higher levels of trade promotions, rising commodity costs and worsening foreign currency headwinds. However, we plan to deliver strong sales, cash and earnings growth with our balanced portfolio of value and premium products, the launch of innovative new products, aggressive productivity programs and tight management of overhead costs.”

With regard to 2017, Mr. Farrell said, “We expect reported and organic sales growth of approximately 3% supported by our new product introductions. We expect reported and adjusted gross margin to expand by approximately 60 basis points despite rising commodity costs and foreign exchange headwinds. We expect to increase marketing spending to 12.3% of net sales, a 10 basis point increase, in support of our new products. SG&A is expected to increase 180 basis points, although once adjusted for the pension settlement and Brazil charges, the increase is 10 basis points to 12.7% of sales, largely due to amortization from the two new acquisitions. Including these charges, reported operating margin is expected to decline 120 basis points, but will expand 40 basis points when adjusted to exclude the pension and Brazil charges.”

In conclusion, Mr. Farrell said, “We believe 2017 will be an exciting year for Church & Dwight based on our continued focus on innovation and confidence in gross margin expansion. On a reported basis, EPS is expected to be $1.72 to $1.74 per share, which includes a $0.02 negative impact from the Brazil charge, $0.16 to $0.18 negative impact from the pension settlement and a $0.03 positive impact from adopting the new options accounting standard.

We expect to achieve 7% adjusted EPS growth or $1.89 per share. This outlook includes incremental marketing spending and $0.01 EPS dilution from transition expenses related to the recently closed acquisitions. The $1.89 outlook excludes the $0.03 EPS impact from the accounting change. The 2017 outlook equates to 8% currency neutral adjusted EPS growth excluding a 1% negative impact from foreign exchange. In 2017, we expect adjusted free cash flow to exceed adjusted net income as we have in previous years.

For the first quarter, we expect reported and organic sales growth of approximately 1-2%, gross margin expansion and $0.46 EPS, a 7% increase. We expect EPS in the first half of 2017 to be flat as we significantly increase our second quarter marketing and trade in support of new product launches, especially our cat litter innovation.”

Church & Dwight Co., Inc. will host a conference call to discuss fourth quarter and full year 2016 earnings results on February 7, 2017 at 12.30 p.m. Eastern time. To participate, dial 877-322-9846 within the U.S. and Canada, or 631-291-4539 internationally, using access code 47679224. A replay will be available two hours after the call at 855-859-2056 using the same access code. You also can participate via webcast by visiting the Investor Relations section of the Company’s website at

Church & Dwight Co., Inc. manufactures and markets a wide range of personal care, household and specialty products under the ARM & HAMMER brand name and other well-known trademarks.
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