Clorox Reports 4% Sales Gain in Q2

“We delivered strong second-quarter results,” said Chairman and Chief Executive Officer Don Knauss. “We grew sales for the fourth consecutive quarter. Our U.S. categories continue to recover, and our market share remains healthy. While the economic climate remains challenging, our strategies are working and our people are executing well. I feel good about our plans for the remainder of the fiscal year.”

Clorox reported second-quarter earnings from continuing operations of $105 million, or 79 cents diluted EPS. This compares with $95 million from continuing operations, or 68 cents diluted EPS, in the year-ago quarter. Current quarter results reflected the benefit of price increases and strong cost savings, partially offset by higher costs for raw materials, manufacturing and logistics.

Volume for the second quarter of fiscal year 2012 was flat, with gains in the Lifestyle and Household segments largely offset by lower shipments in international markets and flat volume in the Cleaning segment. Sales grew 4%, with increases in three of the company’s four reportable segments. Sales growth was primarily driven by the benefit of price increases and product innovation across several businesses, partially offset by unfavorable product and country mix.

Gross margin decreased 20 basis points to 41.5%in the year-ago quarter. The decrease in the current quarter gross margin was primarily driven by higher commodity costs, higher manufacturing and logistics costs and unfavorable product and country mix. These factors were partially offset by the benefit of price increases and strong cost savings.

Year-to-date cash provided by continuing operations was $168 million, a slight decrease from $170 million in the year-ago period. For the full fiscal year, Clorox continues to anticipate free cash flow of about 10% of sales, within its targeted range of 10-12%. The company defines free cash flow as cash provided by continuing operations less capital expenditures.

During the second quarter, Clorox repurchased 2.3 million shares of the company’s common stock at a cost of approximately $149 million, using the remaining proceeds from the sale of the Auto Care businesses. The company has used all net proceeds from the sale to repurchase a total of 10 million shares for $679 million since February 2011.

Within the cleaning segment, which includes laundry, home care and away from home, volume was flat, sales rose 5% and pretax earnings jumped 22%.

The away from home business grew volume by double digits, supported by new products and distribution gains in the institutional health care channel. These results were offset by lower shipments in the laundry and home care business units. Laundry volume was lower due to the impact of a recent price increase on Clorox bleach. Home care volume decreased modestly due to lower shipments of Clorox disinfecting wipes. Price increases on several home care brands also reduced volume. The variance between volume and sales was primarily due to the benefit of price increases. Pretax earnings reflected higher sales and strong cost savings, partially offset by higher commodity costs.