Church & Dwight (CHD) Q4 2023 earnings summary

Executive summary

• FY2023 net sales rose 9.2% to $5,867.9, led by Consumer Domestic and Consumer International; SPD sales declined 7.9%.

• Diluted EPS was $3.05 versus $1.68 in 2022, which included a $1.26-per-share non-cash Flawless impairment charge.

Financial highlights

• Net sales increased $492.3 YoY; volume contributed 0.9%, pricing/product mix 4.4%, and acquired product lines 3.9%.

• Gross profit reached $2,588.5; gross margin rose 220 bps to 44.1%, reflecting favorable price/volume/mix, productivity, lower freight and acquisition benefits, partly offset by higher manufacturing costs and commodities.

• Operating income was $1,057.4 and operating margin 18.0%, up 690 bps reported; excluding the 2022 $411.0 Flawless impairment, operating margin decreased 70 bps.

• Net income was $755.6 versus $413.9 in 2022; interest expense increased $21.3 to $110.9, primarily from higher average borrowing rates.

• Cash from operations increased $145.4 to $1,030.6, supported by improved working capital and higher cash earnings, including acquisition impacts.

Outlook and guidance

• 2024 capital expenditures are expected to be ~$180.0, primarily for laundry, litter and vitamin manufacturing capacity to support expected sales growth.

• Cash from operations and borrowing capacity are expected to fund debt service, dividends, repurchases and capital spending; cash may also support complementary acquisitions.

• Inflation, interest rates, recession concerns, retailer acceptance of price increases, workforce availability and third-party manufacturing/distribution remain variables affecting future performance.

• The MEGALAC dairy supplement business exit is planned for Q1 2024 following foreign competition and declining sales.