New York, May 05, 2020 -- Moody's Investors Service, ("Moody's") today
assigned a Baa1 rating to $500 million of senior unsecured notes
being offered by The Clorox Company (Clorox). Net proceeds will
be used to repay borrowings under the company's revolving credit
agreement, with the remainder being used for general corporate purposes.
Clorox's existing ratings including the Baa1 senior unsecured and
Prime-2 commercial paper ratings are not affected and the rating
outlook is stable.
Ratings assigned:
The Clorox Company
$500 million senior unsecured notes due 2030 at Baa1.
RATINGS RATIONALE
Clorox's Baa1 senior unsecured rating reflects the company's good market
position in most of its product categories, strong brand name recognition
and solid product innovation, all of which gives rise to steady
operating earnings and cash flow. Moody's also recognizes
the company's commitment to maintaining a moderate financial leverage
profile. These strengths are partially offset by the need to continually
launch new products with associated marketing and trade promotion support.
The company generates a large portion of its revenue from the mature U.S.
market and has meaningful customer concentration with the company's top
5 customers generating about 45% of net sales. Clorox is
also exposed to volatile raw material and energy prices.
The stable rating outlook reflects Moody's view that Clorox will
modestly grow earnings, generate stable cash flow, maintain
a moderate leverage profile, and pursue acquisitions over the next
12 to 18 months.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Ratings could be upgraded if the company has a profitable increase in
scale and geographic diversity, solid organic growth and cash flow,
maintains conservative financial policies, is able to sustain retained
cash flow to net debt above 20%, and is able to sustain debt-to-EBITDA
leverage below 2.0x.
The ratings could be downgraded if there is a deterioration in operating
performance, a shift to more aggressive financial policies,
debt to EBITDA is sustained above 3.0x, retained cash flow
to net debt is sustained below 15%, or liquidity weakens.
Moody's regards the coronavirus outbreak as a social risk under our ESG
framework, given the substantial implications for public health
and safety. The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices,
and asset price declines are creating a severe and extensive credit shock
across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The consumer products
sector has been one of the sectors affected by the shock given its sensitivity
to consumer demand and sentiment. More specifically, potential
pressure on Clorox's credit profile, including its exposure
to multiple affected countries, could occur because of shifts in
market sentiment in these unprecedented operating conditions and the company
remains vulnerable to the outbreak continuing to spread. However,
many of Clorox's products including cleaning supplies are benefitting
from increased demand because of the focus on containing the spread of
the coronavirus and organic revenue was up 17% in the fiscal third
quarter ending in March. Moody's expects Clorox's revenue
and earnings to grow more modestly over the next 12 months because consumer
will pull back from actions such as pantry loading, but Moody's
projects growth will remain positive. An extended downturn could
negatively affect growth and consumer demand because of higher unemployment.
The consumer packaged goods industry has relatively low environmental
and social risk. Clorox has various commitments to lessen its overall
impact on the environment by making sustainability improvements to its
product portfolio, making primary packaging recyclable, eliminating
PVC in packaging and APE in retail products, and reducing emissions,
among other items. Clorox has an "Eco Strategy" that
strives to make responsible products responsibly and shrink the company's
environmental footprints as it grows. In terms of social factors,
the company has set several goals including enhancing financial literacy
of its employees, maintain a recordable incident rate of <1.0
with comprehensive safety management, ensure gender and ethnic pay
equity, and achieve gender and ethnic minority representation targets,
among other items. Moody's views Clorox's financial policies
as conservative. The majority of Clorox's Board members are independent
directors, and have extensive consumer product experience.
That said the Chairman of the Board is also the CEO. Clorox is
a widely held public company.
The principal methodology used in these ratings was Consumer Packaged
Goods Methodology published in February 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1202237.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
The Clorox Company, based in Oakland, California, manufactures
and markets a diverse portfolio of branded consumer products. Some
key products include Clorox Bleach, Clorox cleaning products,
Pine-Sol cleaners, Liquid Plumr clog removers, Fresh
Step cat litter, Glad bags, wraps, and containers,
Kingsford charcoal, Hidden Valley dressings and sauces, Brita
water-filtration products, and Burt's Bees natural personal
care products. The company also markets brands for professional
services including Clorox Healthcare and Clorox Commercial Solutions.
Clorox is publicly traded and generates roughly $6.1 billion
in annual revenue.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Chedly Louis
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
John E. Puchalla, CFA
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
