Company Overview and History

Church & Dwight Co., Inc. (CHD) is a leading consumer products company that has successfully navigated the dynamic consumer landscape for decades. With a diversified portfolio of iconic brands, a focus on innovation, and a commitment to operational excellence, Church & Dwight has positioned itself as a resilient player in the household and personal care markets.

Established in 1846 and headquartered in Ewing, New Jersey, Church & Dwight's rich history is marked by strategic acquisitions, brand expansions, and a relentless pursuit of growth. The company began as a manufacturer of baking soda under the Arm & Hammer brand and has since expanded its portfolio to include a diverse range of consumer household and personal care products, as well as specialty chemical products. Key milestones in the company's history include the acquisition of the Xtra laundry detergent brand in 1986 and the Orajel oral care brand in 2008. In 2011, the company acquired the Batiste dry shampoo brand, which has become a global leader in the category. More recently, Church & Dwight expanded its personal care portfolio with the acquisitions of the TheraBreath oral care brand in 2020 and the Hero Cosmetics acne treatment brand in 2022.

Product Portfolio

The company's portfolio now encompasses a diverse array of well-recognized brands, including Arm & Hammer, OxiClean, Batiste, WaterPik, TheraBreath, HERO, and Vitafusion, among others. These brands collectively account for approximately 70% of the company's net sales and profits, underscoring the strength and market leadership of Church & Dwight's core product lines.

Church & Dwight's product portfolio is divided into three main segments:

1. Consumer Domestic Segment: This segment includes household and personal care products such as ARM & HAMMER baking soda, cat litter, and laundry detergent; OXICLEAN stain removers and laundry detergents; THERABREATH oral care products; HERO acne treatment products; VITAFUSION and LIL CRITTERS gummy dietary supplements; TROJAN condoms and lubricants; SPINBRUSH toothbrushes; FIRST RESPONSE pregnancy and ovulation test kits; NAIR depilatories; ORAJEL oral analgesics; XTRA laundry detergent; and ZICAM cold shortening products.

2. Consumer International Segment: This segment primarily includes personal care products such as OXICLEAN stain removers, THERABREATH oral care products, ULTRAMAX antiperspirant deodorant, VITAFUSION and LIL CRITTERS gummy vitamins, and HERO acne treatment products.

3. Specialty Products Division (SPD) Segment: This segment includes specialty chemical products. In the first quarter of 2024, CHD exited the MEGALAC supplement portion of the Animal Nutrition business within this segment and sold the Passport food safety business in the second quarter of 2024.

Innovation and Market Adaptation

Over the years, Church & Dwight has demonstrated its ability to adapt to changing consumer preferences and market conditions. The company's focus on innovation has been a key driver of its success, with a steady stream of new product introductions catering to evolving consumer needs. From the launch of Arm & Hammer Deep Clean, a premium laundry detergent, to the introduction of Arm & Hammer Power Sheets, a new form of laundry detergent, Church & Dwight has consistently stayed ahead of the curve, capturing market share and driving category growth.

Financials

Church & Dwight's financial performance has been impressive, with a track record of consistent revenue and earnings growth. In the most recent fiscal year (2023), the company reported net sales of $5.87 billion and net income of $755.6 million, reflecting a net profit margin of 12.9%. The company's strong cash flow generation, with annual operating cash flow of $1.03 billion and free cash flow of $807.1 million, has enabled it to invest in organic growth initiatives, pursue strategic acquisitions, and maintain a shareholder-friendly capital allocation strategy.

For the third quarter of 2024, Church & Dwight reported revenue of $1.51 billion, up 3.8% year-over-year. However, net income decreased by 37.2% to $243.5 million, primarily due to a $357.1 million non-cash impairment charge related to the Vitamins, Minerals and Supplements (VMS) business, which has experienced declining market share and profitability. Operating cash flow for the quarter was $236.9 million, up 0.2% year-over-year, while free cash flow decreased slightly by 0.8% to $206.6 million.

Breaking down the performance by segment for Q3 2024:

- Consumer Domestic: Net sales were $1.17 billion, an increase of 3.3% compared to the prior year period. Income before income taxes was $107.1 million, a decrease of 310.5% due to the VMS impairment charges. Excluding these charges, income before taxes increased by 8.3%.

- Consumer International: Net sales were $267.7 million, an increase of 9.5%. Income before income taxes was $4.7 million, a decrease of 27.4% due to VMS impairment charges. Excluding the impairment, income before taxes increased by 10.1%.

- Specialty Products Division (SPD): Net sales were $72.1 million, a decrease of 8.0%. Income before income taxes increased by 19.4% to $7.4 million, driven by favorable pricing and product mix, as well as lower costs.

Liquidity

Despite the challenges posed by the COVID-19 pandemic and the evolving macroeconomic environment, Church & Dwight has demonstrated its resilience. The company's diverse product portfolio, with exposure to both essential and discretionary categories, has allowed it to navigate shifting consumer trends and maintain its market position. Moreover, Church & Dwight's focus on operational efficiency, supply chain optimization, and cost management has helped it to preserve profitability and cash flow generation during periods of market volatility.

As of the latest report, Church & Dwight maintains a strong financial position with a debt-to-equity ratio of 0.52. The company has $752.1 million in cash and cash equivalents and access to a $1.5 billion unsecured revolving credit facility, which matures in 2027. Additionally, the company has $658.9 million remaining under its share repurchase authorization. The current ratio stands at 1.53, while the quick ratio is 0.98, indicating a healthy liquidity position.

Geographic Performance

Church & Dwight operates globally, with approximately 80% of sales coming from the United States and the remainder from international markets. The company's international segment, which includes markets such as Canada, Europe, and Asia-Pacific, delivered organic sales growth of 8.1% in Q3 2024, demonstrating strong performance in key global markets.

Future Outlook and Guidance

Looking ahead, Church & Dwight remains well-positioned for continued growth. The company's recent acquisition of Graphico, a Japan-based distributor, is expected to contribute to the expansion of its business in the Asia-Pacific region, a key growth market. Additionally, the company's investments in innovation, digital capabilities, and international expansion are expected to drive long-term value creation for shareholders.

For the full year 2024, Church & Dwight continues to expect organic revenue growth of approximately 4% and reported sales growth of approximately 3.5%. The company now expects full year 2024 adjusted EPS growth of approximately 8%, which is in line with their previous guidance. For Q4 2024, organic sales are expected to be in the range of 2-3%, consistent with Q3 performance.

Church & Dwight now anticipates full year 2024 gross margin expansion of approximately 110 basis points, at the high end of their previous range. Marketing spend as a percentage of sales is expected to be above 11% for the full year 2024, reflecting the company's commitment to brand-building and growth initiatives.

It's worth noting that Church & Dwight has consistently exceeded its guidance in recent quarters. For Q3 2024, the company beat its outlook on reported sales growth (3.8% vs. 2.5% guided), organic sales growth (4.3% vs. 3% guided), and adjusted EPS ($0.79 vs. $0.67 guided).

Conclusion

In conclusion, Church & Dwight's rich history, diversified product portfolio, and focus on innovation and operational excellence position the company as a resilient consumer products powerhouse. Despite challenges in certain segments, such as the VMS business, the company's overall performance remains strong, with consistent growth in key product categories and international markets. As it continues to adapt to the evolving market landscape, invest in its brands, and expand globally, Church & Dwight remains well-equipped to drive sustainable growth and create value for its shareholders.