Church & Dwight had a successful second quarter of 2023, with reported revenue up 9.7%, organic sales up 5.4%, and adjusted earnings per share of $0.92. The U.S. consumer business had 6.3% organic sales growth and six of the company's 14 power brands held or gained market share, accounting for 65% of U.S. sales. Online purchases accounted for 18% of global sales, and private label was stable in the company's categories.

Church & Dwight closed out the quarter as the fastest-growing overall laundry detergent manufacturer, and ARM & HAMMER liquid laundry detergent grew share by 90 basis points. ARM & HAMMER litter also grew 12.6% and gained share. BATISTE grew consumption by 12%, and TROJAN increased share to 68.3%. HERO, which was acquired last October, grew consumption by 66% and THERABREATH, acquired in 2021, had 100% year-over-year consumption growth.

Church & Dwight's THERABREATH brand has seen significant growth since its acquisition, becoming the number two non-alcohol mouthwash brand and the clear number three in total mouthwash. WATERPIK and VITAFUSION both had supply issues in 2022, but the company expects them to be flat in net sales year-over-year. International sales are up 6.1%, while Specialty Products have decreased 6.5% due to lower volume in the dairy business. Consumption of consumer products is strong and expected to continue in the second half, with July off to a strong start.

In the second quarter of 2023, the company saw a 21% increase in adjusted EPS, 9.7% increase in net sales, and 5.4% increase in organic sales. Gross margin increased by 270 basis points due to productivity pricing, a better product mix, and higher margin acquisitions. These results exceeded expectations, and the company expects to see volume growth in the second half of the year.

The company reported a strong Q2, resulting in a raised outlook for sales, gross margin, EPS and cash flow. They now expect reported sales growth to be 8% and organic sales growth to be 5%, with a 200 basis point expansion in gross margin. They also plan to make incremental investments in their brands and capabilities in future quarters.

The company expects to see some commodity cost increases in 2023, but they are still lower than the costs seen in 2021 and 2022. There is an increase in demand for soda ash, which is causing an upwards pressure on prices, and the company is still 200 basis points below their pre-COVID margin levels. To increase their marketing, they plan to increase marketing as a percent of net sales to 11%, and expect SG&A both in dollars and as a percent of sales to increase compared to 2022.

The company expects full-year EPS to be 6%, cash flow from operations to be $1 billion, and CapEx to be $250 million. For Q3, they expect 8% reported sales growth, 4% organic growth, and gross margin expansion. Additionally, there will be an increase in marketing and SG&A, and adjusted EPS is expected to be $0.66 per share, which is a 13% decrease from last year.

Chris Carey is asking Matt Farrell about the underlying drivers of organic sales growth in the personal care portfolio, specifically mentioning WATERPIK, FLAWLESS, and HERO. Matt Farrell responds that WATERPIK and vitamins are expected to be up in the second half of the year, BATISTE and STERIMAR are capacity constrained but will help with international sales, BATISTE continues to grow in the US, THERABREATH is a growing business, and HERO has already seen distribution gains and more are expected.

The speakers discuss their success since the company was bought last October and the brands that are contributing to their growth. They confirm that the Q1 organically for personal care was negative, but Q2 is positive and expect Q3 and Q4 to be positive as well, which will be a tailwind for gross margins in the back half. They also confirm that there has been no incremental pricing on laundry, but an increase in price on baking soda due to an increase in soda ash.

Matt Farrell and Rick Dierker discuss their success in gaining market share with their 14 power brands, and explain that a better metric is that 65% of their net sales have gained share. They also discuss the promotional environment, noting that the laundry category is only slightly more promotional in Q2 than in Q1.

Rick Dierker is expecting up to 50% of growth in the second half of the year to be driven by volume. He also predicts that domestic specialty products will have around 5% organic growth, international specialty products will have 6-7% organic growth, and SPD will have negative organic growth.

Matt Farrell discussed the company's focus on sales per employee as a way to increase efficiency and performance. He mentioned the company's goal to increase automation in both the plants and the office workers. With a projected $6 billion in sales next year and around 5,000 employees, the company is looking to increase efficiency and performance.

Rick Dierker provides two examples of how the company is using automation and technology to make their workers more productive and to scale and grow the business. These investments include RPA projects to save thousands of hours of work, as well as an ERP system for their GMG business in China. These investments are part of the company's goal to achieve 25 basis points of SG&A leverage each and every year.

Rick Dierker and Matt Farrell explain that the additional $30 million being spent on marketing is already paying off with increased distribution and consumption of brands like THERABREATH and HERO. Two-thirds of the additional SG&A spending is incentive comp due to the company's outperforming results, while the other third is one-time investments. They also mention that they are pulling forward some investments to prepare for faster growth and more optionality to expand in different countries.

Matt Farrell discusses why the company is comfortable with their guidance regarding the rebound in volume for their more discretionary categories, which make up 20% of their revenue. He explains that WATERPIK was expected to be choppy in the first six months of the year, and that FLAWLESS is a small brand for them now. He also notes that investing in marketing is a no-brainer because it strengthens brand equity.

In the second half of 2022, the three businesses of VITAFUSION, inventory in the channel, and vitamins were down, leading to a 4% drag in Q4, 3% drag in Q1, and 1% drag in Q2. Matt Farrell and Rick Dierker have stated that they expect these businesses to be flat in the second half, and that work has been done to stabilize the business and win back retailers and consumers.

Matt Farrell has been with the company since 2006 and has been running the business with an evergreen model for many years. The company is now relooking at their packaging, graphics, and messaging in light of the black eye they got last year. They are also adding displays, advertising, and changing their messaging to get back into a leading position. They are also reinvesting to get back on track for 2022, but they are still running the business with an evergreen mentality.

Matt Farrell discussed the success the company had in the first half of the year and their plans for the future. He mentioned that they plan to get their marketing back up to 11% of sales and that they are aiming to have double digit gross profit growth. He also mentioned that they have seen gains in distribution with their retail partners, and that there may be some challenges in gaining more distribution.

Matt Farrell and Rick Dierker discuss the distribution and facings of Hero and THERABREATH, two brands innovating in the space. Hero was built through Amazon, Target, and Ulta, while THERABREATH has been developed in many classes of trade but not with respect to facings. The retailers are interested in helping THERABREATH grow and anticipate more facings in the future. Both brands have a lot of runway left on TDPs, with THERABREATH being third or fourth in the segment but still room to run.

Matt Farrell is discussing the advantages of their products, MIGHTY PATCH and THERABREATH, compared to other brands in the acne and mouthwash categories. He also mentions that they have an advantage in their packaging, go-to-market strategy and use of social media. Bill Chappell from Truist Securities then asks about the percentage of sodium bicarbonate in terms of cost goods sold, and why the animal business within SPD is not passing out price increases and driving sales. Matt Farrell states that sodium bicarbonate is not a big part of the animal business.

Matt Farrell has reported that the company has been in the animal business for about 50 years, and they now sell prebiotics, probiotics, and bulk sodium bicarbonate. He also mentioned that baking soda is used in a variety of products, such as toothpaste, deodorant, cat litter, and laundry detergent. Farrell went on to explain that the consumer trade down has been a big driver of their results for the past few quarters, and it is expected to continue through mid-23.

Church & Dwight has invested in their brands THERABREATH and HERO, as well as their master brand campaign "Give it the Hammer". This campaign is resonating with consumers, as it is consistent and promotes ARM & HAMMER as the working man’s brand. The company expects the campaign to lead to positive volume in Q3.

Rick Dierker and Matt Farrell from Church & Dwight Co. discussed their expectations for the second half of the year, including their view on price mix and their plans for pricing. They mentioned that most of their pricing has already lapsed, with the exception of baking and BATISTE dry shampoo. They also commented on private label performance in categories that have exposure to it, and Matt Farrell spoke about their assumption on consumer trade down in their second half guidance.

In the second half of the year, the company expects to increase their advertising spending, but they do not anticipate any financial benefit from it. It is more of an attempt to rebuild a baseline of investment.

Matt Farrell and Rick Dierker discussed the potential of THERABREATH and HERO in the second half of the year, and how the increased advertising spending of 11% could help the company in the future. They also discussed the potential for gross margin expansion and positive volume inflection in the second half. Finally, they thanked everyone for joining the call and concluded the conference.

This summary was generated with AI and may contain some inaccuracies.