In this paragraph, the operator begins the Newell Brands Inc. Fourth Quarter and Full Year 2024 Earnings conference call, which is in a listen-only mode initially but will open for questions later. Participants are instructed to ask only one question during the Q&A to stay on schedule. The call is being recorded and is available as a live webcast. Joanne Freiberger, SVP, Investor Relations, and Chief Communications Officer, introduces the call, with Chris Peterson (President and CEO) and Mark Erceg (CFO) present. Joanne mentions that forward-looking statements will be made during the call and advises participants to review their previous disclosures for risks. She also notes that non-GAAP financial measures will be discussed, although they are not superior to GAAP measures. The explanations and reconciliations for these measures are available in their earnings release and SEC filings. Joanne then hands the call over to Chris Peterson.

In the call, the speakers plan to discuss their 2024 achievements, approach to tariffs, and 2025 priorities. They successfully implemented a new corporate strategy, operating model, and cultural transformation across all segments, improving brand management, geographic organization, and centralizing supply functions. This transformation enhanced talent, focused on high performance, innovation, and inclusion, and is reflected in strong financial results, meeting or exceeding key metrics. Despite ongoing work, these changes have significantly advanced the organization's potential. Mark will also provide insights on the 2024 results and 2025 financial guidance.

In 2024, the company achieved significant progress towards improving top-line performance, with core sales growth aligning with expectations, particularly in the latter half of the year. Sales trends improved across all business units, with innovation driving growth in the baby, writing, and commercial sectors. The learning and development segment and international business demonstrated positive core sales growth throughout the year. Despite a 3.4% decline in overall core sales due to category contraction, the company focused on sustainable growth and share gains. Structural economic improvements led to a substantial increase in gross and operating margins, with gross margin reaching 34.1%, the highest since 2018. The operating margin improved to 8.2% despite increased costs. Since the new corporate strategy launched in June 2023, there have been consistent improvements in both gross and operating margins.

The paragraph highlights Newell's progress in 2024, focusing on improving cash flow and strengthening the balance sheet through increased EBITDA and better cash conversion, leading to debt reduction and a lower leverage ratio. The company also achieved its goal of reducing complexity by streamlining processes, consolidating its ERP environment, cutting brands and SKUs, and decreasing its supply base and distribution network. Moreover, it surpassed its forecast accuracy target, achieving a 95% global fill rate. Newell is actively addressing tariff challenges by reducing reliance on China for sourcing, having started to accelerate these efforts about a year ago.

Newell has been actively reducing its reliance on Chinese imports by insourcing production and shifting manufacturing to other regions, resulting in only 15% of its cost of goods sold being linked to China, with a target of reducing it further to less than 10% by year-end. Various projects have been completed in writing, baby, and home businesses. While Mexico accounts for 5% of imports to the US, Canadian imports are minimal. Newell's strategic move away from China, with strong US manufacturing in several categories, could offer a competitive edge over rivals who still source primarily from China.

In 2023, Newell shifted to a new supply chain model and expanded its US manufacturing capabilities, allowing it to gain competitive advantages in certain product categories. The company is engaging with strategic retailers to utilize its manufacturing capacity effectively. Looking towards 2025, Newell anticipates a dynamic macroeconomic environment due to inflation, a strong US dollar, and potential changes in trade policies. The company aims to achieve top-line growth through its corporate strategy, focusing on innovation, distribution, and international expansion. For example, Newell introduced the Graco SmartSense bassinet and swing in 2024, with plans to expand its distribution in 2025. Additionally, they launched the Graco Easy Turn 360 convertible car seat, emphasizing ease of use and space efficiency.

The paragraph outlines several new product expansions and innovations across different brands. Sharpie is introducing twelve new colors and a fine tip to its Creative Markers line, while Expo is enhancing its dry erase markers with a new proprietary ink for better vibrancy and readability, and launching a wet erase liner. Rubbermaid Commercial Products is releasing a new line of durable farm animal feeders based on extensive consumer research, featuring a ten-year warranty. In the kitchen segment, Oster is launching the Extreme Mix Professional Blender with patented titanium-coated blades and a powerful motor, available in the US and Mexico, followed by the launch of Rubbermaid EasyStore food storage later in the year.

The paragraph highlights various product innovations and strategic initiatives across different brands. It discusses a new product line designed for easy storage with secure lids, improvements to Yankee Candle products with a soy wax blend and enhanced design, and the introduction of a premium candle line targeting younger consumers. Additionally, it mentions upcoming 2025 initiatives involving influencers Ali Love and Kane Brown for Contigo and Coleman Brands, respectively. The overarching goals for 2025 are to drive company growth and improve operating margins beyond the annual target.

In 2024, Newell Brands Inc. achieved significant progress in fuel cost savings and other initiatives to counteract inflation and support innovation. They focused on deleveraging the balance sheet, improving cash flow, and advancing operational excellence through technology standardization and reducing complexity. The company also emphasized transformation into a high-performance, inclusive culture. Despite challenges such as contracting categories and foreign exchange issues, Newell showed strong sales and margin improvements and increased A&P investments. The company remains committed to sustainable growth and acknowledges its team's dedication in achieving these goals.

The paragraph discusses Newell Brands Inc.'s strategic progress and improved financial performance. It highlights that while fourth-quarter core sales decreased by 3%, they met the company's guidance and demonstrated improved forecasting abilities. The core sales decline has lessened over several halves, indicating a positive turnaround. Additionally, the fourth quarter experienced a currency headwind and effects from divestitures and closures. Gross margin improved significantly, marking the sixth consecutive quarter of year-over-year growth.

In the fourth quarter, Newell Brands successfully offset challenges from lower sales volume, inflation, and foreign exchange with productivity savings and positive pricing. The two-year accumulated increase in gross margin by 800 basis points reflects a successful corporate transformation. The normalized operating margin increased by 70 basis points to 7.1%, attributable to higher gross margins and restructuring savings, though partially offset by increased A&P investments and incentive costs. Despite a $2 million rise in net interest expense to $72 million, the company recorded a $4 million tax benefit, with Q4 earnings per share surpassing guidance at 16 cents. Notably, in 2024, Newell achieved a significant reversal in declining gross margins, increasing by 460 basis points to 34.1%, thanks to a focused corporate strategy stemming from a thorough capability assessment.

The paragraph discusses Newell's strategic initiatives, including prioritizing top brands and countries, pricing actions, and product innovations, which have contributed to margin recovery and expansion. In 2024, the company generated $496 million in operating cash flow, slightly below guidance due to increased inventory levels anticipating a port strike. Strong cash flow allowed a $175 million reduction in net debt, decreasing the leverage ratio to 4.9 times. Additionally, Newell refinanced $1.25 billion in debt maturing in 2026 into two new tranches due in 2030 and 2032 at favorable rates. The company plans to refinance the remaining $1.25 billion of the original debt in 2025 into new tranches maturing in 2031 and 2033.

The paragraph discusses Newell Brands Inc.'s preliminary 2025 financial outlook amidst the challenges posed by global trade policy changes and tariffs. The company highlights the unpredictability of these factors due to their large global presence and various economic impacts like currency shifts and consumer behavior changes. The 2025 guidance excludes potential impacts from recent tariffs against Mexico, Canada, and China, which are still under negotiation. Newell expects core sales to range from -2% to +1%, with the first half of the year showing a slight decline and the second half turning positive, owing partly to phasing out non-strategic brands. Net sales are projected to decline by 4% to 2%, impacted by unfavorable foreign exchange and business exits.

The paragraph outlines Newell's financial outlook and strategic plans for the coming years. The company anticipates core sales growth in learning, development, and international sectors for a second consecutive year, with home and commercial sales likewise improving in the latter part of the year. While outdoor and recreation sales are projected to improve by 2025, a return to core sales growth is not expected until 2026, coinciding with key product innovations. Sales in 2024 are predicted to see a slight decline, stabilizing by 2025. Retail inventory management is expected to remain cautious, but without significant restocking or destocking. Newell anticipates an improved normalized operating margin of 9% to 9.5% in 2025, driven by increased gross margins and reduced SG&A costs, despite plans to increase advertising and promotion spending. Interest expenses are expected to rise slightly, and the effective tax rate will be in the low to mid-teens. The overall expectation is for an 18% increase in normalized diluted earnings per share, reaching $0.70 to $0.76.

The article discusses Newell Brands Inc.'s financial expectations and plans for fiscal 2025. The company anticipates generating an operating cash flow of $450 million to $500 million, partially through a reduction in the cash conversion cycle. Planned investments of $250 million will focus on high-return cost-saving projects and product innovations. Newell aims for a year-end 2025 leverage ratio of about 4.5 times, improving its debt status towards investment grade. In Q1 2025, the company expects a core sales decline of 4% to 2% and net sales decline of 8% to 5%, attributed to foreign exchange impacts and divestitures. It forecasts a normalized operating margin of 2% to 4% in Q1, typically a lower-performing quarter. A strengthening U.S. Dollar presents a foreign exchange challenge, but pricing actions are being taken to mitigate its effects. Interest expenses will slightly increase, and the company predicts a normalized per-share loss of $0.09 to $0.06 for Q1. Overall, Newell is optimistic about its performance going forward, crediting its workforce for successful 2024 outcomes.

The paragraph details a discussion during a conference call where Bill Chappell from Truist Securities questions company executives about their expectations for organic or core sales growth in 2025. He inquires whether the company plans to grow with the market or gain market share, considering new products and innovations aren't expected until 2026. Chris Peterson responds, stating the company has guided for a core sales growth range of -2% to +1% for 2025, indicating a significant improvement from the current year. He adds that the first half of 2025 is expected to see low single-digit declines, with positive core sales growth anticipated in the latter half of the year.

The company expects flat growth across various categories, with a notable one-time business headwind due to discontinuing certain operations. Excluding this, core sales guidance would range from -1% to +2% for the year. The learning and development segment has shown core sales growth throughout 2024 and is expected to continue growing into 2025, making it a crucial profit area. The international segment also displayed consistent growth in 2024 and is expected to do so in 2025. With an expanding innovation pipeline, the home and commercial segment is projected to achieve positive growth later in the year. The outdoor and recreation segment, which is less significant in terms of company revenue and profit, is anticipated to see sequential sales improvement in 2025, although major innovations are not expected until 2026. The company is currently in discussions with key retailers for the 2026 season.

The paragraph discusses the financial outlook for a business, indicating that core sales are expected to improve sequentially but not turn positive until 2026. Bill Chappell inquires about interest expenses, and Mark Erceg explains that despite a successful refinancing effort, there was an increase in interest rates from previous debt due to step-ups. New bonds issued for 2030 and 2032 are seeing better trading conditions, reflecting confidence in the company's credit metrics improvements. The projected refinancing scheduled for midyear 2026 has already been considered in the financial guidance, meaning it's not expected to create additional financial burdens.

In this paragraph, Lauren Lieberman from Barclays poses a question about the impact of tariffs on the company's business. Chris Peterson responds by suggesting that, while it's hard to predict, tariffs could potentially be a net positive for the company in the midterm due to their strong US manufacturing base. He mentions that half of their business is manufactured in the US, giving them a competitive edge over rivals who manufacture abroad. The company has started engaging with retailers to promote US-made products, encouraging them to adjust promotions and shelf placements to favor these products as a strategy to mitigate tariff risks.

The paragraph discusses the balance of potential positive and negative factors affecting a business's performance. On the positive side, there's increasing traction and opportunities due to investments in the US manufacturing base, particularly since the 2017 tax cut initiative, which might lead to greater profitability and expansion through hiring more workers. On the negative side, the business faces uncertainty and potential setbacks from tariffs imposed by China, Mexico, and Canada, which makes future predictions challenging. The speaker also addresses a question about Q1 core sales, seeking more clarity on the factors influencing them.

In the paragraph, Chris Peterson and Mark Erceg discuss their company's performance and outlook for Q1. They note that Q1 is typically their smallest quarter due to seasonal factors and minimal innovation launches. Although Q1's guidance shows a decline of 2% to 4% compared to last year, it is still an improvement over last year's start. They express confidence in their innovation pipeline, which is expected to be three times larger in 2025 compared to 2024. Additionally, they mention that a currency dislocation and a tariff discussion have impacted their EPS guidance, but they are confident in achieving their full-year EPS growth projection of 18%. Both convey optimism about the company's ongoing strength and view these issues as temporary.

The paragraph discusses a company's strategy of launching innovations, primarily in the summer, which is expected to drive sales growth in the latter half of the year. The company has been making strategic decisions to prioritize higher-margin businesses, resulting in improved gross margins, even though net sales in 2024 were $550 million less than in 2023. Despite the revenue decline, the company's trailing twelve-month adjusted EBITDA increased by $120 million. Chris Carey from Wells Fargo Securities questions whether the company's ongoing strategy of divesting and shedding businesses, which has improved gross margins but created revenue headwinds, will be a long-term approach.

In the paragraph, Chris Peterson discusses the company's strategic shift from having 80 brands to reducing them to 55 by the end of 2024, with plans to further narrow down to a core portfolio of 50 brands. The focus will be on the top 25 brands that account for 90% of sales and profits. He indicates that while the process of eliminating lesser-performing brands has been challenging, by 2026, this will no longer be a hindrance to the company's sales. Chris Carey inquires about visibility and growth prospects in the company's main categories, noting that some categories are currently experiencing sluggish growth.

The paragraph discusses Chris Peterson's approach to predicting category growth, acknowledging that it's more of an art than a science due to recent volatility. As of 2024, their prediction of categories declining by low single digits was accurate. For 2025, they forecast that global category growth will be flat, relying on various data sources such as Zircona, Euromonitor, retailer insights, macroeconomic forecasts, and historical data. Peterson notes there will be regional and category-specific fluctuations but sees no reason to deviate from the forecast for improvement in 2025 compared to 2024. The dialogue then transitions to the next question from Brian Vaccine of Canaccord Genuity, who asks about the company's practical tariff exposure in China.

The paragraph discusses the impact of tariffs on the company's business, particularly related to products from China. Currently, 15% of their business is affected, but they expect this to reduce to 10% by the end of the year, with the majority connected to baby products that are exempt from 301 tariffs. However, a new 10% tariff on all Chinese goods has been announced, which might affect this exemption, but the company believes they won't be significantly disadvantaged as the industry relies on China for these categories. Additionally, they have no exposure to retaliatory tariffs from China, as their US-made products are not exported there. The company maintains a business in China for fine writing items, but those are manufactured in Europe. In response to a question about returning to core sales growth, the company hints at factors such as easy comparables, reduction in brand exits, and innovation as potential growth drivers.

The paragraph outlines the company's strategy for achieving core sales growth. First, they anticipate category improvement from a decline to stabilization next year. They have significantly enhanced their new product innovation pipeline, with the number of tier one initiatives increasing from one in 2023 to mid-teens by 2025. The gross revenue from these innovations is expected to be significantly higher. Additionally, the company is focusing on expanding distribution, which is projected to shift from negative to positive by 2025. They believe that increasing shelf space for their market-leading brands, which currently have less shelf space than their market share warrants, can further drive sales growth.

The paragraph outlines Newell Brands Inc.'s strategy to improve core sales by focusing on product innovation and adjusting their mix and pricing strategy towards medium and high price points. The company aims to enhance price per unit and shift from sales decline to sales growth. Additionally, it highlights the increased investment in advertising and promotion (A&P), aiming to reach 6% of sales by 2025, up from 4% in 2022. The company acknowledges previous shortcomings in branding and marketing, and since Chris's capability assessment, they have implemented full brand management to address these issues. The discussion concludes with a question from Andrea Teixeira of JPMorgan.

In the paragraph, Chris Peterson responds to a question about the impact of pricing and volume on core sales and provides insights into international market dynamics. He states that pricing contributed about a point to Q4, primarily in markets with significant currency devaluation. Looking ahead to Q1, they anticipate increased foreign exchange pressure and are planning additional pricing adjustments, mainly in international markets, which will have a more substantial impact in Q2. He also addresses Mexico's role in their international expansion, noting its importance as a key market and mentioning their manufacturing presence there, which supports both local and U.S. operations.

The paragraph discusses a company's perspective on its business in Mexico, which constitutes about 4% to 5% of its total revenue, and their plans for expansion to increase market share. Mark Erceg talks about expected net pricing in 2025, largely influenced by currency movements, with a predicted distribution of one-third impact in the first half of the year and two-thirds in the second half, although the FX impact will be opposite. He mentions recent significant currency fluctuations but reassures that the company was prepared and proactive, with plans in place to manage these changes. Their strategy aims to improve operating margins by over a hundred basis points, outperforming their evergreen target. Andrea Teixeira acknowledges the comments, and the operator introduces the next question from Peter Grom of UBS, who notes the challenges in predicting uncertainties mentioned by Chris and Mark.

In this paragraph, Chris Peterson explains their approach to providing financial guidance and managing company performance. He emphasizes a focus on delivering what they promise without being overly conservative. Internally, they set higher targets than what is publicly guided. He acknowledges the impact of macroeconomic factors but expresses confidence in their improved flexibility to manage the profit and loss statement compared to previous years. There is a discretionary budget for adjustments if innovations face disruptions, and contingency plans are in place to increase investments if conditions are better than expected.

In the paragraph, Mark Erceg discusses the company's focus on long-term operating margin expansion without providing specific quarterly guidance. He emphasizes that substantial improvements have been made in gross margin due to structural changes rather than cyclical factors. These improvements are attributed to efforts in enhancing productivity, automation, innovation, and effective management of pricing and promotions. The company anticipates continued margin expansion, particularly in the latter part of the year, and is optimistic about achieving long-term targets despite current challenges such as declining top-line numbers and inventory reductions impacting short-term capacity utilization.

The paragraph discusses the progress made by Chris and the speaker at Deutsche Bank over the past two years towards achieving their midterm financial goals. They aimed for a gross margin of 37% to 38%, A&P expenses at 6% to 7%, and overheads at 17%, which would yield a margin of 13% to 15%. Despite ending the year with an 8% margin, they are pleased with their achievements, including a $900 million adjusted EBITDA and improved profitability despite lower sales. They attribute their success to decisive actions and leadership, expressing confidence in their ongoing business turnaround. The paragraph concludes with Peter Grom thanking participants and the operator ending the conference call, mentioning a replay available on the company's website.

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