On this page of StockholderLetter.com we present the 3/17/2023 shareholder letter from CHURCH & DWIGHT CO INC /DE/ — ticker symbol CHD. Reading current and past CHD letters to shareholders can bring important insights into the investment thesis.

 •  3/17/2023 Letter Continued (Full PDF)
 •  3/22/2024 CHD Stockholder Letter
 •  3/20/2025 CHD Stockholder Letter
 •  3/19/2026 CHD Stockholder Letter
 •  More "Consumer Goods" Category Stockholder Letters
 •  CHD Benford's Law Stock Score = 89

CHD 3/17/2023 Shareholder/Stockholder Letter Transcript:

CHURCH & DWIGHT CO., INC.
annual
report
2022

in millions , except per share data
2022
reported
2021
adjusted*
reported
adjusted*
Net Sales
$ 5,376   
$ 5,376
$ 5,190   
$ 5,190
Gross Profit Margin   41.9%   41.9%   43.6%   43.6 %
Income from Operations
$ 598   
$ 1,015
$ 1,079   
981
Operating Profit Margin   11.1%   18.9%   20.8%   18.9 %
Net Income
$ 414   
$ 731
828   
754
Net Income Per Share     Diluted
$ 1.68   
$ 2.97
$ 3.32   
$ 3.02
Dividends Per Share
$ 1.05   
$ 1.05
$ 1.01   
$ 1.01
Year-end Stock Price
$ 80.61   
$ 80.61
$ 102.50   
$ 102.50
On February 3, 2023, the Company declared a 4.0% increase in its
quarterly dividend from $0.2625 per share to $0.2725 per share.
2022 Key Financial Results
    Worldwide net sales increased 3.6%.    
    Organic sales increased 1.4%.    
    Gross profit margin decreased 170 basis points to 41.9%.  
    Adjusted operating profit margin was unchanged at 18.9%.    
    Net cash from operations was $885 million.    
    Adjusted earnings per shared decreased 1.7%.    
NET SALES
ADJUSTED EARNINGS PER SHARE (1)
(in millions of dollars)
(in dollars)
2020
2021
2022
$4,896
$5,190
$5,376
2020
$2.83 (2)
2021
$3.02 (3)
2022
$2.97 (4)
For additional information, see Management   s Discussion and Analysis of Financial Condition and Results of Operations included in the Company   s Annual Report on Form 10-K for
the year ended December 31, 2022.
*  This annual report includes non-GAAP financial measures, including adjusted income from operations, adjusted operating profit margin, adjusted net income, adjusted EPS, organic
sales, and free cash flow, which differ from reported results using Generally Accepted Accounting Principles (GAAP).      
(1)  This annual report presents adjusted EPS, namely, earnings per share calculated in accordance with GAAP, as adjusted to exclude significant one-time items that are not indicative
of the Company   s period to period performance. We believe that this metric provides investors a useful perspective of underlying business trends and results and provides useful
supplemental information regarding our year over year earnings per share growth.         
(2) Adjusted 2020 EPS excludes a $0.28 positive FLAWLESS acquisition related earn out adjustment and a $0.01 gain on the sale of an international brand.
(3) Adjusted 2021 EPS excludes $0.30 per share positive impact from the FLAWLESS acquisition earn-out estimate.      
(4)  Adjusted 2022 EPS excludes $1.26 impact of the FLAWLESS intangible asset impairment and $0.03 impact of charges related to restricted stock that was issued for the Hero
acquisition, wh ich will be treated as compensation expense.          

Corporate Information
Church & Dwight Co., Inc., founded in 1846, is the leading
XTRA, VMS (L   IL CRITTERS and VITAFUSION), BATISTE,
U.S. producer of sodium bicarbonate, popularly known
WATERPIK, ZICAM, THERABREATH and HERO. About
as baking soda, a natural product that cleans, deodorizes,
45% of the Company   s domestic consumer products are
leavens and buffers. The Company   s ARM & HAMMER
sold under the ARM & HAMMER brand name and derivative
brand is one of the nation   s most trusted trademarks
trademarks, such as ARM & HAMMER liquid and powder
for a broad range of consumer and specialty products
laundry detergent, ARM & HAMMER cat litter, ARM &
developed from the base of sodium bicarbonate and
HAMMER dental care and ARM & HAMMER baking soda.
related technologies.
The remaining 13 power brands have been added to the
Company   s portfolio since 2001 through a series of
Church & Dwight   s consumer products business is
organized into two segments: Consumer Domestic, which
acquisitions.
encompasses both household and personal care products,
The combination of the core ARM & HAMMER brands and
and Consumer International, which primarily consists of
the other 13 power brands make Church & Dwight one of
personal care products. The Company has fourteen key
the leading consumer packaged goods companies in the
brands representing approximately 85% of its revenues.
United States. Church & Dwight   s third business segment
These    power brands    include ARM & HAMMER, TROJAN,
is Specialty Products. This business is a leader in specialty
OXICLEAN, SPINBRUSH, FIRST RESPONSE, NAIR, ORAJEL,
inorganic chemicals, animal nutrition, and specialty cleaners.
Growth Driven by 14 Power Brands
ARM & HAMMER
More aisles in the grocery store than any other brand;
A&H products are in 86% of U.S. households
XTRA
#1 Extreme Value
Laundry Detergent
L   IL CRITTERS &
VITAFUSION
#1 Gummy Brands for
Adults and #1 Gummy
Brand for Kids in the U.S.
OXICLEAN
#1 Laundry
Additive Brand
SPINBRUSH
#2 Battery Powered
Toothbrush Brand
FIRST RESPONSE
#2 Branded Pregnancy
Kit in the U.S.
WATERPIK
#1 Power Flosser
and #1 Replacement
Showerhead in the U.S.
ORAJEL
#1 Oral Care Pain
Relief Brand
BATISTE
#1 Dry Shampoo
in the U.S.
NAIR
#1 Depilatory Brand
in the U.S.
TROJAN
#1 Condom Brand
in the U.S.
ZICAM
#1 Adult Cold
Shortening in the U.S.
THERABREATH
#2 Alcohol-Free
Mouthwash in the U.S.
HERO
#2 Acne Treatments
Based on Information Resources, Inc.     (IRI) Total US     MULO for the period ending 12/25/22.
| 1 |

Matthew T. Farrell
Richard A. Dierker
Patrick D. de Maynadier, Esq.
Chairman, President
and Chief Executive Officer
Executive Vice President,
and Head of Business
Operations
Executive Vice President,
General Counsel and Secretary
Dear Fellow Stockholder,
2022 was another volatile year dominated by significant
inflation which resulted in unplanned material, labor and
transportation costs that put significant pressure on gross
margins. Prior to 2022, we had already raised prices on
80% of our portfolio to offset the inflationary pressures
of the pandemic. In 2022, a second round of pricing was
taken in several categories including laundry and cat litter.
Our organic sales growth was 1.4% reflecting consumer
pullback on discretionary purchases of WATERPIK flossers
and FLAWLESS hair removal devices as consumers were
squeezed by inflation. In late 2022, we wrote off our
investment in FLAWLESS, a device business acquired in
2019. In the future, we will stick to acquiring fast-moving
consumables. There was also a pullback in VITAFUSION
gummy vitamins as many consumers exited the category
post COVID, which had artificially inflated demand.
WATERPIK, FLAWLESS, and VITAFUSION, which account
for approximately 20% of our global sales, were a significant
drag on our organic revenue growth. The good news is the
remaining 80% of our business grew approximately 4%
in 2022. ARM & HAMMER liquid laundry detergent and
ARM & HAMMER litter achieved all time high market shares.
THERABREATH, ZICAM, and HERO experienced double-digit
consumption growth and market share gains. We believe we
are set up for success in 2023.
Here are the 2022 results:
    Reported net sales were $5,376 million, a 3.6% increase.
     Organic sales increased 1.4% driven by 0.9% growth in
our Consumer Domestic business, 2.8% growth in our
Consumer International business, and a 3.7% increase in
our Specialty Products business.
| 2 | C H U R C H & D W I G H T C O . , I N C .     A N N U A L R E P O R T 202 2
   G
  ross margin decreased 170 basis points to 41.9%,
primarily due to higher manufacturing costs. These
higher costs were partially offset by our productivity
improvements and higher pricing.
    Adjusted EPS was $2.97 per share, a 2% decrease.
     We generated $885 million of cash from operating
activities and invested $179 million in capital expenditures
resulting in free cash flow of $706 million.
     Total Shareholder Return (TSR) represents the combination
of stock price appreciation and dividends. We manage
Church & Dwight with the perennial goal of delivering
strong TSR to you, our stockholders. Over the past decade,
we delivered an annual TSR of approximately 13.3%, which
was better than the 10.4% TSR of the S&P 500 stock index
during the same period. In the 15 years prior to 2022,
we delivered positive TSR each year, often double-digit
returns. In 2022, we went backwards and posted negative
20% TSR. This is a disappointment to management, our
employees, and our shareholders. Our goal is to start
another 15-year positive TSR streak in 2023.
Evergreen Model
Our long-term mission is to maintain our track record
of delivering outstanding TSR. Our long-term plan for
delivering superior returns is based on what we call our
   Evergreen business model        3% annual organic revenue
growth and 8% annual increase in earnings per share. The
3% annual organic growth is driven by U.S. 2%, International
6% and Specialty Products 5%. The 8% earnings per share
growth is primarily driven by 3% organic growth and 50

basis points of operating margin improvement. Our operating
margin improvement is dependent on 25 basis points of
gross margin expansion and a 25-basis points reduction
of overhead costs. Achievement of the Evergreen model
influences both our short-term and long-term decision
making and promotes financial literacy inside our Company.
It is an important part of our success. The mid-point of our
2023 Outlook calls for 3% organic revenue growth and
2% EPS growth. 2023 EPS is burdened by a deliberate
incremental investment in marketing, normalized incentive
compensation, and higher interest expense. We expect to
return to our evergreen algorithm in 2024 and beyond.
Key Drivers of TSR
The following are the key drivers of our success:
(1) A Diversified Product Portfolio
Church & Dwight   s diverse consumer product portfolio,
consisting of both premium (60%) and value (40%) brands,
enables us to succeed in various economic environments.
We believe no other consumer packaged goods (CPG)
company has such a well-balanced portfolio of both
premium and value brands.
(2) Focus on Power Brands
While we sell over 80 brands, 14 of these brands generate
over 85% of our revenues and profits. These 14 brands,
which we call our    power brands,    are ARM & HAMMER,
TROJAN, OXICLEAN, VMS (L   IL CRITTERS and VITAFUSION),
XTRA, FIRST RESPONSE, SPINBRUSH, ORAJEL, NAIR,
BATISTE, WATERPIK, ZICAM, THERABREATH and HERO.
Our 14 Power Brands are    Brands Consumers Love    and,
consequently, are market leaders in most categories. We
connect with consumers through execution of creative
marketing campaigns, innovative new products, and sustained
marketing spending resulting in high market shares for
our brands.
(3) High International Growth
Our Evergreen model calls for our Consumer International
business to grow revenues 6% annually. Today, 17% of
our sales are outside the U.S. We have fully operational
subsidiaries in six countries (U.K., France, Germany, Canada,
Mexico, and Australia) and export our products to over 130
countries through our Global Markets Group (   GMG   ). In
2022, our international business posted organic growth of
2.8%, which is below our Evergreen model, largely driven
by the GMG results. In 2022, our international subsidiaries
together grew 4% and accounted for 65% of our international
business. GMG continues to be the largest international
business, representing 35% of our international revenues.
GMG did not grow in 2022 due to widespread supply chain
constraints, lockdowns in China, and a cessation of sales into
Russia and Ukraine due to the war. In the 5 years prior to
2022, GMG grew sales at an average annual rate of 15%.
We expect GMG to return to a high growth rate in 2023.
International is a destination for continued investment. In
2022, we opened an office in Mumbai to better serve markets
in IME (India Middle East), installed an ERP system in China to
facilitate direct selling, and expanded local manufacturing in
APAC for certain of our products. In 2023, we will be making
a significant investment in our back-office infrastructure,
especially regulatory and new product development, to
support the long-term growth we expect from GMG.
(4) Animal Nutrition Growth Opportunity
We expect our Specialty Products division (   SPD   ) to grow
revenues 5% annually. In 2022, SPD grew organic revenues
3.7%. Our long-term growth expectation is driven by our
animal and food production business which represents about
70% of SPD sales (with the remainder largely bulk sodium
bicarbonate). The global population is expected to rise from
7.7 billion today to 9.7 billion in 2050. The demand for
protein will increase with population growth. At the same
time, there is a trend away from the use of antibiotics,
hormones, and chemicals in animal nutrition. Our portfolio
of natural supplements, prebiotics, and custom probiotics for
dairy cows, poultry, cattle, and swine are well-positioned for
this global growth. Considering the population tailwind and
the strength of our products, we have strong confidence in
long-term growth.
(5) Winning Online
Our long-term success requires us to be    digitally savvy.    We
are preparing ourselves for a world where 40% of our net
sales are ordered online. In 2015, only 1% of our sales were
online. In 2022, approximately 16% of our global sales were
online. That percentage is closer to 18% if we include last
milers (e.g., Instacart) and Click and Collect (i.e., order online,
pick up in store). The online channel is the fastest growing
class of trade in our company. We are moving quickly to build
on our digital expertise. In 2022, we created a new position,
Global Chief Digital Growth Officer that leads the charge
| 3 |

3/17/2023 Letter Continued (Full PDF)

 

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