Clorox (CLX) to Discontinue Clorox Venezuela Operations

The Clorox Company (NYSE: CLX) reported its affiliate Corporación Clorox de Venezuela S.A. (Clorox Venezuela) is no longer viable. As a result, Clorox Venezuela is discontinuing its operations, effective immediately, and is seeking to sell its assets.

"This is a very difficult situation for our company," said Chairman and CEO Don Knauss. "We are extremely proud of the men and women who did their very best to operate our business in the face of significant economic challenges. We are working to support them through this transition."

For nearly three years, Clorox Venezuela was required to sell more than two-thirds of its products at prices frozen by the Venezuelan government. During this same period, Clorox Venezuela experienced cumulative triple-digit inflation resulting in massive increases in Clorox Venezuela's input costs, including packaging, raw materials, transportation and wages. As a result, Clorox Venezuela had been selling its products at a loss, causing ongoing operating losses. Clorox Venezuela repeatedly met with government authorities to help them understand the rapidly declining state of the business, including the need for immediate, significant and ongoing price increases and other critical remedial actions to address these adverse impacts. Based on their representations, Clorox Venezuela had expected significant price increases would be forthcoming much earlier this year. However, price increases subsequently approved by the government were nowhere near sufficient and would have caused Clorox Venezuela to continue operating at a significant loss.

While Clorox Venezuela would have preferred to maintain its business in Venezuela and continue supplying its products to the Venezuelans who use them every day, given the operating restrictions imposed by the Venezuelan government, considerable economic uncertainty, continual supply disruptions, and without significant and ongoing price increases as well as other remedial actions, Clorox Venezuela anticipated considerable operating losses would continue into the foreseeable future. As a result, the business is no longer viable and, therefore, Clorox Venezuela has been forced to discontinue its operations.

This announcement relates only to the Clorox Venezuela business; The Clorox Company's other international businesses are not impacted.

The Clorox Company Confirms FY15 Outlook for Sales and EPS From Continuing Operations In the last fiscal year, which ended June 30, 2014, net sales from Clorox Venezuela represented about 1.4 percent, or about $77 million, of The Clorox Company's total sales, and the Clorox Venezuela business generated losses before interest and taxes of about $23 million.

In the company's fiscal year 2015 outlook, first communicated in May 2014, Clorox Venezuela had anticipated receiving approval for significant price increases to meaningfully reduce the operating loss versus fiscal year 2014. However, price increases subsequently approved by the government were nowhere near sufficient and would have caused Clorox Venezuela to continue operating at a significant loss.

With this exit, the historical and future financial results of Clorox Venezuela will be reflected as discontinued operations. For fiscal year 2015, discontinued operations will also include anticipated after-tax exit costs of $60 million to $65 million, or 46 cents to 50 cents diluted EPS. In addition, discontinued operations may reflect approximately $10 million to $15 million in after-tax exit costs over the next three fiscal years. Cash-related exit costs, net of expected tax benefits, are expected to be $5 million to $10 million.

The company's fiscal 2015 financial outlook continues to anticipate sales to be about flat and diluted earnings per share from continuing operations to be in the range of $4.35-$4.50.

The Clorox Company will discuss its fiscal 2015 financial outlook when it communicates first-quarter results on Oct. 31. In addition, concurrent with its first-quarter Form 10-Q filing, the company will provide historical company results that reflect the Venezuela business on a discontinued operations basis.

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