Newell Brands announced that it will explore a series of strategic initiatives to accelerate its transformation plan, improve operational performance and enhance shareholder value.
Newell Brands acquired Rawlings’ former parent company, Jarden Corp., in 2016.
Key components include:
- Focusing Newell’s portfolio on nine core consumer divisions with approximately $11 billion in net sales and $2 billion of EBITDA;
- Exploring strategic options for industrial and commercial product assets, including Waddington, Process Solutions, Rubbermaid Commercial Products and Mapa;
- Exploring strategic options for the smaller consumer businesses, including Rawlings, Goody, Rubbermaid Outdoor, Closet, Refuse and Garage, and U.S. Playing Cards;
- Execution of these strategic options would result in a significant reduction in operational complexity through a 50 percent reduction in the company’s global factory and warehouse footprint, a 50-percent reduction in its customer base and the consolidation of 80 percent of global sales on two ERP platforms by end of 2019.
If fully actioned, Newell Brands would expect to be an approximately $11 billion focused portfolio of leading consumer-facing brands with attractive margins and growth potential in global categories. These brands would leverage the company’s advantaged capabilities in brands, innovation, design and e-commerce. The company expects proceeds after tax to be greater than that required to achieve a leverage ratio below the lower end of its current leverage ratio target range. Newell Brands intends to begin the evaluation process immediately and expects any resulting transactions to be completed by the end of 2019.
“Today’s announcement is a step toward a significant acceleration in our transformation plan. We believe that exiting non-strategic assets, reducing complexity and focusing on our key consumer-focused brands will make us more effective at unlocking value and responding to the fast-changing retail environment,” said Michael Polk, Newell Brands CEO. “A stronger, simpler, faster Newell, together with leading brands, brilliant marketing, outstanding innovation and an advantaged e-commerce capability, better positions us to win in these dynamic times. As a result, we have chosen to explore these strategic options.”
Preliminary Unaudited 2017 Results and Initial 2018 Guidance
Newell Brands also announced preliminary estimated results for 2017. The company currently anticipates:
- Core sales growth of approximately 0.8 percent (previous guidance 1.5 percent to 2.0 percent)
- Normalized EPS in the range of $2.72 to $2.76 (previous guidance $2.80 to $2.85)
- Approximately $1.0 billion of operating cash flow generated in the fourth quarter of 2017, resulting in full year operating cash flow of approximately $930 million (previous guidance of $700 to $800 million)
The company’s core sales results were impacted by an acceleration of the gap between sell-in and sell-through results due to a continuation of retailer inventory rebalancing in the U.S. and the bankruptcy of a leading baby retailer. Margins were impacted by the negative mix effect of lower Writing sales and a reduction of fixed cost absorption due to shorter cycle runs on self-manufactured products, designed to reduce inventories and maximize operating cash flow.
Polk commented, “Despite a very difficult commercial outcome in the second half of 2017, the vast majority of our brands are performing well in the marketplace. Our e-commerce business grew at a strong double-digit pace, our market shares have continued to increase and sell-through growth has accelerated with Q4 2017 growth rates ahead of Q3 2017 in the U.S., which strengthens our confidence in our brand, design and innovation-led strategy. Importantly, our early efforts to improve working capital metrics look to have yielded good results with operating cash flow of nearly $1 billion dollars in Q4, despite the increased margin pressure from planned downtime in our factories and input cost inflation. We are committed to achieving our transformation objectives and are taking decisive action with speed to adapt our agenda to the unprecedented volatility in our retailer landscape.”
The company’s initial guidance for 2018 assumes continued ownership of all assets for the entire calendar year. The company expects to achieve market share growth in its core categories and geographies in 2018, with core sales growth despite continued retailer inventory reductions. Normalized earnings per share for 2018 are expected to be approximately $2.65 to $2.85, which includes the negative impact of an approximately $135 million replenishment of management and sales bonuses that were not earned in 2017, and assumes a tax rate of 20 percent to 21 percent after the benefits from U.S. tax reform. Operating cash flow is expected to be $1.15 billion to $1.45 billion, excluding the impact of any potential divestitures.
The company will provide additional details on its fourth quarter and full year 2017 financial performance, as well as an update on its strategic and operational initiatives as part of its earnings announcement and conference call on Friday, February 16, 2018.
Newell Brands’ portfolio includes Paper Mate, Sharpie, Dymo, EXPO, Parker, Elmer’s, Coleman, Jostens, Marmot, Rawlings, Oster, Sunbeam, FoodSaver, Mr. Coffee, Rubbermaid Commercial Products, Graco, Baby Jogger, NUK, Calphalon, Rubbermaid, Contigo, First Alert, Waddington and Yankee Candle.