01—Abstract
Summary
Summary of the 10-Q filed July 30, 2021. Cited figures are marked; the original filing is the authoritative source.
Church & Dwight Co., Inc. (CHD) reported solid results for the second quarter and first half of 2021, demonstrating resilience and growth across its segments.
Net sales increased by 6.4% for both the three and six-month periods, reaching $1.27 billiona and $2.51 billion, respectively. This growth was driven by increased product volumes, favorable pricing and product mix in certain segments, and the inclusion of recently acquired businesses. The company demonstrated strong operational efficiency, with income from operations increasing by 19.1% in the second quarter and 6.4% in the first half.
While gross margin experienced a slight contraction due to increased manufacturing and transportation costs, this was partially offset by productivity programs and favorable price/volume/mix. Strategic reductions in marketing and SG&A expenses also contributed positively to profitability. Despite inflationary pressures, CHD's focus on cost management and strategic price adjustments, coupled with strong consumer demand for its essential and personal care products, positions it well for continued performance.
02—Key points
Key Highlights
- Net sales grew by 6.4% year-over-year for both the three and six-month periods ending June 30, 2021.
- Income from operations increased by 19.1% in Q2 2021 and 6.4% in the first half of 2021 compared to the prior year periods.
- Gross margin saw a decline of 340 basis points in Q2 2021 primarily due to higher manufacturing and transportation costs, but productivity programs and price/volume/mix provided some offset.
- SG&A expenses decreased significantly by 26.8% in Q2 2021, aided by a favorable adjustment to the Flawless business acquisition liability and lower incentive compensation.
- The company is managing supply chain challenges and input cost inflation by increasing short-term manufacturing capacity, working with suppliers, and evaluating price increases.
- Cash flow from operating activities decreased to $344.3 million for the first six months of 2021 from $598.6 million in the prior year, mainly due to changes in working capital.
- The company repaid a $300 million term loan in June/July 2021 and continues to have significant availability under its revolving credit facility.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2021, Church & Dwight Co Inc kept $0.17.
- Revenue$1.27B100.0%
- Cost of revenue−$718.9M56.6%
- Gross profit$552.2M43.4%
- Operating costs−$253.5M19.9%
- Operating income$298.7M23.5%
- Interest, other & tax−$80.4M6.3%
- Net income$218.3M17.2%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2021filed July 30, 2021Financial Statements
Q2 FY2021 against Q2 FY2020
| Line item | Q2 FY2021Q2 FY2020 | Change |
|---|---|---|
| Revenue | $1.27B$1.19B | +6.4% |
| Cost of Revenue | $718.90M$634.70M | +13.3% |
| Gross Profit | $552.20M$559.60M | −1.3% |
| R&D Expenses | $25.40M$24.60M | +3.3% |
| SG&A Expenses | $136.50M$186.60M | −26.8% |
| Operating Income | $298.70M$250.70M | +19.1% |
| Interest Expense | $14.10M$16.80M | −16.1% |
| Net Income | $218.30M$189.70M | +15.1% |
| EPS (Basic) | $0.89$0.77 | +15.6% |
| EPS (Diluted) | $0.87$0.75 | +16.0% |
| Shares Outstanding (Basic) | 245246.20M | −100.0% |
| Shares Outstanding (Diluted) | 250251.30M | −100.0% |
05—Questions
Frequently Asked Questions
How did the company's top-line performance fare in the second quarter and first half of 2021?
Church & Dwight Co., Inc. reported a net sales increase of 6.4% for both the three and six months ended June 30, 2021, compared to the respective periods in 2020. Net sales reached $1.27 billion for the quarter and $2.51 billion for the first half.
What were the main drivers behind the gross margin pressure observed in the quarter?
The gross margin decreased by 340 basis points in the second quarter of 2021 compared to the prior year. This was primarily due to higher manufacturing costs, including commodities (410 bps) and transportation costs (70 bps), as well as incremental tariffs (50 bps). These pressures were partially offset by productivity programs (140 bps) and favorable price/volume/mix (50 bps).
How is the company addressing the current inflationary environment and supply chain challenges?
The company is experiencing significant inflation in manufacturing and distribution costs due to shortages in labor, raw materials, packaging, and transportation. They are addressing this by increasing short-term manufacturing capacity, working closely with suppliers, and evaluating price increases. They are also investing in long-term manufacturing capacity expansion and qualifying additional suppliers.
What is the company's liquidity position and how is it managing its debt?
As of June 30, 2021, Church & Dwight had $149.8 million in cash and cash equivalents and approximately $767.0 million available under its revolving credit facility and commercial paper program. The company repaid a $300 million term loan in June/July 2021 and continues to manage its debt prudently.
06—Continue