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Newell Brands(NWL) - 2024 Q4 - Earnings Call Transcript
NWLNewell Brands(NWL)2025-02-07 19:06
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Financial Data and Key Metrics Changes - Fourth quarter and full year core sales growth was in line with expectations, with a sequential improvement in the second half of 2024 compared to the first half [12] - The company reported a 3.4% core sales decline for the year, despite experiencing category contraction [13] - Normalized gross margin improved by 460 basis points to 34.1% for the full year compared to 2023, marking the highest full-year normalized gross margin since 2018 [14][47] - Normalized operating margin increased by 210 basis points to 8.2%, driven by improved gross margin [15] - The company generated nearly 500millionofoperatingcashflow,allowingforareductionindebtandaleverageratioof4.9timesatyear−end[16][51]BusinessLineDataandKeyMetricsChanges−Coresalestrendsimprovedacrossallsixbusinessunits,withthreeunitsturningpositivefortheyear,specificallyinbaby,writing,andcommercialbusinesses[12]−Thelearninganddevelopmentsegmentandtheinternationalbusinessachievedpositivecoresalesgrowthinallquartersof2024[12]−Fourthquartercoresalesweredown3500 million of operating cash flow, allowing for a reduction in debt and a leverage ratio of 4.9 times at year-end [16][51] Business Line Data and Key Metrics Changes - Core sales trends improved across all six business units, with three units turning positive for the year, specifically in baby, writing, and commercial businesses [12] - The learning and development segment and the international business achieved positive core sales growth in all quarters of 2024 [12] - Fourth quarter core sales were down 3%, with pricing in international markets contributing significantly to performance [41] Market Data and Key Metrics Changes - The company faced a 2.6% currency headwind in net sales during the fourth quarter [43] - Imports from China now account for about 15% of the company's total cost of goods sold, with expectations to reduce this to less than 10% by the end of the year [20][21] Company Strategy and Development Direction - The company aims to return to top-line growth through continued execution of its corporate strategy, focusing on product and commercial innovation, distribution expansion, and international growth [25] - The strategy includes a significant emphasis on US manufacturing capabilities to leverage competitive advantages in certain product categories [92] - The company plans to continue deleveraging the balance sheet and improving cash conversion cycles while investing in high-return capability improvement projects [36] Management's Comments on Operating Environment and Future Outlook - The macroeconomic backdrop is expected to be dynamic, with lower-income consumers under pressure from inflation and evolving tax policies [24] - Management expressed confidence in returning to sustainable top-line growth and improving operating margins despite ongoing challenges [38] - The preliminary guidance for 2025 indicates core sales expected to be between -2% and +1%, with a focus on sequential improvement [57] Other Important Information - The company has reduced its brand count from 80 to about 55 and plans to exit a few more small brands in 2025 [114] - The company has invested close to 2 billion in US manufacturing since 2017, positioning itself competitively against peers [95] Q&A Session Summary Question: Focus on organic or core sales growth for 2025 - Management expects core sales guidance for 2025 to be between -2% and +1%, with a significant sequential improvement anticipated [73][74] Question: Clarity on Q1 core sales drivers - Q1 is typically the smallest quarter, and management does not read too much into it as an indicator for the year [100] Question: Practical tariff exposure in China - Current exposure is at 15%, expected to reduce to 10% by year-end, primarily related to the baby business [126]