Church & Dwight Co. Inc (CHD) — Q2 2021 Earnings Call Transcript

Good morning, everyone. Thanks for joining us today. I'll begin with a review of the Q2 results and then I'll turn the call over to Rick Dierker, our CFO. When Rick is done, we'll open up the call for questions. But before we begin, I'd like to recognize all Church & Dwight employees around the world for their continued dedication to keeping our Company going during the pandemic, especially our Supply Chain and R&D teams. During this quarter, the Company faced the complexities of raw material shortages and labor shortages at our suppliers and third-party manufacturers. Now, let's talk about the results. Q2 was another solid quarter for the Company. Reported sales growth was 6.4%. Organic sales growth grew 4.5% and exceeded our 4% Q2 outlook. The 4.5% organic growth is impressive considering Q2 2020 organic sales growth was 8.4%. Adjusted EPS was $0.76, and that is $0.07 better than our outlook. The EPS beat is attributed to two things: one, a temporary reduction in marketing; and two, our revenue growth handily exceeded our outlook. Another noteworthy item is that we overcame a tax rate which was much, much higher than expected in Q2. We grew consumption in 13 of the 16 categories in which we compete, and in some cases on top of big consumption gains last year. Another way to look at this is to compare our Q2 consumption on those 16 categories to 2019, a pre-COVID year. We have higher consumption in 14 of those 16 categories compared to Q2 2019. Regarding brand performance, 9 of our 13 brands saw double-digit consumption growth, including Gummy vitamins, stain fighters, cat litter, condoms, battery powered toothbrushes, depilatories, dry shampoo, sailing spray, and water flossers. However, although many of our brands delivered double-digit consumption growth, it is not reflected in our 4.5% organic sales growth, as shipments were constrained by supply issues, which we expect to lessen by Q4. In Q2, online sales as a percentage of total sales was 14.2%. Our online sales increased by 7% year-over-year, keeping in mind this is on top of the 75% growth in e-commerce that we experienced in Q2 2020 compared to 2019. We continue to expect online sales for the full year to be 15% as a percentage of total sales. With 70% of American adults having at least one vaccine shot so far, the US has been opening up with consumers becoming more mobile. In recent days, however, it appears that trend could slow down due to the delta variant combined with many people still being unvaccinated. Outside the US, many countries continue to enforce periodic lockdowns, and we expect that to continue. As described in the release, we face shortages of raw and packaging materials and labor shortages that have reduced our suppliers’ and third-party manufacturers’ ability to produce. Transportation challenges have further contributed to supply problems. Besides shortages, we are dealing with significant inflation of material and component costs, which is affecting our gross margin expectations, which Rick will cover in his remarks. Due to a lower case fill rate, we pulled back on Q2 marketing, especially for household products. We expect the supply issues to begin to abate in Q4. The higher input costs and transportation costs are expected to continue though for the rest of the year. On past earnings calls, we've described how we expected categories and brands to perform in 2021. Overall, our full-year thinking is generally consistent. Demand for vitamins, laundry additives, and cat litter is expected to remain elevated in 2021. Condoms, dry shampoo, and water flossers are recovering and experiencing year-over-year growth as society opens up and consumers have greater mobility. Baking soda and oral analgesics are expected to decline from COVID highs. The consumer domestic business grew organic sales by 2.8%. This is on top of 10.7% organic growth in Q2 2020. Looking at market shares in Q2, 5 out of our 13 power brands met or gained share. Our share results are clearly impacted by our supply issues. I'll comment on a few of the brands right now. VITAFUSION gummy vitamins saw great consumption growth in Q2, up 10%. Consumers have made health and wellness a priority. It appears that new consumers are coming into the category and they're staying. In the last year, VITAFUSION household penetration is up 17%. That means the brand is now in one out of every 10 households. Next up is WATERPIK. WATERPIK grew consumption 72% in Q2 as it continues to recover from COVID lows and benefits from the heightened consumer focus on health and wellness. In the second half of this year, we expect the frequency of our lunch and learn program to return to normal levels. BATISTE dry shampoo grew consumption 37%. Dry shampoo is recovering as stores have reopened and consumers are becoming more mobile. Similarly, TROJAN delivered 11% consumption growth. Society has been opening up. As restaurants, bars, and clubs have reopened, people are hooking up again. Here's a fun fact: In Q2, TROJAN launched on TikTok with explosive uptake from consumers, accumulating over 47 million views. I want to discuss the International aspect of our business. Despite intermittent lockdowns in our markets, our International business came through with 10.4% organic growth in the quarter, primarily driven by our strong growth in our Global Markets Group. Asia continues to be a strong growth engine for us. WATERPIK, BATISTE, and ARM & HAMMER led the growth for the International division in the quarter. Our specialty products business delivered a positive quarter with 11.8% organic growth, driven by higher pricing and volume. Milk prices remain stable, and demand is high for our nutritional supplements. The prior year quarterly organic growth for specialty products was 3%, so 11.8% is an impressive result. Now, turning to new products. Innovative new products will continue to attract consumers. In 2021, we have launched many new products, which are described in our press release. In the household products portfolio, we introduced OXICLEAN Laundry and Home sanitizer, the first and only sanitizing laundry additive that boosts stain fighting and eliminates 99.9% of bacteria and viruses. In the personal care portfolio, VITAFUSION launched Elderberry gummies, Triple Immune gummies, and POWER ZINC gummies to capitalize on increased consumer interest in immunity. WATERPIK launched WATERPIK ION, a water flosser which is 30% smaller with a long-lasting lithium-ion battery. It is specifically designed for smaller bathroom spaces. To capitalize on its earlier success, WATERPIK SONIC-FUSION, the world's first flossing toothbrush, has been upgraded to SONIC-FUSION 2.0. Finally, FLAWLESS is taking advantage of the at-home beauty and self-care trends with at-home manicure and pedicure solutions. Turning to the outlook, since we last spoke to you in April, unplanned cost inflation has grown by another $35 million. In addition to the price increases on 33% of our portfolio that we announced in April, we have just announced price increases on other categories, which means we have now priced up 50% of our portfolio. There is a lag on the positive impact of these increases, which impacts our earnings outlook. We now expect to be at the lower end of our range of adjusted EPS growth of 6% to 8% as a result of elevated input costs. Although we expect to be at the low end of the range, it's important to remember that we are comparing against 15% EPS growth in 2020. We expect full-year reported sales growth of 5%, with 4% full-year organic sales growth. It's also essential to note that we are committed to maintaining the long-term health of our brands by ensuring sustained high levels of marketing investment in the second half. In conclusion, July consumption continues to be strong. We are navigating through significant supply challenges and cost inflation. We believe we are well positioned for 2022 with the pricing actions we have taken. We expect our portfolio of brands to perform well, both in good and bad times, and especially in uncertain economic periods such as now. We have a strong balance sheet and we continue to seek TSR accretive businesses. Now, I'll turn it over to Rick for more details on Q2.

Thank you, Matt, and good morning, everybody. We'll start with EPS. The second quarter adjusted EPS, which excludes the positive earn-out adjustment, was $0.76, down 1.3% compared to the prior year. As we discussed in previous calls, the quarterly earn-out adjustment will continue until Q4, which is the conclusion of the earn-out period. The $0.76 was better than our $0.69 outlook, primarily due to continued strong consumer demand for many of our products as well as a temporary reduction in marketing spend as supply chain shortages impacted customer fill rates, which we expect to recover in Q4. The $0.76 includes a $0.04 drag from a higher tax rate and a $0.04 drag from the VMS recall cost. Reported revenue was up 6.4%. Organic sales were up 4.5%, driven by a volume increase of 4.3%. Matt covered the topline, and I'll jump right into gross margin. Our second quarter gross margin was 43.4%, a 340 basis point decrease from a year ago. This was right in line with our outlook for a decrease of 350 basis points for the quarter. Gross margin was impacted by 480 basis points of higher manufacturing costs primarily related to commodities, distribution, and labor costs. Tariff costs negatively impacted gross margin by an additional 50 basis points. These costs were partially offset by ongoing price increases, volume mix, and a positive impact from productivity programs, as well as a small positive impact from currency. Moving to marketing, marketing expense was down $5.3 million year-over-year as we lowered spend to reduce demand until fill rates could recover. Marketing expense as a percentage of net sales decreased by 100 basis points to 9.2%. We continue to expect full-year marketing expense as a percentage of net sales to be approximately 11.5%, in line with historical averages. For SG&A, Q2 adjusted SG&A decreased by 140 basis points year-over-year with lower legal costs and lower incentive compensation. Other expenses totaled $11.4 million, including a $3.3 million decline due to lower interest expense from reduced interest rates. Regarding income tax, our effective rate for the quarter was 24%, compared to 19.6% in 2020, an increase of 440 basis points, primarily driven by lower stock option exercises. This will also affect our full-year tax rate, and now to cash: for the first six months of 2021, cash from operating activities decreased by 42% to $344 million due to higher cash earnings being offset by an increase in working capital. Accounts payable and accrued expenses decreased due to the timing of payments. As a reminder, last year there was an $80 million benefit in Q2 related to the timing of US federal income tax payments shifting from the second to the third quarter in the prior year. We expect cash from operations to be approximately $950 million for the full year. As of June 30, cash on hand was $149.8 million. Our full-year CapEx plan has now been adjusted to $140 million as we continue to expand manufacturing and distribution capacity, primarily focused on laundry, litter, and vitamins. The decrease from our previous $180 million is project timing related. For Q3, we expect reported sales growth of approximately 3% and organic sales growth of approximately 1.5%, entirely due to supply chain constraints. We expect gross margin expansion in the quarter, led by our price increases. Adjusted EPS is expected to be $0.70 per share, flat in comparison to last year's adjusted EPS. Our strong operating performance is offset by a higher tax rate. For the full-year outlook, we now expect full-year 2021 reported sales growth to be approximately 5% and organic sales growth to be approximately 4%. Our consumption is strong and outpacing shipments, and we expect our customer fill levels to improve by Q4. Regarding gross margin, we now expect full-year gross margin to be down 75 basis points. This represents an incremental impact from our last guidance due to broad-based inflation on raw materials and transportation costs. Our April outlook expected gross margin to be flat for the year and estimated $90 million of inflation from original guidance. Now, we're absorbing $125 million of incremental costs for the full year. This additional $35 million in inflation drives the change in our gross margin outlook. We've taken another round of pricing actions with over 50% of our global brands experiencing price increases. While some of this benefit is helpful in the second half of 2021, most is expected in 2022. As a reminder, we price to protect gross profit dollars, not necessarily margin. The $35 million movement versus our previous outlook is primarily non-commodity related; transportation, labor, third-party manufacturers, and other raw material price increases account for the majority. Commodities are also up. While we have 80% of our commodities hedged, let me give you a sense of what's occurring with major commodities. Over the past few months, expectations for resins in the second half have risen considerably. For example, previously, our forecast anticipated HDPE would rise 30% in the second half of the year; now, it’s up 60%. Polypro has moved from being up 40% to 90%. Additionally, transportation costs such as diesel have continued to rise. We previously expected second-half diesel to be at 18%, now it’s at 27%. Cartons and corrugate, previously single-digit increases, are now low double-digits. So, that is the latest thinking on commodities, and now, we'll move to tax. Our full-year tax rate expectations are now 23%, higher compared to our last expectations due to lower stock option exercises. This translates to a $0.04 drag versus our previous outlook. We now expect adjusted EPS to be at the lower end of our earlier range of 6% to 8%. Our brands continue to thrive, as strong consumption and organic sales growth eclipse almost 10% organic growth from a year ago. While inflation is widespread, we have implemented pricing actions to mitigate this, which gives us confidence in margin expansion in the back half. That said, Matt and I would be happy to take any questions.

Hi, thank you, good afternoon and good morning or whatever it is. A couple of questions on the supply constraints: are you running into constraints because perhaps demand is better than expected, or is it that there are certain pieces within the supply chain that just tightened up, maybe a particular bottleneck that's isolated? Can you just provide a bit more detail on what's going on?

Yes. The issue is not that we're capacity constrained; we have capacity. The issue is getting components. It can be raw or packaging materials, chemicals, etc. The shortages arise because our suppliers have trouble getting labor into their plants to actually produce raw and packaging materials. That's exacerbated by the inability to get products delivered, especially if you're sourcing components from Asia. So it's not a capacity issue; it's entirely due to labor availability and, in some cases, due to the freeze we had with force majeure affecting some of our suppliers’ chemicals. If you recall, earlier in the year, the Texas freeze caused similar issues, and we're not quite out of the woods on that one yet.

The only thing I would add to that is the force majeure comment. As we stated publicly back in Q1, we had around six of them. In this quarter, we had 10 or 11 force majeure instances. So, just pure disruptions in the supply chain.

Okay, got it. Maybe just your best guess on whether the labor issue is abating at all or do these comments reflect Q2 specifically, and are you seeing situations improving, or does it seem likely to remain ongoing?

We think it's starting to abate. We're seeing that from some of our suppliers and co-packers. However, we have to acknowledge that the weekly unemployment supplement is contributing to the labor shortages, and that's scheduled to roll off in September. So, it’s reasonable to expect that things will loosen up a bit in the fourth quarter.

Yes. We look at demand planning all the way back across the supply chain, and all of our independent forecasts suggest that raw material input costs and similar challenges will recover late Q3 to early Q4.

Okay, great. Thank you.

Good morning, and thanks for taking my question. I wanted to have a few questions on the supply chain disruptions. Can you provide any more color on what categories are being impacted? And regarding the adjustment to your organic sales growth guidance for the year, would it be fair to say it could have been raised if not for these disruptions?

Yes, that's a fair question, Rupesh. I think could have, would have, should have. Consumption is really strong. Matt mentioned it in his prepared comments, and I did as well. If you look at consumption, it's right there at high single digits in the quarter while we were closer to 2.8% organic growth. So, definitely we are constrained. If you roll that forward to the full year, we would have been at the top of the range on revenue if not for supply chain disruptions.

To address your other question, if you review the release and look at the schedules in the back, household products are down year-over-year, and that’s where it's most acute. Fabric care shipments are constrained by supply shortages, and we have plenty of demand out there, but the shortages are affecting the household side of the business, which encompasses both laundry, detergent, stain fighters, and litter. We expect to be out of these supply challenges by the end of Q3.

Okay, great. And then, looking at some of your leading retailers like Walmart and others, are they starting to experience out-of-stocks, or do you foresee such a situation arising within some of those categories this quarter?

Currently, we're kind of living hand to mouth. If the situation worsens from where we are today, I think we would experience out-of-stocks. The area most prone to out-of-stocks right now would be OXICLEAN sprays, especially the triggers.

Okay. That's really helpful. Thank you very much.

Hey, good morning, guys. I have a question for both of you on pricing. Matt, I believe the comment was that you've priced over 50% of the portfolio. A couple of questions related to that; are you leading where you can in pricing at this point? Is there an expectation that competition will ultimately move, which is not accounted for in your guidance? Maybe just some parameters around what has not been priced and your reasoning there.

You hit the nail on the head, Kevin. Price increases require cost justification. They are larger in some categories than in others, but we also keep an eye on the competitive set. We are looking at the rest of our portfolio now to determine if it makes sense to pursue a price increase in 2022. Additionally, we will review the price increases we've already taken on the first 50% to assess if those need to be revisited. As for the pricing increases we announced in April for laundry, those took effect in July. We are aware that at least one competitor has publicly stated their prices will rise in Q4. This may create some temporary price gaps in Q3. We raised prices on the litter side, and that pricing will hit shelves in mid-October. We’ve seen that at least one major competitor has already raised their prices. This indicates a broader trend, as Rick mentioned on the earlier call in April that we were not assuming competitors would follow suit. However, we've observed in laundry and litter that a couple of competitors have increased prices. It's a good sign for us.

To add to your first question, Kevin, about the roll-forward for 2022, the straightforward way to understand it is that when we provided our April outlook, inflation was projected at minus 300 basis points and was factored into our flat guidance. Now, our inflation estimate is closer to minus 375, which accounts for the shift from flat to minus 75 and includes the inflation we've faced throughout the year. As we approach the end of the year, we believe that price volume mix will contribute positively at around 285 basis points. This should serve as a helpful indicator; we are not fully recovering all of our inflation yet, but we have managed to price half of the portfolio.

If I could squeeze in another question regarding M&A; with the current volatility, do you see that impacting your interest in transacting, or do you feel comfortable moving forward with potential acquisitions?

To your question, Kevin, would we be reluctant to buy a business that experienced a COVID bump? We’re wary of businesses that had a significant COVID boost. Remember, we acquired ZICAM last December, who possesses 73% market share, and we made that acquisition strategically for future growth. Yes, we will remain skeptical, but I assure you there are opportunities available for sale right now that we are considering.

Got it. Good luck, guys. Thank you.

Okay. Thanks, Kevin.

Great, thanks, good morning. I wanted to ask you a little bit about your view on trade promotion and the current levels of trade promotion, particularly as you roll that into pricing. If you could discuss the early impact of that; I know it’s early days, but any retail or consumer response that you can see. Also, regarding pricing, could you share thoughts on the magnitude of change you’re looking at?

Thanks, Olivia. Regarding your second question, we won't go into specifics about pricing magnitude just yet. We'll be clear next quarter after it ends, just as we did for laundry. For litter, for example, year-over-year sold on deal for litter was down 80 basis points, with promotions around 13% sold on deal. Historically, sold on deal has been around 19% to 20%, so it’s quite off from normal. We do know that one major competitor, besides ARM & HAMMER, has faced supply issues too, which may explain the decline in litter sold on deal for our competitors during Q2. For laundry, sold on deal was up nearly 1,200 basis points to about 32% for liquid laundry detergent. Last year, promotions were minimized, so it's not surprising to see this rebound. Our last year promotions were lowest, leading to a 700 basis point increase in sold-on-deal in Q2. Going forward, we prefer the price to remain stable, so promotions will be limited as well.

As for the price increase, it's only been a few weeks since its implementation, so it's still early to comment, but it’s been as we anticipated to date.

Got it, thanks. If I could just ask two more questions. First, regarding your sales guidance change — though it’s driven by supply chain disruptions, Specialty was actually quite strong this quarter. Just thinking about the mix's contribution to the top line for the full year. Second, on margins, how are you thinking about long-term operating margin expansion considering pricing is a piece, but given your controls on overheads, how much flexibility do you have to adjust SG&A?

For the specialty products division: yes, we had a solid quarter last year, with growth at 3% this year, up 10%. If you look in the release, half this growth is due to price increases in SPD. We’ve raised prices across both the animal side and bulk sodium bicarbonate side. The specialty products business continues to be strong and is set for a solid third quarter. For your gross margin question, you're correct — long-term pricing would mitigate inflation. We’re confident in our evergreen model and expect to achieve 25 basis points of expansion over time through productivity, innovation, and mix optimization, with ongoing work regarding technology for trade optimization continuing.

Regarding our outlook for divisions: last quarter, we communicated domestic at 4%, international at 6%, and SPD at 6%. If we had to revise that today, it would be more like 3%, 6%, and 9%, with domestic at 3% largely due to the supply constraints. International remains at 6%, and SPD is now at 9%. As for gross margins, pricing will recover inflation long-term, so that’s a strong aspect contributing to our projections. While inflation is broad-based, we have taken pricing actions to mitigate it, allowing us confidence in margin expansion in the second half. To clarify your adjusted SG&A question, we will maintain overhead efficiencies for as long as our data supports it. This was reflected in our lower legal and incentive compensation expenses.

Thank you.

Hey guys, thanks for your comments regarding supply constraints. I have two follow-ups. Firstly, regarding litter, can you clarify how competitors are faring in this regard? Are you saying you're under pressure from these constraints or is it generally applicable across the sector?

I think we have different challenges from our competitors. We're aware some competitors face shipping constraints, but overall, our labor shortage and raw material challenges seem somewhat universal.

Okay, great. As a second question on marketing: if these constraints persist beyond your expectations, will you consider pulling back on marketing longer, and at which point would that become a substantial concern for you?

We've made it clear that we expect recovery by late Q3 or early Q4, driven by strong demand. We have taken measures to support our brands while managing this transition. If supply constraints last beyond that, we will make necessary adjustments.

Okay. Regarding the tax rate, do we expect a reversion to lower levels beyond 2021, or will the higher rate be extrapolated?

The main issue with our tax rate is primarily due to stock option exercises. Historically, we’ve seen around $2 million worth of stock options exercised annually, with 2020 being an exception at $3 million. Our forecast this year is a little under $1 million. So we expect this to revert back to 2019 levels ultimately.

Okay, great. Thank you.

Thanks, good morning.

Hi, Bill.

So maybe oversimplified, but I feel like I need that because I’m a fairly simple person. Is it safe to say that commodities and input costs were moving higher when you last reported in late April; you were kind of taking a best guess on where they would settle down, and that they kept moving throughout the quarter but peaked at a certain point? Now you have much more confidence about where pricing and costs are moving for the remainder of the year. Is that a valid way to look at it?

That's one aspect, Bill. It's indeed a fair assessment. Additionally, we’ve experienced more broad-based inflation beyond commodities than we initially expected. I cited the example with pallets, which impacted us by $2 million in the back half, a cost we had never encountered before. That said, we have a great handle on the situation now and have been qualifying additional suppliers for redundancy and flexibility.

Do you feel there is any disadvantage when considering your scale? You’re a $5 billion business but with multiple smaller segments. Are suppliers treating you differently compared to a larger competitor?

It’s more of a broad-based issue affecting the industry. It doesn't seem to matter if you're $2 billion, $5 billion, or $50 billion; it’s impacting everyone similarly.

Got it. And for one last follow-up regarding the M&A pipeline: with the proliferation of SPACs and consumer-focused IPOs, would it be safe to say that the traditional $200 million to $500 million revenue businesses you’d target are less available moving forward, given they have other options?

That logic is quite valid, Bill. There are indeed other avenues for monetizing investments, such as SPACs. Despite that, we believe there will be ample opportunities available for acquisition in the next six months.

Similar to private equity, SPACs offer comparable opportunities. We can often afford to pay more because of the synergies we can generate, making that a significant advantage.

Got it. Thanks so much for the color.

Okay.

Thank you. Thanks, guys. So, first on international and then a clarification on the cost outlook. On the international side, I know it’s a smaller portion, but we’ve dedicated most of the time to the U.S. So I wanted to check on the international growth outlook. You reiterated the 6% growth target; given your strong start to the year, do you expect any significant slowdown in the back half, or do you anticipate going negative in growth?

We had a good second quarter internationally. While we aim for 6% for the full year, we must keep in mind the intermittent shutdowns occurring in many of our markets. With the delta variant and its potential for further lockdowns weighing in, we’re tempered in our expectations.

You must also consider the growth rates from last year. Internationally in Q2 last year, we saw merely flat growth. Q3 and Q4 last year also witnessed mid-teens growth. So, our current guidance indicates a different landscape, aiming for more like a 5% or 6% growth moving forward.

Understood. For new guidance, are you anticipating commodities to ease, or are you assuming they will remain steady?

At this point, we’re not banking on any decline in commodity prices. Our guidance reflects that we expect them to remain steady or even trend upwards.

That's great. Thank you. I’ll pass it on.

Okay.

Great, thanks. Good morning. I know we’ve discussed supply chain issues extensively, but I wanted to follow up regarding the company potentially running too lean. It seems you may have exposed yourself to risks that others are managing better. What are your thoughts on adjusting your operations moving forward to mitigate these storms?

I'm surprised you'd conclude that given our forecast for a full year organic growth of 4% or better, showing that we’ve managed to maintain resilience despite significant cost increases. We believe this is temporary concerning supply issues, and we’ll move past it at some point. Our actions in supplier qualification have given us greater flexibility.

Some competition is vertically integrated in certain areas of their supply chain. We are not, and while that might hurt us slightly during times like this, we’re increasing our flex capacity by qualifying more suppliers and co-packers as we exit this COVID-like environment.

That’s exactly what I was inquiring about. My next question pertains to gross margin. I’m having difficulty understanding the sequential improvement mentioned, as volume may challenge the price-volume mix. Can you explain the large sequential changes for gross margin that contribute to the modest expansion expected in Q3?

For right now, let me provide a long-term outlook on gross margin. The first half has reflected a decline of 230 basis points, while we forecast an 80 basis point improvement in the second half, powered primarily by price-volume mix improvements. For the second half, our estimates suggest an improvement in productivity for lasting recovery.

Thanks. Lastly, regarding the incentive compensation mentioned; was that part of where you initially aimed to be, or was it a true-up this quarter and how should we view SG&A for the rest of the year?

Yes, the impact on Q2 and full-year forecasting is favorable primarily due to lower anticipated incentive compensation costs, which were not initially budgeted but became necessary due to margin tightening in the current landscape.

Understood. Thank you very much.

Hi, thank you. I wanted to clarify what you said about pricing. You noted that your large competitor in litter has already adjusted pricing, and I've noticed revenue growth management initiatives happening with competitors in laundry as well. Is the message there that you’re comfortable following suit with pricing, or are you waiting for more signals from the competition before proceeding? And just how do supply issues reflect on your ability to push pricing through in laundry if out-of-stocks arise?

Yes, the pricing in laundry has been accepted by retailers; that’s already established. This should prove beneficial with the litter pricing we expect to implement in Q4. We are contemplating pricing increases across several segments. Notably, VITAFUSION, OXICLEAN, TROJAN, and WATERPIK are among our prioritized increases. We maintain strong brand leadership in several categories, allowing us to confidently push price increases through.

Okay, thank you.

Okay. Thank you all for your questions.