ATLANTA, U.S. — Newell Brands has announced its fourth quarter and full year 2020 financial results. “We gained considerable momentum on our turnaround in 2020 and laid a solid foundation to deliver sustainable, profitable growth in the future,” said Ravi Saligram, Newell Brands President and CEO. “We are proud of our accomplishments in 2020, returning to meaningful core sales growth and operating margin improvement in the back half of the year, delivering stellar cash flow, significantly reducing complexity, improving productivity, accelerating eCommerce growth, and improving customer relationships.
The strength and resilience of our portfolio shone through as growth in Food, Commercial and Appliances & Cookware business units offset Writing softness caused by the stay at home pandemic related phenomenon. I am excited about Newell‘s prospects and feel our best days are ahead as we focus on sustaining top line growth, strengthening our brands through insights and innovation, focus on omni-channel initiatives, expand distribution and begin to unlock international opportunities.”
Chris Peterson, Chief Financial Officer and President, Business Operations, said, “We ended the fourth quarter on a very strong note, delivering mid-single-digit core sales growth, operating margin expansion, excellent cash flow, and double-digit normalized earnings per share growth, all ahead of our expectations. Full year results showed sequential improvement across key metrics, with operating cash flow exceeding $1.4 billion and free cash flow productivity above 150%, enabled by progress on working capital. We strengthened the balance sheet, exiting the year with a leverage ratio of 3.5x. As we look out to 2021, we are projecting low single digit core sales growth, normalized operating margin improvement of 30 to 60 basis points, normalized diluted EPS of $1.55 to $1.65, and operating cash flow of approximately $1.0 billion.”
Fourth Quarter 2020 Executive Summary
- Net sales were $2.7 billion, an increase of 2.5 percent compared with the prior year period.
- Core sales grew 4.9 percent compared with the prior year period. Six of eight business units and every major region increased core sales compared with the prior year period.
- Reported operating margin was 9.2 percent compared with 5.0 percent in the prior year period. Normalized operating margin was 11.4 percent compared with 11.3 percent in the prior year period.
- Reported diluted earnings per share were $0.30 compared with $1.87 per share in the prior year period.
- Normalized diluted earnings per share were $0.56 compared with $0.42 per share in the prior year period.
- Full year 2020 operating cash flow was $1.4 billion compared with $1.0 billion in the prior year period, reflecting strong progress on working capital initiatives.
- The company’s leverage ratio came down to 3.5x at the end of the fourth quarter from 4.0x at the end of the prior year period.
- The company completed a tender offer for $300 million of its 3.85 percent senior notes due 2023 in the fourth quarter.
- The company initiated its full year 2021 outlook, with expected normalized earnings per share of $1.55 to $1.65 and operating cash flow of approximately $1.0 billion.
Fourth Quarter 2020 Operating Results
Net sales were $2.7 billion, a 2.5 percent increase compared to the prior year period, as core sales growth of 4.9 percent was partially offset by the impact of unfavorable foreign exchange, as well as business and retail store exits.
Reported gross margin was 32.9 percent compared with 32.5 percent in the prior year period, reflecting the benefit from FUEL productivity savings, as well as the headwind from business unit mix, COVID-related expenses and inflation. Normalized gross margin was 32.9 percent compared with 33.5 percent in the prior year period.
Reported operating income was $248 million compared with $132 million in the prior year period. Reported operating margin was 9.2 percent compared to 5.0 percent in the prior year period. Normalized operating income was $307 million, or 11.4 percent of sales, compared with $296 million, or 11.3 percent of sales, in the prior year period.
Interest expense was $69 million compared with $70 million in the prior year period, as the company reduced its debt balance.
The company reported a tax benefit of $26 million compared with a tax benefit of $721 million in the prior year period, reflecting a reduction in discrete tax benefits. Normalized tax benefit was $6 million compared with a tax expense of $51 million in the prior year period.
The company reported net income of $127 million, or $0.30 diluted earnings per share, compared with $794 million, or $1.87 diluted earnings per share, in the prior year period.
Normalized net income was $238 million, or $0.56 normalized diluted earnings per share, compared with $180 million, or $0.42 normalized diluted earnings per share, in the prior year period.
Full Year 2020 Operating Results
Net sales for the full year ended December 31, 2020 were $9.4 billion, a decline of 3.4 percent compared with $9.7 billion in the prior year, reflecting core sales decline of 1.1 percent, as well as the impact of unfavorable foreign exchange and business and retail store exits.
Reported gross margin was 32.8 percent compared with 33.1 percent in the prior year, as pressure from unfavorable business unit mix, COVID-related expenses, higher absorption costs, and inflation more than offset the benefit from FUEL productivity savings. Reported gross margin for the prior year period includes cumulative depreciation expense recorded as a result of the decision to retain the Commercial business. Normalized gross margin was 32.9 percent compared with 33.8 percent in the prior year.
The company reported an operating loss of $634 million compared with $482 million in the prior year, as both periods were impacted by non-cash impairment charges. Normalized operating income was $1.0 billion, similar to the prior year. Normalized operating margin increased by 30 basis points to 11.1 percent compared with 10.8 percent in the prior year.
Interest expense was $274 million compared with $303 million in the prior year period, reflecting a reduction in outstanding debt.
Reported net loss was $770 million compared with net income of $107 million in the prior year. Reported diluted loss per share was $1.82 compared with a reported diluted income per share of $0.25 in the prior year. Normalized net income was $760 million compared with $722 million in the prior year. Normalized diluted earnings per share were $1.79 compared with $1.70 in the prior year.
