Church & Dwight to use free cash for M&A first, debt reduction last

By Lisa Kerner

Charlotte, N.C., June 18 – Church & Dwight Co., Inc. chief financial officer Matt Farrell detailed the company’s priorities for use of free cash during a presentation Wednesday at the Deutsche Bank Global Consumer Conference in Paris.

The priorities, in order of importance, are M&A, new product development, capital expenditures for growth, return of cash to shareholders and, lastly, debt reduction.

Farrell noted that Church & Dwight has $2.3 billion of “dry powder” for acquisitions and had about $470 million of free cash flow last year.

Chief executive officer Jim Craige said the company is “aggressively” pursuing acquisitions but is “picky” when it comes to the right ones. The CEO said he is not interested in reviving dead brands.

According to Farrell, the company is not capital intensive and expects cap ex to be about 5.4% of sales. Dwight & Church targets a dividend payout ratio of 40%, said Farrell.

The company has current debt of $800 million, leverage capacity of $2 billion and cash and cash equivalents of $300 million.

During the first quarter, organic sales grew 1% as expected, gross margin decreased 150 basis points, and adjusted free cash flow declined 2% to $96.1 million.

The maker of personal-care, household and specialty products is based in Princeton, N.J.

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