Boston, MA 09/23/2014 (wallstreetpr) – The Clorox Co (NYSE:CLX) has announced plans to exit operations in Venezuela amidst declining profit margins in the country. It is a sigh of relief for the investors as the unit only accounted for 1.4% of the company’s total sales for the fiscal year ended June, according to the Financial Times.
Impact of High Inflation
The unit has been struggling, mostly filled with operational headaches in terms of turbulent operating environment as the country continues to grapple with one of the highest levels of inflation in the recent past. The government had resorted to allowing the company to increase prices of it’s products, a move that did not have any significant impact as The Clorox Co (NYSE:CLX) continued to register losses.
The Clorox Co (NYSE:CLX) decided to call it quits after evaluating economic uncertainty, as well as disruptions and government restrictions in the country. Had the company opted to continue with operations in Venezuela; it would only have increased it’s losses considerably affecting profit margins. Acting on shareholders’ interests, the company had to close doors in the country to shift focus to more profitable markets.
2015 Outlook
Closure of business in Venezuela will result in The Clorox Co (NYSE:CLX) incurring between $60 million and $65 million as costs after tax, for the 2015 fiscal year. Despite the impact the closure, Clorox has affirmed it’s 2015 outlook reiterating that sales will remain flat with an EPS of between $4.35 and $4.50. The affirmation of the full year guidance essentially signals that The Clorox Co (NYSE:CLX) has a number of challenges that it will have to get over with, if it is to hit peaks in terms of profit margins.
Investors have remained loyal to The Clorox Co (NYSE:CLX) mostly because of it’s enticing dividend that stands at $2.96 a share, on annualized basis. Investors have enjoyed 25 consecutive years of dividends meaning that an exit of Venezuela and a shift of focus into key markets could result in dividend offers improving going forward
