2009-06-24 19:07:14 -

Fitch Ratings has affirmed The Clorox Company's (Clorox) Issuer Default Ratings (IDRs) and debt ratings as follows.

-- Long-term IDR at 'BBB';

-- Unsecured bank facility at 'BBB';

-- Senior unsecured notes at 'BBB''

-- Short-term IDR at 'F2';

-- Commercial paper program at 'F2'.

The $1.1 billion revolving credit facility and $2.7 billion in unsecured senior notes

are affected by this action. The Rating Outlook is Stable.

Clorox's ratings reflect its strong financial and business profile with a competitive focus on having big share brands in mid-sized categories.
The ratings also recognize that commodity price movement, while relatively benign at present, can fluctuate significantly, and there is a portion of Clorox's revenues related to bleach and trash bags that have a strong private label presence. Bleach and trash bags are a part of categories that represent about 28% of fiscal year June 30, 2008 (FY'08) revenues.

The Stable Outlook incorporates the expectation that gross and operating margins will improve in the medium-term with less pressure from commodities and continued cost reduction efforts, cash flow from operations should remain over $700 million with free cash flow modestly lower. On June 11, 2009 the company announced that they will manage to leverage (Debt/EBITDA) of 2-2.5 times (x) from the previous target of 2.5-3x. If the company continues to reduce debt and/or improve margins, they should meet their leverage target within the next fiscal year.

Clorox reports that the bulk of its brands hold #1 or #2 market positions. Due to its strong brand position, Clorox has taken pricing action on 60% of its portfolio with most competitors following given the run-up in commodity pricing through mid-2008. For the last twelve months (LTM) ended March 31, 2009 Clorox's revenues grew 6.3% to $5.4 billion.
Much of that growth was driven by price increases taken during 2008 which have served to offset negative foreign exchange and volume during 2009. With retailers focusing on stocking the two leading brands plus a private label brand, Clorox should continue to have a presence on-shelf and perhaps improve its market share.

Clorox's gross margins have improved in each quarter of the current fiscal year. The company's gross margin ended FY'08 down 190 basis points (bps) with commodity prices and logistic costs more than offsetting pricing and cost savings. As commodity pricing - particularly resin - hit a nadir in June/July 2008 and cycled through the supply chain over 3-6 months the year over year quarterly change moderated strongly; first quarter 2009 gross margin declined 200bps, the second quarter declined 40 bps, and the third quarter was up 550 bps. As a result, LTM EBITDA margins improved 70 basis points to 21.4% from the 20.7% recorded in FY'08.

Despite intense margin pressure due to the run-up in commodity prices in FY'07 and FY'08, Clorox was able to generate approximately $700 million in cash flow from operations in each year and is on track to do so again in FY'09. Free cash flow averaged $355 million in the past two fiscal years but should be modestly lower in 2009 mainly due to increased dividends and higher levels of capital expenditures supporting the company's manufacturing consolidation efforts. EBITDA/Interest improved to 6.9x in the last twelve months from 6.5x at FY'08.

Sharp upward pricing in commodities, particularly resin, and competitive moves by private label participants could pressure margins and cash flow. However, Fitch notes that resin prices have declined more than 36% since their mid-2008 peak and expects resin prices to remain at currently low levels through 2010 which should benefit Clorox's margins in the near term. Fitch also expects that Clorox will continue to bring innovative products to market as well as manage price gaps against private label and others across their product set.

Clorox, based on Oakland, California, is a leading U.S. household products company. Its Clorox bleach brand holds the #1 position in the domestic bleach market with a share of over 60%. Leading household cleaners include Pine-Sol, Clorox Clean-up, Formula 409, Tilex and Liquid-Plumr. Other product categories include salad dressings and sauces (Hidden Valley Ranch, KC Masterpiece), cat litters (Fresh Step, Scoop Away), charcoal briquettes (Kingsford), water filtration systems (Brita), plastic bags and wraps (Glad), and auto care (Armor All, STP).
The company's largest customer, Wal-Mart Stores, Inc., accounts for 27% of sales.

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Fitch Ratings, New YorkGrace Barnett, CPA, +1-212-908-0718Tom
Razukas, CFA, +1-212-908-0223Cindy Stoller, +1-212-908-0526(Media
Relations) cindy.stoller@fitchratings.com : mailto:cindy.stoller@fitchratings.com