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Newell Brands To Explore Series Of Strategic Initiatives; Cut 2017 Outlook

Newell Brands (NWL) said that it will explore a series of strategic initiatives to accelerate its transformation plan, improve operational performance and enhance shareholder value. It cut guidance for fiscal year 2017 and provided 2018 guidance.

Newell Brands also announced that Ian G.H. Ashken, Domenico De Sole and Martin Franklin have resigned from the Newell Board of Directors. These changes are currently effective.

The company noted that it will focus its portfolio on nine core consumer divisions with approximately $11 billion in net sales and $2 billion of EBITDA; explore strategic options for industrial and commercial product assets, including Waddington, Process Solutions, Rubbermaid Commercial Products and Mapa.

It will explore strategic options for the smaller consumer businesses, including Rawlings, Goody, Rubbermaid Outdoor, Closet, Refuse and Garage, and U.S. Playing Cards.

The company stated that it will execute these strategic options would result in a significant reduction in operational complexity through a 50 percent reduction in the company's global factory and warehouse footprint, a 50 percent reduction in its customer base and the consolidation of 80% of global sales on two ERP platforms by end of 2019.

If fully actioned, Newell Brands would expect to be an approximately $11 billion focused portfolio of leading consumer-facing brands with attractive margins and growth potential in global categories.

Newell Brands intends to begin the evaluation process immediately and expects any resulting transactions to be completed by the end of 2019.

Newell Brands also announced preliminary estimated results for 2017. The company currently anticipates Core sales growth of about 0.8 percent, compared to the previous guidance 1.5 percent to 2.0 percent. It cut Normalized earnings per share outlook to a range of $2.72 to $2.76 from the previous guidance $2.80 to $2.85 per share. Analysts polled by Thomson Reuters expect the company to report earnings of $2.81per share for 2017. Analysts' estimates typically exclude special items.

The company's core sales results were impacted by an acceleration of the gap between sell-in and sell-through results due to a continuation of retailer inventory rebalancing in the U.S. and the bankruptcy of a leading baby retailer. Margins were impacted by the negative mix effect of lower Writing sales and a reduction of fixed cost absorption due to shorter cycle runs on self-manufactured products, designed to reduce inventories and maximize operating cash flow.

The company's initial guidance for 2018 assumes continued ownership of all assets for the entire calendar year. The Company expects to achieve market share growth in its core categories and geographies in 2018, with core sales growth despite continued retailer inventory reductions.

Normalized earnings per share for 2018 is expected to be approximately $2.65 to $2.85, which includes the negative impact of an approximately $135 million replenishment of management and sales bonuses that were not earned in 2017, and assumes a tax rate of 20% to 21% after the benefits from U.S. tax reform. Operating cash flow is expected to be $1.15 billion to $1.45 billion, excluding the impact of any potential divestitures. Analysts expect annual earnings of $2.94 per share.

The company said it will provide additional details on its fourth quarter and full year 2017 financial performance as well as an update on its strategic and operational initiatives as part of its earnings announcement on February 16, 2018.

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