Colgate's Worldwide Sales and Unit Volume Up Strongly; 1st Quarter
Profits In Line With Expectations NEW YORK, April 27, 2005
/PRNewswire-FirstCall/ -- Colgate-Palmolive Company (NYSE:CL) today
announced strong worldwide sales and unit volume growth for first
quarter 2005, with every operating division reporting top-line
increases. Global sales and unit volume grew 9.5% and 7.5%,
respectively, excluding divestments. Dollar sales as reported
increased 9.0%, which includes 2.5% positive foreign exchange and
0.5% lower pricing due to increased commercial spending. The
recently acquired GABA oral care business contributed 2.5% to both
sales and volume in the quarter. First quarter 2005 results include
$44.6 million of aftertax charges related to the previously
disclosed 2004 Restructuring Program. Reported net income and
diluted earnings per share were $300.1 million and $.53,
respectively, including this restructuring charge. Excluding the
restructuring charge, net income in the quarter increased 2% versus
first quarter 2004 to $344.7 million and diluted earnings per share
increased 3% to $.61. In first quarter 2004, net income and diluted
earnings per share were $338.5 million and $.59, respectively. As
reported, gross profit margin was 54.8%. Excluding the
restructuring charge, gross profit margin was 55.2% versus 55.7% in
the year ago record quarter and up from the gross profit margin
achieved in both the third and fourth quarters of 2004. Gross
profit was affected by significant increases in raw and packing
material costs, especially oil related costs, and increased
commercial spending. The Company's aggressive savings programs and
shift toward higher-margin oral care products largely offset the
impact of these increases. Including the restructuring charge,
operating profit declined 7%. Excluding the charge, operating
profit increased 2% versus first quarter 2004 to a record $542.3
million after a 13% increase in total advertising worldwide. Global
advertising supporting Colgate's brands of $267 million was at the
highest first quarter level ever led by a strong double-digit
global increase in media. Net cash provided by operations increased
to $425.0 million, up 14% versus the year ago period while working
capital increased slightly to 1.9% of sales versus 1.5% of sales a
year ago due to inventory increases to ensure continued product
supply during the restructuring program. Reuben Mark, Chairman and
CEO said, "The year has started with a continuation of the very
strong top-line momentum that began building in second half 2004.
Our focused category strategy is working well, with our oral care
business up more than 10% in North America and Latin America, with
Europe, excluding the GABA acquisition, and Asia/Africa close
behind, up 9% and 7%, respectively." Strong commercial investment
drove oral care market share gains in more than 100 countries
around the world. Colgate's global leadership in toothpaste
expanded even further during the quarter with toothpaste market
shares reaching a record high worldwide, in the U.S. and in other
key countries. Mr. Mark continued, "We are also pleased that the
gross margin in our top priority oral care business worldwide was
up more than 100 basis points, while the lower priority detergent
businesses were down as a result of much higher levels of petroleum
based ingredients. Continued strong cost control largely offset raw
material price increases. We are especially encouraged that the
worldwide pricing negative was lower in the current quarter than it
has been for five quarters." As previously disclosed, the 2004
Restructuring Program is projected to result in cumulative aftertax
charges of between $550 and $650 million by 2008. Annual aftertax
savings are expected to be in the range of $250 to $300 million
also by 2008. First quarter 2005 restructuring projects have been
implemented as planned. Also as planned and previously disclosed,
savings are expected to begin ramping up late in second quarter
2005. Mr. Mark said further, "We expect good top-line growth to
continue throughout the year, and despite raw and packing material
cost increases, we also expect gross profit margin, before the
impact of the 2004 Restructuring charges, to be up for the year.
"The strong sales momentum and excellent results from our
cost-saving initiatives should enable us to achieve our
expectations, excluding restructuring charges, of high single-digit
E.P.S. growth for this year and allow us to return to double-digit
E.P.S. growth in 2006." Separately, the Company announced that as
part of a long planned succession process, William S. Shanahan, 65,
President of Colgate-Palmolive made known his intention to retire
during third quarter 2005 on a date to be selected. Simultaneously,
the Company's Board of Directors has indicated that Ian M. Cook,
52, currently Chief Operating Officer, will be elected President
upon Mr. Shanahan's retirement. Mr. Cook said, "I look forward to
working closely with Reuben and Javier* in leading the Company's
operations." At 11:00 a.m. ET today, Colgate will host a conference
call to elaborate on first quarter results. To access this call as
a webcast, please go to Colgate's web site at
http://www.colgate.com/. The following are comments about
divisional performance. See attached Geographic Sales Analysis and
Segment Information schedules for additional information on
divisional sales and operating profit. *Javier Teruel, Colgate
Vice-Chairman North America (22% of Company Sales) Strong growth
momentum continued in North America, fueled by new product sales
and market share gains. Sales rose 7.0% during the quarter and unit
volume grew 7.5%, the strongest volume growth seen in seven
quarters. As planned, North American operating profit increased 1%
as volume growth was largely offset by increased commercial
investment and higher raw material costs. Colgate's leadership of
the U.S. toothpaste market grew substantially during the quarter,
with its ACNielsen market share reaching 35.9% year to date, up 170
basis points versus the year ago period and over four share points
ahead of the number two competitor. In the U.S., new products and
increased commercial investment are generating strong volume and
market share growth. In oral care, new testimonial advertising for
Colgate Total toothpaste continued to drive strong market share
gains during the quarter as did the recently launched Colgate 360
Degree manual toothbrush. Other new products contributing to growth
include Colgate Max Fresh Cinnamint and Colgate Sparkling White
Vanilla Mint toothpastes, Palmolive Oxy Plus Citrus Purity
dishwashing liquid and Irish Spring Micro Clean bar soap. Positive
growth momentum in the U.S. is expected to continue throughout the
year driven by a full pipeline of new product launches supported by
higher commercial spending. Recent announcements planned for launch
in 2005 include Colgate 2 in 1 Oxygen toothpaste, Colgate manual
toothbrush and toothpaste featuring Dora the Explorer and Friends,
Softsoap brand Kitchen Fresh liquid hand soap and Fabuloso Passion
Fruit liquid cleaner. Also planned for 2005 are the launch of Lady
Speed Stick 24/7 and the relaunch of Speed Stick 24/7 multiform
deodorants, both with improved packaging and new Micro-Absorber
technology that targets and absorbs moisture, providing an even
more powerful defense against odor-causing wetness. Europe (25% of
Company Sales) European dollar sales and unit volume grew 13.0% and
9.0%, respectively, during the quarter. The GABA acquisition added
11.0% to both sales and volume growth for the region while foreign
exchange added 6.0% and pricing was 2.0% lower. Positive volume
gains were achieved in the United Kingdom, Spain, Greece,
Switzerland, Ireland, Russia, Ukraine, Adria, Romania, Baltic
States and Czech Republic. Volume declined during the quarter in
Germany, France and Italy reflecting challenging economic and
retail environments in these countries. Oral care unit volume in
Europe grew 9%, excluding the GABA acquisition. Dollar operating
profit increased 4% to a record level even after strongly increased
commercial spending behind Colgate brands during the quarter.
Colgate strengthened its oral care leadership in Western Europe
with regional market shares in toothpaste and manual toothbrushes
both increasing during the quarter. Successful new products driving
these gains include Colgate Oxygen and Colgate Sensitive
toothpastes and Colgate 360 Degree manual toothbrush. Recent
innovations contributing to gains in other categories include
Palmolive deodorants, Palmolive Aroma Creme and Palmolive Shea
Butter shower gels, and Ajax Grapefruit Vinegar glass cleaner.
Colgate also strengthened its oral care leadership throughout
Central Europe and Russia, with Colgate's toothpaste market share
for the region now exceeding 25%. In Russia, for example, Colgate's
share of the toothpaste market reached an all-time high during the
quarter. Share gains in the region were driven by strong sales of
Colgate Propolis Whitening and Colgate Total toothpastes. Colgate
360 Degree manual toothbrush and Lady Speed Stick 24/7 multiform
deodorants contributed to gains in other categories. Latin America
(22% of Company Sales) Latin American dollar sales and unit volume,
excluding divestments, grew 11.5% and 8.5%, respectively, in first
quarter 2005 continuing the strong momentum seen building in this
region in 2004. All 18 countries in the region contributed to the
strong volume gains led by Brazil, Colombia, Venezuela, Mexico and
Central America. Sales and volume, as reported, increased 10.5% and
7.5%, respectively, with 1.5% positive foreign exchange and 1.5%
higher pricing. Latin American operating profit increased 3% to a
record level even after a double-digit increase in commercial
spending. Colgate continues to build its extremely strong
leadership in Oral Care in Latin America with toothpaste market
shares reaching record highs during the quarter in Colombia,
Central America and Venezuela. In Brazil, market share for the
Colgate equity reached its highest level in nine years. New
products contributing to these gains include Colgate Total Advanced
Fresh, Colgate Herbal Whitening and Colgate Sensitive toothpastes.
New products succeeding in other categories are Colgate Whitening
manual toothbrush, Palmolive Citrus and Cream and Protex Oats bar
soaps, Palmolive Hydra Natura hand and body lotion, and Lady Speed
Stick Aloe multiform deodorants. Asia/Africa (18% of Company Sales)
Asia/Africa sales and unit volume, as reported, both grew 6.5% on
top of a very strong performance in the year ago quarter. Healthy
volume gains were achieved in China, India, Taiwan, Philippines,
Australia and South Africa. Positive foreign exchange of 3.0% was
offset by lower pricing of 3.0%. After a significant increase in
commercial spending, dollar operating profit for the region
declined 3%, as planned, versus the all-time record level achieved
in first quarter 2004. Colgate strengthened its oral care
leadership in the region during the quarter led by toothpaste
market share gains in China, India, the Philippines and New
Zealand. Successful new products driving oral care growth in the
region include Colgate Max Fresh, Colgate Propolis, Colgate Simply
White and Colgate Herbal Salt toothpastes. In the South Pacific,
the recently launched Colgate 360 Degree manual toothbrush
continues to perform ahead of expectations. New products
contributing to growth in other categories throughout the region
include Palmolive Aroma Creme shower gel and liquid hand soap, and
Palmolive Aroma Therapy shampoo and conditioner. Hill's Pet
Nutrition (13% of Company Sales) Innovative new products and
veterinary endorsements continue to drive growth at Hill's, the
world leader in specialty pet food. Unit volume grew 3.0% in the
first quarter and dollar sales rose 7.0% reflecting favorable 2.5%
foreign exchange and the effect of price increases taken in 2004.
Dollar operating profit increased 3% despite a double-digit
increase in commercial spending. Innovative new products
contributing to growth in the U.S. specialty retail channel during
the quarter include Science Diet Large Breed Canine Senior, Science
Diet Large Breed Canine Light and the relaunch of Science Diet
Puppy and Science Diet Kitten pet foods with new upgraded formulas
containing the highest guaranteed levels of natural DHA, a key
nutrient found in their mothers' milk, which is a critical element
in the development of vision and the central nervous system. In the
U.S. veterinary channel, sales of new Prescription Diet j/d, a food
clinically proven to reduce pain and improve mobility in dogs with
arthritis, began during the quarter and have already exceeded
expectations. Internationally, growth was strong led by Spain,
Russia, Austria, Australia and South Africa. New products driving
this growth include Science Diet Canine Large Breed and
Prescription Diet Feline m/d. * * * About Colgate-Palmolive:
Colgate-Palmolive is a leading global consumer products company,
tightly focused on Oral Care, Personal Care, Home Care and Pet
Nutrition. Colgate sells its products in over 200 countries and
territories around the world under such internationally recognized
brand names as Colgate, Palmolive, Mennen, Softsoap, Irish Spring,
Protex, Sorriso, Kolynos, Elmex, Ajax, Axion, Soupline, Suavitel
and Fab, as well as Hill's Science Diet and Hill's Prescription
Diet pet foods. For more information about Colgate's global
business, visit the Company's website at http://www.colgate.com/.
"Colgate 360 Degree" is a trademark of Colgate-Palmolive Company.
Dora the Explorer and all related titles and characters are
trademarks of Viacom International Inc. This press release and the
related webcast (other than historical information) may contain
forward-looking statements. Actual events or results may differ
materially from those statements. Investors should consult the
Company's filings with the Securities and Exchange Commission
(including the information set forth under the caption "Cautionary
Statement on Forward- Looking Statements" in the Company's Form
10-K for the year ended December 31, 2004) for information about
factors that could cause such differences. Copies of these filings
may be obtained upon request from the Company's Investor Relations
Department or the Company's website at http://www.colgate.com/.
Non-GAAP Financial Measures The following provides information
regarding the non-GAAP measures used in this earnings release: Net
income, gross profit margin, operating profit and earnings per
share are discussed in this release both as reported (on a GAAP
basis) and excluding charges related to the restructuring program
that began in the fourth quarter of 2004 and that is expected to be
substantially completed by 2008 (the "2004 Restructuring Program").
Such charges, which are reported in the corporate segment, include
or will include separation-related costs, incremental depreciation
and asset write-downs and other costs related to the 2004
Restructuring Program. Management believes these financial measures
on an ex- restructuring basis provide useful information to
investors regarding the underlying business trends and performance
of the Company's ongoing operations and are useful for period over
period comparisons of such operations. The Company uses these
financial measures internally in its budgeting process and as
factors in determining compensation. While the Company believes
that these financial measures are useful in evaluating the
Company's business, this information should be considered as
supplemental in nature and not as a substitute for the related
financial information prepared in accordance with GAAP. In
addition, these non-GAAP financial measures may not be the same as
similar measures presented by other companies. See Income Statement
and Supplemental Information Reconciliation Excluding the "2004
Restructuring Program" for the three months ended March 31, 2005
and 2004 included with this release for a reconciliation of these
financial measures to the related GAAP measures. Sales and unit
volume growth, both worldwide and in relevant geographic divisions,
are discussed in this release both as reported and excluding
divestments. Management believes this provides useful information
to investors as it allows comparisons of sales and volume growth
from ongoing operations. See Geographic Sales Growth Analysis,
Percentage Changes - First Quarter 2005 vs. 2004 for a comparison
of sales excluding divestments to sales as reported in accordance
with GAAP. The Company defines free cash flow before dividends as
net cash provided by operations less capital expenditures. As
management uses this measure to evaluate the Company's ability to
satisfy current and future obligations, repurchase stock, pay
dividends and fund future business opportunities, the Company
believes that it provides useful information to investors. Free
cash flow before dividends is not a measure of cash available for
discretionary expenditures since the Company has certain
non-discretionary obligations such as debt service that are not
deducted from the measure. Free cash flow before dividends is not a
GAAP measurement and may not be comparable to similarly titled
measures reported by other companies. (See attached tables for
first quarter results.) Colgate-Palmolive Company Income Statement
and Supplemental Information Reconciliation Excluding the "2004
Restructuring Program" For the three months ended March 31, 2005
and 2004 (Dollars in Millions Except Per Share Amounts) (Unaudited)
2005 2004 As Excluding As Reported Restructuring Restructuring
Reported Net Sales $2,743.0 $- $2,743.0 $2,513.5 Cost of Sales
1,239.4 (10.7) 1,228.7 1,113.9 Gross Profit 1,503.6 10.7 1,514.3
1,399.6 Gross Profit Margin 54.8% 55.2% 55.7% Selling, General
& Administrative Expenses 944.4 - 944.4 844.3 Other (Income)
Expense, net 66.6 (39.0) 27.6 24.0 Operating Profit 492.6 49.7
542.3 531.3 Operating Profit Margin 18.0% 19.8% 21.1% Net Interest
Expense 31.6 - 31.6 28.3 Income Before Income Taxes 461.0 49.7
510.7 503.0 Provision for Income Taxes 160.9 5.1 166.0 164.5
Effective Tax Rate 34.9% 32.5% 32.7% Net Income 300.1 44.6 344.7
338.5 Net Earnings Per Common Share Basic $0.56 $0.08 $0.64 $0.62
Diluted $0.53 $0.08 $0.61 $0.59 Average Common Shares Outstanding
Basic 524.8 524.8 524.8 532.9 Diluted 561.7 561.7 561.7 572.5
Colgate-Palmolive Company Condensed Consolidated Balance Sheets As
of March 31, 2005, December 31, 2004 and March 31, 2004 (Dollars in
Millions) (Unaudited) March 31, December 31, March 31, 2005 2004
2004 Cash and cash equivalents $413.9 $319.6 $271.5 Receivables,
net 1,316.2 1,319.9 1,204.8 Inventories 906.7 845.5 788.7 Other
current assets 307.4 254.9 300.0 Property, plant and equipment, net
2,553.8 2,647.7 2,495.2 Other assets, including goodwill and
intangibles 3,193.5 3,285.3 2,440.9 Total assets $8,691.5 $8,672.9
$7,501.1 Total debt 3,756.8 3,675.1 3,115.1 Other current
liabilities 2,303.9 2,145.1 2,115.0 Other non-current liabilities
1,615.8 1,607.3 1,463.6 Total shareholders' equity 1,015.0 1,245.4
807.4 Total liabilities and shareholders' equity $8,691.5 $8,672.9
$7,501.1 Supplemental Balance Sheet Information: Debt less cash and
marketable securities* $3,329.8 $3,338.2 $2,820.5 Working capital %
of sales 1.9% 2.4% 1.5% * Marketable securities of $13.1, $17.3 and
$23.1 as of March 31, 2005, December 31, 2004 and March 31, 2004,
respectively, are included in Other current assets.
Colgate-Palmolive Company Condensed Consolidated Statements of Cash
Flows For the three months ended March 31, 2005 and 2004 (Dollars
in Millions) (Unaudited) 2005 2004 Operating Activities: Net income
$300.1 $338.5 Adjustments to reconcile net income to net cash
provided by operations: Restructuring, net of cash 43.1 (6.2)
Depreciation and amortization 83.2 79.9 Deferred income taxes 1.8
8.0 Changes in: Receivables (19.8) 12.0 Inventories (72.9) (73.8)
Accounts payable and other accruals 45.8 (26.6) Other non-current
assets and liabilities 43.7 39.5 Net cash provided by operations
425.0 371.3 Investing Activities: Capital expenditures (60.5)
(43.3) Other (2.4) 9.3 Net cash used in investing activities (62.9)
(34.0) Financing Activities: Principal payments on debt (613.3)
(179.2) Proceeds from issuance of debt 757.3 181.7 Dividends paid
(127.5) (129.4) Purchases of treasury shares (282.7) (220.3)
Proceeds from exercise of stock options 10.8 21.3 Net cash used in
financing activities (255.4) (325.9) Effect of exchange rate
changes on cash and cash equivalents (12.4) (5.2) Net increase in
cash and cash equivalents 94.3 6.2 Cash and cash equivalents at
beginning of period 319.6 265.3 Cash and cash equivalents at end of
period $413.9 $271.5 Supplemental Cash Flow Information: Free cash
flow before dividends (net cash provided by operations less capital
expenditures) Net cash provided by operations $425.0 $371.3 Less:
Capital expenditures (60.5) (43.3) Free cash flow before dividends
$364.5 $328.0 Income taxes paid $65.9 $154.6 Colgate-Palmolive
Company Segment Information For the three months ended March 31,
2005 and 2004 (Dollars in Millions) (Unaudited) Three Months Ended
March 31, Net Sales 2005 2004 Oral, Personal, and Home Care North
America $609.7 $568.5 Latin America 588.5 533.5 Europe 687.4 607.0
Asia/Africa 498.0 468.2 Total Oral, Personal, and Home Care 2,383.6
2,177.2 Total Pet Nutrition 359.4 336.3 Total Net Sales $2,743.0
$2,513.5 Three Months Ended March 31, Operating Profit 2005 2004
Oral, Personal, and Home Care North America $136.8 $135.4 Latin
America 163.1 158.3 Europe 135.3 129.7 Asia/Africa 81.9 84.1 Total
Oral, Personal, and Home Care 517.1 507.5 Total Pet Nutrition 98.2
95.4 Total Corporate (122.7) (71.6) Total Operating Profit $492.6
$531.3 The Company evaluates segment performance based on several
factors, including operating profit. The Company uses operating
profit as a measure of operating segment performance because it
excludes the impact of corporate- driven decisions related to
interest expense and income taxes. Corporate operations include
research and development costs, unallocated overhead costs,
restructuring costs, and gains and losses on sales of non-strategic
brands and assets. Corporate operating expenses for the quarter
ended March 31, 2005 include $49.7 of charges related to the
Company's 2004 Restructuring Program. Colgate-Palmolive Company -
Geographic Sales Analysis Percentage Changes - First Quarter 2005
vs 2004 March 31, 2005 (Unaudited) COMPONENTS OF SALES CHANGE 1ST
QUARTER Pricing 1st Qtr 1st Qtr Coupons Sales Sales Consumer &
Change Change Ex-Divested Trade Region As Reported Ex-Divestment
Volume Incentives Exchange Total Company 9.0% 9.5% 7.5% -0.5% 2.5%
Europe 13.0% 13.5% 9.5% -2.0% 6.0% Latin America 10.5% 11.5% 8.5%
1.5% 1.5% Asia/Africa 6.5% 6.5% 6.5% -3.0% 3.0% Total International
10.5% 10.5% 8.0% -1.0% 3.5% North America 7.0% 7.0% 7.5% -1.0% 0.5%
Total CP Products 9.5% 10.0% 8.0% -1.0% 3.0% Hill's 7.0% 7.0% 3.0%
1.5% 2.5% NOTE: GABA was acquired June 1, 2004. The impact of GABA
on the three months for both sales and ex-divested volume for Total
Company and Europe is respectively, 2.5% and 11.0%. Divestments
consist of the sale of certain detergent brands, which impact
Europe and Latin America. DATASOURCE: Colgate-Palmolive Company
CONTACT: Bina Thompson, +1-212-310-3072, or Hope Spiller,
+1-212-310-2291, both of Colgate-Palmolive Company Web site:
http://www.colgate.com/
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