Colgate's Worldwide Sales and Unit Volume Up Strongly 2nd Quarter
Profits at Expectation NEW YORK, July 27, 2005
/PRNewswire-FirstCall/ -- Colgate-Palmolive Company (NYSE:CL) today
announced strong worldwide sales and unit volume growth for second
quarter 2005, with every operating division reporting top- line
increases. Worldwide sales rose 10.5%, the largest quarterly growth
in almost ten years. The robust sales reflected unit volume growth
of 8.0%, positive foreign exchange of 2.5% and worldwide pricing
that was even with the year ago quarter. Excluding the recently
acquired GABA oral care business, sales rose 9.0% and volume rose
6.5% in the quarter. Second quarter 2005 results include $28.7
million of aftertax charges related to the previously disclosed
2004 Restructuring Program. Reported net income and diluted
earnings per share were $342.9 million and $.62, respectively,
including this restructuring charge. Excluding the restructuring
charge, net income in the quarter declined 1% versus second quarter
2004 to $371.6 million and diluted earnings per share increased 2%
to $.67. In second quarter 2004, reported net income and diluted
earnings per share were $373.9 million and $.66, respectively. As
reported, gross profit margin was 54.2%. Excluding restructuring
charges, gross profit margin was 55.1% versus 55.4% in the year ago
record quarter. The expected effect on gross profit from increases
in raw and packing material costs and higher business-building
commercial spending was largely offset by the Company's aggressive
savings programs and an accelerated shift toward higher-margin oral
and personal care products. Including the restructuring charge,
operating profit declined 7%. Excluding the charge, operating
profit declined 1% versus second quarter 2004 after a 16% increase
in total advertising worldwide in the current quarter. Global
advertising supporting Colgate's brands of $292.3 million was at an
all-time record level led by a strong double-digit global increase
in media spending. Net cash provided by operations increased to
$728.4 million, up 13% versus the year ago period while working
capital was even with the year ago period at 4.3% of sales. Reuben
Mark, Chairman and CEO said, "We enjoyed outstanding top-line
growth this quarter, particularly in North America, Latin America,
Eastern Europe and Africa. Also, we are encouraged by volume growth
in Western Europe, excluding the GABA acquisition, despite the
challenging retail environment in that region. "Toothpaste market
shares are strong and getting stronger in the U.S. and abroad,
reaching a record high worldwide. Colgate's global leadership in
manual toothbrushes also expanded during the quarter with manual
toothbrush market shares reaching record highs in the U.S., Mexico,
Venezuela, France and other key countries around the world. "We're
delighted that in addition to market share growth, it appears that
our heavier level of advertising spending has accelerated the
growth of the toothpaste market in a considerable number of
overseas countries. "We are pleased that gross profit margin,
excluding the restructuring charge, was only slightly below the
prior year record level despite the significant rise in raw and
packaging material costs. Although the cost environment is expected
to remain difficult, our ongoing focus on cost savings, the
benefits of restructuring and the impact of the recently announced
sale of our North American detergent business should allow gross
margin expansion in the balance of the year. "We are also very
encouraged that pricing was even with last year on a worldwide
basis after being negative for six consecutive quarters." Mr. Mark
continued, "This more positive pricing trend, which is expected to
continue in the second half, combined with an apparent moderation
in the amount of commercial spending required, bodes well for
further increases in profitability. "We are optimistic the strong
sales momentum and excellent results from our cost-saving
initiatives should enable us to achieve our expectations 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, before restructuring charges."
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, with the
majority of the current year's projected savings expected to be
realized in second half 2005. First half 2005 restructuring
projects have been implemented as expected. At 11:00 a.m. ET today,
Colgate will host a conference call to elaborate on second 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. North America
(22% of Company Sales) Strong growth momentum continued in North
America, fueled by new product sales and market share gains. Sales
rose 9.0% during the quarter to an all-time record level and unit
volume grew 8.0%, the strongest volume growth seen in ten quarters.
Positive foreign exchange added 1.0% while pricing was even with
the year ago period. As expected, North American operating profit
declined 1% as volume growth was offset by increased commercial
investment and higher freight and raw material costs. Colgate's
leadership of the U.S. toothpaste market continues to grow, with
its ACNielsen market share reaching 35.6% year to date, up 150
basis points versus the year ago period and over three 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. Key categories continuing to gain market share
year to date versus prior year include toothpaste, manual and
powered toothbrushes, hand dishwashing liquid, bar soap and fabric
conditioners. In oral care, new testimonial advertising for Colgate
Total toothpaste, and the recently launched Colgate Max Fresh
Cinnamint toothpaste and Colgate 360 Degree manual toothbrush
contributed to the share gains. Other new products contributing to
growth in other categories include Palmolive Oxy Plus Citrus Purity
dishwashing liquid, new Mennen Speed Stick and Lady Speed Stick
24/7 multiform deodorants with Micro-Absorber technology, Irish
Spring Micro Clean bar soap and Fabuloso Orange Burst liquid
cleaner. Top-line growth in the U.S. is expected to continue in the
balance of the year driven by a full pipeline of new product
launches supported by higher commercial spending. Recent
announcements planned for second half 2005 include Colgate Luminous
toothpaste, Palmolive with Bleach Alternative dishwashing liquid
and Softsoap Kitchen Fresh Hands liquid hand soap. Latin America
(23% of Company Sales) Latin American dollar sales and unit volume,
excluding divestments, grew 19.5% and 11.0%, respectively, in
second quarter 2005. This is the strongest quarterly volume growth
for the region in almost eight years and the strongest quarterly
sales growth in nearly ten years. All 18 countries in the region
contributed to the strong volume gains led by Brazil, Mexico,
Colombia, Venezuela, Central America and Argentina. Sales and
volume, as reported, increased 18.0% and 9.5%, respectively, with
5.0% positive foreign exchange and 3.5% higher pricing. Latin
American operating profit increased 12% to an all-time record level
as volume growth and the positive impact of foreign exchange more
than offset the increased level of commercial spending behind
Colgate brands during the quarter. Colgate continues to build its
extremely strong leadership in oral care throughout Latin America
with toothpaste market share gains seen in nearly every country in
the region, reaching record highs in Venezuela and Central America.
New products contributing to these gains include Colgate Triple
Action Mild Mint and Colgate Sensitive toothpastes, and the
relaunch of Colgate Total toothpaste with new packaging and strong
advertising highlighting the toothpaste's ability to provide
complete 12 hour protection while actively fighting 12 teeth and
gum problems. New products succeeding in other categories are
Colgate MicroSonic battery-powered toothbrush, Palmolive Citrus and
Cream and Protex Oats bar soaps, Palmolive Hydra Natura hand and
body lotion, and Lady Speed Stick Aloe multiform deodorants. Europe
(25% of Company Sales) European dollar sales and unit volume grew
11.5% and 10.5%, respectively, during the quarter. The GABA
acquisition added 6.0% to both sales and volume growth for the
region while foreign exchange added 3.5% and pricing was 2.5%
lower. Volume gains were achieved in the United Kingdom, Denmark,
France, Greece, Italy, Spain, Ireland, Russia, Ukraine, Adria,
Romania, and Czech Republic. Dollar operating profit increased 6%
to a record level as volume growth and the positive impact of
foreign exchange more than offset a double-digit increase in
commercial spending during the quarter. Colgate strengthened its
oral care leadership in Western Europe with regional market shares
in toothpaste and manual toothbrushes both increasing year to date.
Successful new products driving these gains include Colgate Oxygen
and Colgate Sensitive toothpastes, Colgate 360 Degree manual
toothbrush and Colgate MicroSonic battery-powered toothbrush.
Recent innovations contributing to gains in personal care include
Palmolive multiform deodorants, and Palmolive Aroma Creme and
Palmolive Naturals with Shea Butter shower gels. Throughout Central
Europe and Russia, Colgate's toothpaste market share continues to
grow, now exceeding 26% and reaching record highs during the
quarter in Russia, Ukraine, Kazakhstan, Slovenia and Croatia. Share
gains in the region were driven by strong sales of Colgate Propolis
Whitening, Colgate Cavity Protection, Colgate Total and Colgate
Sensitive toothpastes. Colgate 360 Degree manual toothbrush, Lady
Speed Stick 24/7 multiform deodorants and Palmolive Aroma Creme
shower gel contributed to gains in other categories. Asia/Africa
(17% of Company Sales) Asia/Africa sales and unit volume, as
reported, grew 4.5% and 4.0%, respectively, on top of double-digit
growth in the year ago quarter. Healthy volume gains were achieved
in the China region, Australia, India, Philippines and South
Africa. Positive foreign exchange of 2.5% was offset by lower
pricing of 2.0%. After a significant increase in commercial
spending, dollar operating profit for the region declined 7% versus
the record level achieved in second quarter 2004. Colgate
strengthened its oral care leadership in the Asia Pacific region
led by toothpaste market share gains in India, the Philippines, New
Zealand and Australia. Regional toothbrush market shares for the
Colgate equity reached a record high during the quarter. Successful
new products driving the oral care growth include Colgate Max
Fresh, Colgate Propolis, and Darlie Tea Care toothpastes. In the
South Pacific, the recently launched Colgate 360 Degree manual
toothbrush and Colgate MicroSonic battery-powered toothbrush
continue 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,
Palmolive Naturals shampoo and conditioner, and Palmolive Naturals
Sun Care bar soap. Hill's (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
3.5% in the second quarter and dollar sales rose 6.0% reflecting
favorable 2.0% 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 Canine Senior Large
Breed and Science Diet Canine Light Large Breed dog food. In the
U.S. veterinary channel, sales of new Prescription Diet Canine j/d,
a food clinically proven to reduce pain and improve mobility in
dogs with arthritis, continue to exceed expectations.
Internationally, growth was strong led by Spain, Russia, the United
Kingdom, Italy, France and Japan. New products driving this growth
include Science Diet Canine Senior Large Breed and Prescription
Diet Canine j/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 web site at http://www.colgate.com/. 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 web site 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 June 30, 2005 and
2004 and for the six months ended June 30, 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 Analysis, Percentage Changes - Second 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 second quarter results.)
Colgate-Palmolive Company Consolidated Income Statement and
Supplemental Information Reconciliation Excluding the "2004
Restructuring Program" For the three months ended June 30, 2005 and
2004 (Dollars in Millions Except Per Share Amounts) (Unaudited)
2005 2005 2005 2004 Excluding As Restruct- Restruct- As Reported
uring uring Reported Net sales $2,837.5 $- $2,837.5 $2,571.7 Cost
of sales 1,298.4 (23.1) 1,275.3 1,148.1 Gross profit 1,539.1 23.1
1,562.2 1,423.6 Gross profit margin 54.2% 55.1% 55.4% Selling,
general and administrative expenses 959.1 - 959.1 848.1 Other
(income) expense, net 38.9 (12.9) 26.0 (9.3) Operating profit 541.1
36.0 577.1 584.8 Operating profit margin 19.1% 20.3% 22.7% Interest
expense, net 30.9 - 30.9 29.3 Income before income taxes 510.2 36.0
546.2 555.5 Provision for income taxes 167.3 7.3 174.6 181.6
Effective tax rate 32.8% 32.0% 32.7% Net income 342.9 28.7 371.6
373.9 Earnings per common share Basic $0.64 $0.06 $0.70 $0.69
Diluted $0.62 $0.05 $0.67 $0.66 Average common shares outstanding
Basic 521.4 521.4 521.4 531.4 Diluted 557.4 557.4 557.4 570.6
Colgate-Palmolive Company Consolidated Income Statement and
Supplemental Information Reconciliation Excluding the "2004
Restructuring Program" For the six months ended June 30, 2005 and
2004 (Dollars in Millions Except Per Share Amounts) (Unaudited)
2005 2005 2005 2004 Excluding As Restruct- Restruct- As Reported
uring uring Reported Net sales $5,580.5 $- $5,580.5 $5,085.2 Cost
of sales 2,537.8 (33.8) 2,504.0 2,262.0 Gross profit 3,042.7 33.8
3,076.5 2,823.2 Gross profit margin 54.5% 55.1% 55.5% Selling,
general and administrative expenses 1,903.5 - 1,903.5 1,692.4 Other
(income) expense, net 105.5 (51.9) 53.6 14.7 Operating profit
1,033.7 85.7 1,119.4 1,116.1 Operating profit margin 18.5% 20.1%
21.9% Interest expense, net 62.5 - 62.5 57.6 Income before income
taxes 971.2 85.7 1,056.9 1,058.5 Provision for income taxes 328.2
12.4 340.6 346.1 Effective tax rate 33.8% 32.2% 32.7% Net income
643.0 73.3 716.3 712.4 Earnings per common share Basic $1.20 $0.14
$1.34 $1.31 Diluted $1.15 $0.13 $1.28 $1.25 Average common shares
outstanding Basic 523.1 523.1 523.1 532.2 Diluted 559.5 559.5 559.5
571.5 Colgate-Palmolive Company Condensed Consolidated Balance
Sheets As of June 30, 2005, December 31, 2004 and June 30, 2004
(Dollars in Millions) (Unaudited) June 30, December 31, June 30,
2005 2004 2004 Cash and cash equivalents $392.1 $319.6 $417.3
Receivables, net 1,315.4 1,319.9 1,277.2 Inventories 915.7 845.5
843.4 Other current assets 306.2 254.9 297.0 Property, plant and
equipment, net 2,548.6 2,647.7 2,502.7 Other assets, including
goodwill and intangibles 3,189.2 3,285.3 3,092.8 Total assets
$8,667.2 $8,672.9 $8,430.4 Total debt 3,889.1 3,675.1 3,962.4 Other
current liabilities 2,031.2 2,145.1 1,941.0 Other non-current
liabilities 1,552.0 1,607.3 1,495.6 Total shareholders' equity
1,194.9 1,245.4 1,031.4 Total liabilities and shareholders' equity
$8,667.2 $8,672.9 $8,430.4 Supplemental Balance Sheet Information:
Debt less cash and marketable securities* $3,487.7 $3,338.2
$3,522.8 Working capital % of sales 4.3% 2.4% 4.3% * Marketable
securities of $9.3, $17.3 and $22.3 as of June 30, 2005, December
31, 2004 and June 30, 2004, respectively, are included in Other
current assets. Colgate-Palmolive Company Condensed Consolidated
Statements of Cash Flows For the six months ended June 30, 2005 and
2004 (Dollars in Millions) (Unaudited) 2005 2004 Operating
Activities: Net income $643.0 $712.4 Adjustments to reconcile net
income to net cash provided by operations: Restructuring, net of
cash 61.8 (4.8) Depreciation and amortization 165.2 159.7 Deferred
income taxes 3.0 22.6 Cash effects of changes in: Receivables
(26.8) (32.3) Inventories (95.7) (115.9) Accounts payable and other
accruals (20.3) (57.4) Other non-current assets and liabilities
(1.8) (40.3) Net cash provided by operations 728.4 644.0 Investing
Activities: Capital expenditures (159.2) (117.6) Payment for
acquisition, net of cash acquired - (714.8) Other (4.9) 52.4 Net
cash used in investing activities (164.1) (780.0) Financing
Activities: Principal payments on debt (1,119.9) (235.5) Proceeds
from issuance of debt 1,432.5 1,103.7 Dividends paid (291.2)
(268.6) Purchases of treasury shares (513.5) (358.2) Proceeds from
exercise of stock options 19.3 57.2 Net cash (used in) provided by
financing activities (472.8) 298.6 Effect of exchange rate changes
on cash and cash equivalents (19.0) (10.6) Net increase in Cash and
cash equivalents 72.5 152.0 Cash and cash equivalents at beginning
of period 319.6 265.3 Cash and cash equivalents at end of period
$392.1 $417.3 Supplemental Cash Flow Information: Free cash flow
before dividends (net cash provided by operations less capital
expenditures) Net cash provided by operations $728.4 $644.0 Less:
Capital expenditures (159.2) (117.6) Free cash flow before
dividends $569.2 $526.4 Income taxes paid $298.3 $335.4
Colgate-Palmolive Company Segment Information For the three and six
months ended June 30, 2005 and 2004 (Dollars in Millions)
(Unaudited) Three Months Ended Six Months Ended June 30, June 30,
2005 2004 2005 2004 Net Sales Oral, Personal and Home Care North
America $632.1 $578.9 $1,241.8 $1,147.4 Latin America 651.4 552.4
1,239.9 1,085.9 Europe 691.4 618.8 1,378.8 1,225.8 Asia/Africa
487.1 467.0 985.1 935.2 Total Oral, Personal and Home Care $2,462.0
$2,217.1 $4,845.6 $4,394.3 Total Pet Nutrition 375.5 354.6 734.9
690.9 Total Net Sales $2,837.5 $2,571.7 $5,580.5 $5,085.2 Three
Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004
Operating Profit Oral, Personal and Home Care North America $135.3
$136.4 $272.1 $271.8 Latin America 179.3 159.8 342.4 318.1 Europe
139.0 131.1 274.3 260.8 Asia/Africa 73.8 79.0 155.7 163.1 Total
Oral, Personal and Home Care 527.4 506.3 1,044.5 1,013.8 Total Pet
Nutrition 102.6 99.4 200.8 194.8 Total Corporate (88.9) (20.9)
(211.6) (92.5) Total Operating Profit $541.1 $584.8 $1,033.7
$1,116.1 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 three and
six months ended June 30, 2005 include $36.0 and $85.7 of charges
related to the Company's 2004 Restructuring Program, respectively.
Additionally, Corporate operating expenses for the three and six
months ended June 30, 2004 were reduced by a $26.7 gain related to
the sale of the Company's detergent businesses in Ecuador and Peru.
Colgate-Palmolive Company - Geographic Sales Analysis Percentage
Changes - Second Quarter 2005 vs 2004 June 30, 2005 (Unaudited)
COMPONENTS OF SALES CHANGE 2ND QUARTER 2nd Qtr 2nd Qtr Pricing,
Sales Sales Coupons, Change Change Ex- Consumer & As Ex-
Divested Trade Reported Divestment Volume Incentives Exchange
Region Total Company 10.5% 10.5% 8.0% 0.0% 2.5% Europe 11.5% 11.5%
10.5% -2.5% 3.5% Latin America 18.0% 19.5% 11.0% 3.5% 5.0%
Asia/Africa 4.5% 4.5% 4.0% -2.0% 2.5% Total International 11.5%
12.0% 9.0% -0.5% 3.5% North America 9.0% 9.0% 8.0% 0.0% 1.0% Total
CP Products 11.0% 11.5% 8.5% 0.0% 3.0% Hill's 6.0% 6.0% 3.5% 0.5%
2.0% COMPONENTS OF SALES CHANGE SIX MONTHS 6 Months 6 Months
Pricing, Sales Sales Coupons, Change Change Ex- Consumer & As
Ex- Divested Trade Reported Divestment Volume Incentives Exchange
Region Total Company 9.5% 10.0% 8.0% -0.5% 2.5% Europe 12.5% 12.5%
10.0% -2.0% 4.5% Latin America 14.0% 15.5% 10.0% 2.5% 3.0%
Asia/Africa 5.5% 5.5% 5.5% -2.5% 2.5% Total International 11.0%
11.5% 8.5% -0.5% 3.5% North America 8.0% 8.0% 8.0% -0.5% 0.5% Total
CP Products 10.5% 10.5% 8.0% -0.5% 3.0% Hill's 6.5% 6.5% 3.0% 1.0%
2.5% NOTE: GABA was acquired June 1, 2004. The impact of GABA on
Total Company sales and volume was 1.5% in the second quarter and
2.0% in the six month period. The impact of GABA on European sales
and volume was 6.0% in the second quarter and 8.5% in the six month
period. DATASOURCE: Colgate-Palmolive Company CONTACT: Bina
Thompson, +1-212-310-3072, or Hope Spiller, +1-212-310-2291, both
for Colgate-Palmolive Company Web site: http://www.colgate.com/
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