CL Colgate Palmolive Co

Colgate-Palmolive Company (CL) posted first quarter of fiscal 2011 earnings of $1.16 per share, at par with the Zacks Consensus Estimate. However, earnings fell short of the prior-year quarter figure of $1.21 per share.

Global net sales increased 4.5% year over year to $3,994 million despite a 3% benefit from foreign exchange and a 2% addition from global unit volume, which was offset by a 0.5% fall in pricing. On an organic basis (excluding foreign exchange, acquisitions and divestitures), sales increased 1.5% in the quarter. Global net sales beat the Zacks Consensus Revenue Estimate of $3,956 million.

Gross profit increased by 2.8% to $2,331 million. Gross profit margin declined by 80 basis points to 58.4% compared with the prior-year quarter, as higher material costs and steep promotional investments undid the benefits from cost-saving initiatives.

Colgate-Palmolive notified that its share of the global toothpaste market has increased to 44.7% year to date, representing an increase of 0.6 share points from the year-ago period. Colgate’s market share in manual tooth brushes has increased to 32.4%, which represents an increase of 1.0 share point from a year ago.

Segment Discussion

North America sales (18.0% of  total sales) declined 4.5% in the quarter, primarily due to a 1.0% unit volume decline and 4.0% lower pricing, partially offset by a 0.5% favorable foreign exchange. On an organic basis, sales declined by 5.0%. Operating profit decreased by 12.0% to $192 million due to lower gross profit partially offset by lower selling, general and administrative expenses.

Latin America sales (28.0% of total sales) increased 9.0% during the quarter as unit volume increased by 0.5%. Volume gains in Venezuela, Argentina and Central America mitigated the volume declines in Brazil, Colombia and the Dominican Republic.

In addition, pricing contributed 4.5% to the growth, and foreign exchange positively added another 4.0%. On an organic basis, sales increased by 5.0%. Operating profit nevertheless plunged 4.0% to $326 million attributable to higher selling, general and administrative expenses partially offset by higher gross profit.

Europe/South Pacific sales (21.0% of total sales) inched up 1.0% as foreign currency translation made a positive contribution of 2.5% while pricing negatively impacted the growth by 2.5%. Unit volume increased 1.0% during the quarter.

Volume gains in the GABA business, Poland, Greece, Ireland and Australia were partially offset by volume declines in the United Kingdom and the Netherlands. On an organic basis, sales fell 1.5%, whereas operating profit dropped 3.0% in the quarter, reflecting a fall in gross profit partially offset by a decline in selling, general and administrative expenses.

Greater Asia/Africa sales (20.0% of total sales) climbed 11.5%, with increase in volume by 8.5%, primarily led by volume gains in the Greater China region, India, South Africa and Turkey. Pricing dropped marginally by 1.0% but foreign currency translation made a positive contribution of 4.0%. On an organic basis, sales grew 7.5%. Operating profit rose 7.0%.

Hill’s sales (13.0% of total sales) upped 3.5%. Unit volume increased 3.0% due to volume gains in U.S., France, Japan, South Africa, Italy and Canada, partially offset by volume decline in Australia and South Korea. On an organic basis, sales increased 1.5% while operating profit came in flat.

Other Financial Details

Colgate-Palmolive ended the quarter with cash and cash equivalents of $686.0 million, total debt of $3,804 million and shareholders’ equity of $2,419 million. Net cash provided by operating activities came in at $680 million.

Colgate-Palmolive, which competes with Procter & Gamble Company (PG) and Church & Dwight Company Inc. (CHD), maintains a Zacks #3 Rank, which translates into a short-term Hold recommendation. Our long-term recommendation on the stock remains Neutral.

 
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