CL Colgate Palmolive Co

Colgate-Palmolive Company (CL) posted second quarter 2011 earnings of $1.26 per share, keeping in line with Zacks Consensus Estimate. Earnings surpassed the prior-year quarter figure of $1.17 per share by 7.7%.

Global net sales increased 9.5% year over year to $4,185 million based on 0.5% increase in pricingand 6% rise in foreign exchange coupled witha 3% addition from global unit volume. On an organic basis (excluding foreign exchange, acquisitions and divestitures), sales increased 3.5% in the quarter. Global net sales beat the Zacks Consensus Revenue Estimate of $4,159 million.

Gross profit increased by 7.2% to $2,404 million. Gross profit margin declined by 140 basis points to 57.4% compared with the prior-year quarter, as higher material costs and steep promotional investments hurt the cost savings benefits from the Company’s funding-the-growth initiatives.

Colgate-Palmolive notified that its share of the global toothpaste market has increased to 44.6% year to date, representing an increase of 0.4 share points from the year-ago period. Colgate’s market share in manual tooth brushes has increased to 31.9%, which represents an increase of 0.7 share point from a year ago.

Segment Discussion

North Americasales (18.0% of total sales) declined 3.0% in the quarter. An increase of 0.5% in unit volume was offset by 4.5% lower pricing, and 1.0% favorable foreign exchange. On an organic basis, sales declined by 4.0%. Operating profit decreased by 15.0% to $194 million due to lower gross profit partially offset by higher selling, general and administrative expenses.

Latin Americasales (29.0% of total sales) increased 17.0% during the quarter as unit volume increased by 4.0%. Volume gains were most prominent in Brazil, Mexico and Colombia.

In addition, pricing contributed 6.5% to the growth, and foreign exchange added another 6.5%. On an organic basis, sales increased by 10.5%. Operating profit climbed 19.0% to $360 million attributable to higherGross profit as a percentage of Net sales, partially offset by an increase in Selling, general and administrative expenses as a percentage of Net sales.

Europe/South Pacific sales (20.0% of total sales) inched up 11.5% as foreign currency translation made a positive contribution of 13.5% while pricing negatively impacted the growth by 2.5%. Unit volume increased 0.5% during the quarter.

Volume gains led by the United Kingdom and Denmark were partially offset by volume declines in the GABA business and France. Organic sales for Europe/South Pacific declined 2.0%.

Greater Asia/Africa sales (20.0% of total sales) climbed 12.0%, with 6.5%, increase in volume primarily led by volume gains in the Greater China region, India and Malaysia. Pricing remained flat year over year but foreign currency translation made a positive contribution of 5.5%. On an organic basis, sales grew 6.5%. Operating profit rose 5.0%.

Hill’s sales (13.0% of total sales) upped 9.5%. Unit volume increased 2.0% on the back of volume gains in Russia, Canada, Brazil and Australia partially offset by volume declines in France and the U.S. On an organic basis, sales increased 3.5% while operating profit beat year-ago level by 5%.

Other Financial Details

Colgate-Palmolive ended the quarter with cash and cash equivalents of $739.0 million, total debt of $5,011 million and shareholders’ equity of $2,969 million. Net cash provided by operating activities came in at $1,154 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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