CL Colgate Palmolive Co

Colgate-Palmolive Company (CL) posted third-quarter 2011 earnings of $1.31 per share, remains in line with Zacks Consensus Estimate. Earnings surpassed the prior-year quarter figure of $1.21 per share by 8.2%.

Global net sales increased 11.2% year over year to $4,383.0 million based on 2.0% surge in pricing and 4.5% rise in foreign exchange coupled with a 4.5% addition from global unit volume. On an organic basis (excluding foreign exchange, acquisitions and divestitures), sales increased 5.0% in the quarter. Global net sales beat the Zacks Consensus Revenue Estimate of $4,374.0 million.

Gross profit increased by 5.0% to $2,462.0 million. However, gross profit margin declined by 260 basis points to 56.8% compared with the prior-year quarter, as higher material costs and steep promotional investments hurt the cost savings benefits of the Company’s funding-the-growth initiatives.

Colgate-Palmolive notified that its share of the global toothpaste market has increased to 44.4% year to date, representing an increase of 0.3 share points from the year-ago period. Colgate’s market share in manual tooth brushes has increased to 31.8%, representing an increase of 0.5 share point from a year ago.

Segment Discussion

North Americasales (18.0% of total sales) increased inched up 3.0% in the quarter. An increase of 0.5% in unit volume and 0.5% favorable foreign exchange was partially offset by 2.5% lower pricing. On an organic basis, sales increased by 2.5%.

However, operating profit decreased by 5.0% to $213.0 million due to lower gross profit as a percentage of net sales, partially offset by decline in selling, general and administrative expenses.

Latin America sales (28.0% of total sales) increased 16.0% during the quarter as unit volume increased by 6.5%. Volume gains were most prominent in Brazil and Mexico. In addition, pricing contributed 9.0% to the growth, and foreign exchange added another 3.0%. On an organic basis, sales increased by 15.5%. Consequently, operating profit climbed 10.0% to $364.0 million from the prior-year quarter.

However, operating margin declined by 180 basis points to 29.3% primarily due to lower gross profit as a percentage of Net sales, partially offset by a decline in selling, general and administrative expenses as a percentage of Net sales.

Europe/South Pacific sales (22.0% of total sales) jumped 18.5% as foreign currency translation made a positive contribution of 11.0% while pricing negatively impacted growth by 2.5%. Unit volume increased 10.0% while Sansex acquisition added 9.0% to sales during the quarter. Volume gains were primarily led by better performance in the United Kingdom, Spain and France. However, organic sales for Europe/South Pacific inched down 1.5%.

However, operating profit margin in the region contracted by 380 basis points to 20.2%. The decline in operating profit margin was primarily attributable to lower gross profit margin and higher Selling, general and administrative expenses as a percentage of Net sales.

Greater Asia/Africa sales (20.0% of total sales) climbed 9.5%, with 4.0% increase in volume, primarily led by volume gains in the Greater China region, India, Russia and Malaysia. Pricing contributed 2.0% to the growth while foreign currency translation made a positive contribution of 3.5% coupled with a 0.5% addition from Sansex acquisition.

On an organic basis, sales grew 5.5%. Consequently, operating profit rose 4.0%. However, operating profit margin decreased to 23.6% primarily due lower gross profit margin partially offset by lower selling, general and administrative expenses as a percentage of Net sales.

Hill’s sales (12.0% of total sales) upped 3.0%. Unit volume decreased 4.0% due to lower volume in Russia. On an organic basis, sales decreased 1.0% from the year-ago quarter. Operating profit margin decreased to 23.6%.

Other Financial Details

Colgate-Palmolive ended the quarter with cash and cash equivalents of $945.0 million, total debt of $4,756.0 million and shareholders’ equity of $2,667.0 million. Net cash provided by operating activities came in at $2,057.0 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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