Colgate Beats, Margins Lag on Costs - Analyst Blog
January 26 2012 - 5:15AM
Zacks
Colgate-Palmolive
Company (CL) posted fourth-quarter 2011 adjusted earnings
of $1.30 per share, beating the Zacks Consensus Estimate by a
penny. Adjusted earnings also surpassed the prior-year quarter
level of $1.24 per share by approximately 5%.
Global net sales increased
nearly 5% year over year to $4,172 million based on a 3% surge in
pricing and 4% upside in global unit volume, partially offset by a
2% negative impact from foreign exchange. On an organic basis
(excluding foreign exchange, acquisitions and divestitures), sales
increased 6% in the quarter. Global net sales, however, missed the
Zacks Consensus Revenue Estimate of $4,215 million.
Gross profit increased 1.8% to
$2,393 million. However, gross profit margin declined 170 basis
points year over year to 57.4%, as higher material and packaging
costs hurt the cost savings benefits of the company’s
funding-the-growth initiatives. Operating profit margin contracted
70 basis points year over year to 22.1%.
Colgate-Palmolive stated that its
share of the global toothpaste market has increased to 44.3% year
to date, representing an increase of 0.3 share points from the
year-ago period. Colgate’s market share in manual tooth brushes
increased to 31.7%, representing an increase of 0.5 share point
from a year ago.
Segment
Discussion
North America
sales (18% of total sales) increased 3.5% in the quarter. The
growth was primarily driven by 3% rise in unit volume and 0.5%
upside in prices. On an organic basis, sales increased 3.5%.
However, operating profit decreased
11% to $192 million due to lower gross profit and higher selling,
general and administrative expenses as a percentage of net
sales.
Latin America
sales (28% of total sales) grew 6.5% during the quarter as unit
volume increased 3%, partially offset by negative foreign exchange
impact of 5%. Volume gains were most prominent in Brazil, Colombia
and Mexico. In addition, pricing contributed 8.5% to the growth. On
an organic basis, sales increased 14.5%.
Consequently, operating profit
climbed 14% to $364 million from the prior-year quarter. Moreover,
operating margin expanded 190 basis points to 30.2%, primarily due
to a decline in selling, general and administrative expenses as a
percentage of net sales that more than offset the lower gross
profit as a percentage of net sales.
Europe/South
Pacific sales (21% of total sales) upped 5% as unit volume
made a positive contribution of 7.5% while pricing had a 3%
negative impact on growth. Sanex acquisition contributed 6.5% 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 2%.
Operating profit during the quarter
declined 4% year over year to $164 million. Further, operating
profit margin in the region contracted 170 basis points to 19.4%.
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% of total sales) climbed 5%, with 6%
increase in volume, primarily led by volume gains in the India,
Thailand, Russia and Malaysia, partially offset by volume decline
in Greater China region. Pricing contributed 3.5% to the growth
while Sanex acquisition added 1%.
On an organic basis, sales grew
8.5%. Consequently, operating profit rose 5% to $203 million.
However, operating profit margin remained flat year over year at
25.5%, as lower gross profit margin was fully offset by lower
selling, general and administrative expenses as a percentage of net
sales.
Hill’s sales (13%
of total sales) upped 2%. Unit volume decreased 1.5% due to lower
volume in the U.S and Japan. On an organic basis, sales inched up
1.5% from the year-ago quarter. Operating profit increased by 4% to
$152 million. Further, operating profit margin improved by 60 basis
points to 27%, primarily due to decreased selling, general and
administrative expenses, as a percentage of net sales that more
than offset the negative impact of lower gross profit margin.
Other Financial
Details
Colgate-Palmolive ended the fiscal
year 2011 with cash and cash equivalents of $878 million, total
debt of $4,810 million and shareholders’ equity of $2,375 million.
Net cash provided by operating activities came in at $2,896
million.
Colgate-Palmolive, which competes
with Procter & Gamble Company (PG) and
Church & Dwight Company Inc. (CHD), retains a
Zacks #4 Rank, which translates into a short-term Sell rating. Our
long-term recommendation on the stock remains Neutral.
CHURCH & DWIGHT (CHD): Free Stock Analysis Report
COLGATE PALMOLI (CL): Free Stock Analysis Report
PROCTER & GAMBL (PG): Free Stock Analysis Report
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