Colgate Announces Record 2nd Quarter Excellent Worldwide Unit
Volume Growth NEW YORK, July 21, 2004 /PRNewswire-FirstCall/ --
Colgate-Palmolive Company (NYSE:CL) today announced all-time record
operating profit, net income and earnings per share in second
quarter 2004. Earnings were driven by unit volume growth in all
operating divisions worldwide. Global sales increased 5.5%
excluding divestments, and global unit volume grew 5.0% on the same
basis. Despite sharply rising material prices, gross profit margin
for the Company increased 40 basis points to 55.4%, a second
quarter record. Operating profit reached an all-time record $584.8
million, up 5% versus second quarter 2003. Operating profit margin
achieved the same record level of 22.7% set in the year ago
quarter. Worldwide dollar sales, as reported including divestments,
increased 4.5% and volume on the same basis was up 4.0%. Net income
increased 4% to $373.9 million and diluted earnings per share
increased 6.5% to $.66 vs. $.62 in the year ago period. This is
Colgate's 33rd consecutive quarter of increased net income,
earnings per share and gross profit margin. Late in the quarter the
acquisition of GABA Holding AG, a European oral care company, was
completed. The addition of this business contributed 0.5% to
worldwide sales and volume growth during the quarter. The
acquisition had a negative effect on earnings of less than $.01 per
share during the quarter. Reuben Mark, Chairman and CEO said, "We
are pleased with the overall strength in the quarter, and are
especially encouraged by the resurgence of Colgate's U.S. business.
Second quarter unit volume growth in the U.S., excluding Simply
White gel, is the strongest in three years, and this momentum is
expected to continue for the balance of the year and into 2005. The
current pace of the business in third quarter is strong and
national market shares, particularly for toothpaste, are up. Our
reinvestment in the U.S. appears to be paying off, which bodes well
for U.S. and global results in 2005." Commenting further on the
Company's worldwide business, Mr. Mark said, "For us and for
others, 2004 is a very challenging year, with incremental marketing
spending in many countries and sharp increases in raw and packing
material costs. Despite these pressures, we are delighted that
worldwide gross margin was up meaningfully in the quarter and the
first half, and is expected to be up for the year as well. "This
increase in gross profit, combined with our usual strict cost
controls, allowed a very sizable global increase in commercial
investment behind our core brands. As evidence of the positive
effect of this spending, for example, our worldwide toothpaste unit
volume increased just under 7% during the quarter, well above the
Company as a whole." As part of Colgate's well-known prioritization
strategy, during the quarter the Company sold its detergent
businesses in Ecuador and Peru to The Procter & Gamble Company.
The $15 million gain on this sale was largely offset by the impact
of previously announced restructurings and changes in distribution
networks. The Company has also agreed to sell its detergent
business in Colombia to Procter & Gamble, subject to regulatory
approval. Colgate maintained its strong balance sheet with
capitalization ratios well within targeted ranges both before and
after the GABA acquisition. Year to date net cash provided by
operations was $644 million, 12% below last year's level. The
change is due to payment of non-operating one-time capital gains
taxes during the period from the sale of European detergents in
2003 and a short-term increase in finished goods inventory in June
2004 to ensure new product supply in Latin America and the U.S.
Cash generation is expected to reach last year's record level for
full year 2004. At 11:00 a.m. ET today, Colgate will host a
conference call to elaborate on second quarter results and to
discuss the Company's ongoing expectations. 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 (23% of
Company Sales) North American sales declined 2.5% and unit volume
was up slightly, somewhat better than expected. These results are
measured against record sales results in the year ago quarter which
were buoyed by strong sales of Colgate Simply White tooth whitening
gel. Excluding the Simply White comparison, North American unit
volume increased 4.5%, with more than 5% volume growth in the U.S.,
continuing the growth momentum seen in recent quarters. Toothpaste
unit volume in the U.S. was up 9% in the quarter. North American
operating profit declined 12%, as expected, versus the all- time
record level in second quarter 2003, reflecting planned increased
commercial spending levels designed to build market share.
Colgate's leadership of the U.S. toothpaste market grew during the
quarter with an ACNielsen national market share of 34.2% year to
date, 270 basis points ahead of the number two competitor.
Colgate's lead has increased in each of the last three months.
Renewed focus on core businesses and increased commercial
investment in the U.S. is generating strong volume and market share
growth. New advertising with strengthened claims in several
categories began during the quarter. Volume growth exceeded 7% in
the key categories of toothpaste, manual toothbrushes, liquid hand
soap, body wash and fabric conditioners. For the first half of
2004, market shares have increased in 8 of 12 categories from the
second half of 2003, reflecting the renewed vigor in the business.
Reaching U.S. store shelves soon is new Colgate Max Fresh
toothpaste, the only toothpaste infused with mini breath strips.
The breath strips dissolve instantly upon brushing, releasing an
extra rush of breath freshening power. Initial acceptance of this
innovative new toothpaste by the retail trade has been strong and
key in-store advertising support is planned through all classes of
trade. Europe (24% of Company Sales) European sales and unit
volume, excluding divestments, grew 11.5% and 7.5%, respectively,
during the quarter. The GABA acquisition added 2.5% to both sales
and volume growth for the region. Healthy volume gains were
achieved in the United Kingdom, Germany, Spain, Switzerland,
Holland, Belgium, Poland, Czech Republic, Russia, Turkey, Romania
and Adria. European sales as reported, which reflect the divestment
of detergents in Europe, the GABA acquisition and the effect of
foreign exchange, increased 7.0%. Dollar operating profit increased
3% to an all-time record level even after strongly increased
commercial investment behind Colgate brands. Colgate continued to
strengthen its toothpaste leadership in Western Europe. Successful
new products driving growth include Colgate Total Advanced Fresh,
Colgate Total Plus Whitening, Colgate Sensitive and Colgate Oxygen
toothpastes. Standouts in other categories include Colgate Massager
and Colgate Sensitive manual toothbrushes, Palmolive Aroma Creme,
Palmolive Thermal and Palmolive Thermal Spa shower gels, Palmolive
deodorant and Soupline Hearts fabric conditioner. Contributing to
growth throughout Central Europe and Russia are Colgate Total
Advanced Fresh, Colgate Propolis and Colgate Herbal Propolis
toothpastes, Colgate Whitening toothbrush, Palmolive Aroma Creme
and Palmolive Thermal Spa shower gels, and Ajax Baking Soda &
Citrus all purpose cleaner. Latin America (21% of Company Sales)
Economic recovery continues in Latin America. Colgate's strong
volume recovery continued, with a 5.0% increase in second quarter
2004. Volume gains were achieved by nearly every country in the
region including Mexico, Brazil, Argentina, Chile, Colombia,
Ecuador, Peru, Venezuela, Central America, Bolivia, Paraguay and
Uruguay. Dollar sales rose 1.5% reflecting negative foreign
exchange. Dollar operating profit increased 5%, continuing the
positive trend established in the first quarter and expected to
continue throughout 2004 and into 2005. Colgate continues to build
its extremely strong Oral Care leadership in Latin America. New
products contributing to market share gains include Colgate Herbal
White, Colgate Sensitive, Colgate Total Plus Whitening, Colgate
Triple Action Mild Mint and Sorriso Jua Plus Baking Soda
toothpastes. Colgate became the Number One brand in manual
toothbrushes in the region driven by the success of Colgate
Navigator Plus and Colgate Massager toothbrushes. Driving growth in
other categories are Palmolive Aromatherapy bar soap, Palmolive
Naturals Milk & Rose shower gel and liquid hand soap, Caprice
Specialties shampoo and conditioners, Mennen Speed Stick 24/7
multiform deodorants, Fabuloso Passion Fruit liquid cleaner, Ajax
multipurpose degreaser spray cleaner and Axion Baking Soda and
Grapefruit dish paste. Asia/Africa (18% of Company Sales)
Asia/Africa sales and unit volume, excluding divestments, grew
13.0% and 11.0%, respectively, on top of a very strong performance
in the year ago quarter. Strong volume gains were achieved by
China, India, Australia, Hong Kong, Taiwan, Malaysia, Philippines,
Thailand, Vietnam and South Africa. Asia/Africa sales as reported
rose 12.0%, reflecting 10.0% volume growth and favorable foreign
exchange of 5.5%. Dollar operating profit increased 13% reflecting
improved profitability combined with strengthened local currencies.
Successful new products driving growth in Oral Care are Colgate
Herbal Salt, Colgate Sensitive, Colgate Total Plus Whitening and
Darlie Hydro Fresh toothpastes, Colgate Massager and Colgate
Designer manual toothbrushes, and Colgate powered toothbrushes for
kids featuring LOONEY TUNES characters. In China for example,
Colgate continues its leadership of the toothpaste market with its
national ACNielsen market share at 31.9% year to date, over 12
share points ahead of the number two competitor. New products
driving growth in Personal Care include Palmolive Naturals Silky
Straight and Palmolive Aromatherapy shampoo, Palmolive Aromatherapy
Sensual shower gel and Palmolive Naturals bar soap with papaya
extracts. Hill's Pet Nutrition (14% 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
4.0% in second quarter 2004 on top of a very strong performance in
the year ago period. Dollar sales rose 9.0% versus second quarter
2003, reflecting this volume growth, favorable foreign exchange of
3.0% and the effect of a domestic price increase. Dollar operating
profit increased 9.0% after increased commercial investment. New
products driving growth in the U.S. specialty retail channel
include Science Diet Advanced Protection and Science Diet Feline
Hairball now available in wet form. Television advertising
supporting Science Diet Advanced Protection began during the
quarter as did targeted activity in support of Science Diet's
entire feline product range. Internationally, solid volume growth
was achieved by Malaysia, Taiwan, Thailand, Russia, Korea, South
Africa, Australia, Spain and Germany. Science Plan Nature's Best,
Prescription Diet Feline m/d, increased promotional activity and
distribution gains contributed to the strong international results.
* * * 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, 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
website at http://www.colgate.com/. LOONEY TUNES is a (TM) &
(C) of Warner Bros. Entertainment Inc. Certain financial measures
contained in this release, as noted, exclude results for Colgate
Simply White tooth whitening gel. Management believes this provides
useful information to investors as it allows comparisons of
Colgate's other product lines and businesses without the impact of
Colgate Simply White, sales of which began in the third quarter of
2002. In addition, sales and unit volume growth both worldwide and
in relevant geographic divisions are discussed in the 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. 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. 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, 2003) 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
website at http://www.colgate.com/. (See attached tables for second
quarter results.) Colgate-Palmolive Company Condensed Consolidated
Statements of Income For the three and six months ended June 30,
2004 and 2003 (Dollars in Millions Except Per Share Amounts)
(Unaudited) Three Months Ended Six Months Ended June 30, June 30,
2004 2003 2004 2003 Net Sales $2,571.7 $2,458.6 $5,085.2 $4,807.0
Cost of Sales 1,148.1 1,105.8 2,262.0 2,156.0 Gross Profit 1,423.6
1,352.8 2,823.2 2,651.0 Gross Profit Margin 55.4% 55.0% 55.5% 55.1%
Selling, General & Administrative Expenses 838.8 795.3 1,707.1
1,583.0 Operating Profit 584.8 557.5 1,116.1 1,068.0 Operating
Profit Margin 22.7% 22.7% 21.9% 22.2% Net Interest Expense 29.3
31.3 57.6 65.3 Income Before Income Taxes 555.5 526.2 1,058.5
1,002.7 Provision for Income Taxes 181.6 166.4 346.1 318.9
Effective Tax Rate 32.7% 31.6% 32.7% 31.8% Net Income 373.9 359.8
712.4 683.8 Net Earnings Per Common Share Basic $.69 $.66 $1.31
$1.25 Diluted $.66 $.62 $1.25 $1.18 Average Common Shares
Outstanding Basic 531.4 538.0 532.2 537.6 Diluted 570.6 580.6 571.5
580.0 Colgate-Palmolive Company Condensed Consolidated Balance
Sheets As of June 30, 2004, December 31, 2003 and June 30, 2003
(Dollars in Millions) (Unaudited) June 30, December 31, June 30,
2004 2003 2003 Cash and cash equivalents $417.3 $265.3 $219.2
Receivables, net 1,277.2 1,222.4 1,196.0 Inventories 843.4 718.3
770.9 Other current assets 297.0 290.5 256.9 Property, plant and
equipment, net 2,502.7 2,542.2 2,517.5 Other assets, including
goodwill and intangibles 3,092.8 2,440.1 2,466.2 Total assets
$8,430.4 $7,478.8 $7,426.7 Total debt 3,962.4 3,102.9 3,459.3 Other
current liabilities 1,941.0 2,027.4 1,861.9 Other non-current
liabilities 1,495.6 1,461.4 1,391.9 Total shareholders' equity
1,031.4 887.1 713.6 Total liabilities and shareholders' equity
$8,430.4 $7,478.8 $7,426.7 Supplemental Balance Sheet Information:
Debt less cash and marketable securities* $3,522.8 $2,800.7
$3,233.2 Working capital % of sales 4.3% 1.7% 3.6% After-tax return
on capital 33.5% 38.0% 35.9% * Marketable securities of $22.3,
$36.9 and $6.9 as of June 30, 2004, December 31, 2003 and June 30,
2003, respectively, are included in Other current assets.
Colgate-Palmolive Company Condensed Consolidated Statements of Cash
Flows For the six months ended June 30, 2004 and 2003 (Dollars in
Millions) (Unaudited) 2004 2003 Operating Activities: Net income
$712.4 $683.8 Restructuring (4.8) - Depreciation and amortization
159.7 153.6 Deferred income taxes 22.6 (1.0) Changes in:
Receivables (32.3) (9.3) Inventories (115.9) (73.1) Accounts
payable and other accruals (57.4) 8.2 Other non-current assets and
liabilities (40.3) (31.9) Net cash provided by operations 644.0
730.3 Investing Activities: Capital expenditures (117.6) (121.2)
Payment for acquisition, net of cash acquired (714.8) - Other
investing activities 52.4 45.4 Net cash used in investing
activities (780.0) (75.8) Financing Activities: Proceeds from
(payments on) debt issuances, net 868.2 (196.5) Dividends paid
(268.6) (237.0) Purchases of treasury shares (358.2) (235.8)
Proceeds from exercise of stock options 57.2 63.7 Net cash provided
by (used in) financing activities 298.6 (605.6) Effect of exchange
rate changes on cash and cash equivalents (10.6) 2.4 Net increase
in cash and cash equivalents 152.0 51.3 Cash and cash equivalents
at beginning of period 265.3 167.9 Cash and cash equivalents at end
of period $417.3 $219.2 Supplemental Cash Flow Information: Free
cash flow before dividends (net cash provided by operations less
capital expenditures) Net cash provided by operations $644.0 $730.3
Less: Capital expenditures (117.6) (121.2) Free cash flow before
dividends $526.4 $609.1 Colgate-Palmolive Company Segment
Information For the three and six months ended June 30, 2004 and
2003 (Dollars in Millions) (Unaudited) Three Months Ended Six
Months Ended June 30, June 30, Net Sales 2004 2003 2004 2003 Oral,
Personal, and Home Care North America $578.9 $593.6 $1,147.4
$1,182.1 Latin America 552.4 544.3 1,085.9 1,042.8 Europe 618.8
577.7 1,225.8 1,108.6 Asia/Africa 467.0 417.4 935.2 838.5 Total
Oral, Personal, and Home Care 2,217.1 2,133.0 4,394.3 4,172.0 Total
Pet Nutrition 354.6 325.6 690.9 635.0 Total Net Sales $2,571.7
$2,458.6 $5,085.2 $4,807.0 Three Months Ended Six Months Ended June
30, June 30, Operating Profit 2004 2003 2004 2003 Oral, Personal,
and Home Care North America $136.4 $154.9 $271.8 $302.7 Latin
America 159.8 151.6 318.1 300.3 Europe 131.1 127.7 260.8 241.6
Asia/Africa 79.0 69.7 163.1 135.6 Total Oral, Personal, and Home
Care 506.3 503.9 1,013.8 980.2 Total Pet Nutrition 99.4 91.2 194.8
179.0 Total Corporate (20.9) (37.6) (92.5) (91.2) Total Operating
Profit $584.8 $557.5 $1,116.1 $1,068.0 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.
Colgate-Palmolive Company - Geographic Sales Analysis Percentage
Changes - Second Quarter 2004 vs 2003 June 30, 2004 (Unaudited)
COMPONENTS OF SALES CHANGE Pricing 2nd Qtr 2nd Qtr Coupons Sales
Sales Consumer & Change Change Ex-Divested Trade As Reported
Ex-Divestment Volume Incentives Exchange Region Total Company *
4.5% 5.5% 5.0% -1.0% 1.5% Europe * 7.0% 11.5% 7.5% -2.5% 6.5% Latin
America 1.5% 1.5% 5.0% 3.0% -6.5% Asia/ Africa 12.0% 13.0% 11.0%
-3.5% 5.5% Total International 6.5% 8.5% 7.5% -1.0% 2.0% North
America -2.5% -2.5% 0.0% -3.0% 0.5% Total CP Products 4.0% 5.0%
5.0% -1.5% 1.5% Hill's 9.0% 9.0% 4.0% 2.0% 3.0% COMPONENTS OF SALES
CHANGE Pricing 6 Months 6 Months Coupons Sales Sales Consumer &
Change Change Ex-Divested Trade As Reported Ex-Divestment Volume
Incentives Exchange Region Total Company * 6.0% 7.0% 4.5% -1.0%
3.5% Europe * 10.5% 15.0% 8.0% -3.0% 10.0% Latin America 4.0% 4.0%
5.0% 3.0% -4.0% Asia/ Africa 11.5% 12.5% 9.0% -4.0% 7.5% Total
International 8.5% 10.5% 7.0% -1.0% 4.5% North America -3.0% -3.0%
-1.5% -2.0% 0.5% Total CP Products 5.5% 6.5% 4.5% -1.5% 3.5% Hill's
9.0% 9.0% 4.0% 1.0% 4.0% NOTE: * GABA was acquired June 1, 2004.
GABA has the effect of increasing Total Company second quarter
sales and volume by 0.5%. The increase on Europe's second quarter
sales and volume is 2.5%. The impact on the six months is
approximately half these amounts. DATASOURCE: Colgate-Palmolive
Company CONTACT: Bina Thompson +1-212-310-3072, or Hope Spiller,
+1-212-310-2291, both of Colgate-Palmolive Company Web site:
http://www.colgate.com/
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