Colgate Announces 3rd Quarter Earnings in Line with Previous
Guidance Worldwide Sales and Unit Volume up Strongly NEW YORK,
October 20, 2004 /PRNewswire-FirstCall/ -- Colgate-Palmolive
Company (NYSE:CL) today announced strong worldwide sales and unit
volume growth for third quarter 2004 and operating profit slightly
ahead of the year ago quarter's record level. These results were in
line with the Company's earnings guidance on September 20, 2004.
Global sales and global unit volume each grew 8.5% during the
quarter, excluding divestments, with the recently acquired GABA
business contributing 2.0%. Worldwide dollar sales as reported
increased 7.0%, which includes the effect of divestments, 2.0%
positive foreign exchange and 2.0% lower pricing brought about by
increased commercial spending. As per previous guidance, net income
was $329.0 million in the quarter, down 10% from the year ago
quarter. Diluted earnings per share declined 8% to $.58 vs. $.63 in
third quarter 2003. The GABA acquisition had a negative effect on
earnings of less than $.01 per share during the quarter. As
previously communicated, the combined effect of increased
commercial spending and increases in raw and packing material costs
more than offset sizable savings generated by the Company's global
"Funding the Growth" savings programs. This resulted in gross
profit margin for the quarter of 54.8%, slightly below last year's
record high level. The global tax rate in the quarter was 35.2%,
more than 700 basis points higher than last year's third quarter
rate of 27.6%. The increase in the tax rate was somewhat higher
than the previous 32.7% guidance, due primarily to increased
commercial spending in low tax rate countries. The Company has
projected its tax rate to improve to approximately 33% in the
fourth quarter, and to improve further in 2005. Reuben Mark,
Chairman and CEO said, "Our aggressive commercial spending in key
countries around the world is showing results. Excellent top-line
volume growth this quarter exceeded our expectations, particularly
in North America and Latin America, with every division worldwide
up in unit volume. We expect good top-line growth to continue in
both the fourth quarter and 2005. "Market shares are high and
getting higher worldwide. Toothpaste share is at an all-time record
high in the U.S., and our leadership in this core category is
increasing in other competitive markets around the world.
Underlying these share gains are large media increases here and
abroad." The Company also reaffirmed its previous earnings guidance
for fourth quarter 2004, which coincides with the range of external
estimates of $.57 to $.59 per share. Mr. Mark continued, "In the
U.S. and overseas, Colgate's marketing and financial fundamentals
are very solid. Top-line growth is excellent, and is expected to
remain so, although it has come at a cost to short-term profits.
Looking forward, Colgate has always been very good at methodically
improving profitability, and we fully expect our current investment
in key countries combined with accelerated "Funding the Growth"
programs will lead to higher profits in 2005 and beyond." During
the quarter, Colgate strengthened its balance sheet with all key
capitalization ratios improving since the June 2004 GABA
acquisition. Working capital as a percent to sales improved since
the prior quarter from 4.3% to 3.4%. Cash flow provided by
operations in the quarter increased 7%, but was slightly below last
year's record year-to-date level, reflecting one-time non-operating
capital gains taxes paid during the period from the prior sale of
detergent businesses. Separately, Colgate's Board of Directors
voted yesterday to authorize an enhanced repurchase plan to buy
back 20 million shares of Colgate stock between now and year-end
2005. This will allow the repurchase of Colgate shares at twice the
rate actually purchased in 2003 and year-to-date 2004. Purchases at
these increased levels will begin immediately. At 11:00 a.m. ET
today, Colgate will host a conference call to elaborate on third
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) Positive growth momentum continued in North America,
fueled by new product sales and market share gains. Unit volume
grew 6.5%, with sales up 4.0% during the quarter. Consumer takeaway
of Colgate's products in the U.S. grew at a record pace during the
third quarter, nearly double that of the second quarter. North
American operating profit increased 5% despite a double-digit
increase in commercial investment during the period. Colgate's
leadership of the U.S. toothpaste market grew substantially during
the quarter. Colgate's share of the U.S. toothpaste market also
increased sequentially in each of the last six months, reaching a
record high in the month of September at 37.3%, over seven full
share points ahead of the number two competitor. New product
launches, renewed focus on core businesses and increased commercial
investment in the U.S. are generating strong volume and market
share growth across categories. In oral care, Colgate Max Fresh
toothpaste, the only toothpaste infused with mini-breath strips
that dissolve instantly upon brushing, is off to a strong start and
new increased media with support behind Colgate Total toothpaste
has helped drive quarterly market share for the Colgate Total
equity to an all-time high. In personal care, new products driving
growth include Softsoap Naturals Vanilla Brown Sugar and Softsoap
Naturals Morning Mist body washes. Palmolive Oxy Plus dishwashing
liquid with its strong grease cutting formula contributed to growth
in home care with its ACNielsen national market share at nearly 4%
just months after launch. Europe (26% of Company Sales) European
dollar sales and unit volume, excluding divestments, grew 19.5% and
16.0%, respectively, during the quarter. The GABA acquisition added
8.5% to both sales and volume growth for the region. Strong volume
gains were achieved in Italy, Germany, the United Kingdom, Spain,
Russia, Turkey, Belgium, Greece, Adria, Romania and Ukraine.
European dollar sales and unit volume as reported, which reflect
the divestment of detergents in Europe, the GABA acquisition and
the 7.0% positive effect of foreign exchange, increased 14.5% and
11.0%, respectively. Dollar operating profit increased 5% to an
all-time record level even after strongly increased commercial
investment behind Colgate brands during the quarter. Colgate
continued to strengthen its toothpaste leadership in Western Europe
during the quarter with market shares increasing in 13 countries
across the region, and reaching record highs in Italy, the United
Kingdom and Portugal. Successful new products driving this strong
growth include Colgate Sensitive, Colgate Total Advanced Fresh and
Colgate Oxygen toothpastes. In personal care, the roll-out of new
Palmolive multi-form deodorants is adding incremental market share
throughout the region as is Palmolive Aroma Creme, Palmolive
Thermal and Palmolive Thermal Spa shower gels. In fabric care, the
success of Soupline Hearts fabric conditioner contributed to growth
during the quarter. Throughout Central Europe and Russia strong
results were achieved across all key categories. In Russia, for
example, Colgate's share of the toothpaste market is at 17.5% for
the latest period, nearly double what it was three years ago.
Colgate's share of the shower gel market in Russia has also nearly
doubled over the same time period. New products contributing to
growth throughout the region include Colgate Propolis and Colgate
Herbal Propolis toothpastes, Colgate Whitening and Colgate Massager
toothbrushes, Palmolive Aroma Creme, Palmolive Thermal and
Palmolive Thermal Spa shower gels and Mennen Speed Stick 24/7
deodorants now available in both stick and aerosol forms. Latin
America (21% of Company Sales) Colgate's strong volume recovery in
Latin America continued, with a 9.0% unit volume increase in third
quarter 2004, excluding divestments, the strongest volume growth in
17 quarters. Nearly every country in the region contributed to the
strong volume gains including Mexico, Brazil, Venezuela, Argentina,
Colombia, Central America, Ecuador, Chile and Peru. Dollar sales
rose 4.5%, excluding divestments and after negative foreign
exchange of 4.5%. Latin American dollar sales and unit volume as
reported, which reflect the divestment of detergents in Ecuador and
Peru, grew 3.0% and 7.5%, respectively. Dollar operating profit
declined 1% after a double-digit increase in commercial investment
and negative foreign exchange. Colgate continues to strengthen its
already strong oral care leadership in key countries throughout the
region. In Mexico, for example, increased advertising and marketing
support behind growth-oriented brand-building activities has helped
increase Colgate's share of the toothpaste market from its already
high level of 80%. New products contributing to growth in this
category throughout the region include Colgate Total Advanced
Fresh, Colgate Triple Action Mild Mint, Colgate Sensitive and
Colgate Herbal Whitening toothpastes. The Colgate brand expanded
its leadership in manual toothbrushes throughout the region by more
than three full share points year-to-date driven by the success of
Colgate Navigator Plus and Colgate Massager manual toothbrushes.
Driving growth in other categories are Palmolive Aromatherapy
translucent bar soap, Palmolive Naturals Milk & Rose Petals
shower gel and Lady Speed Stick Aloe multiform deodorants.
Asia/Africa (17% of Company Sales) Asia/Africa sales and unit
volume, excluding divestments, grew 4.5% and 6.0%, respectively, on
top of a very strong performance in the year ago quarter. Strong
volume gains were achieved in China, India, Taiwan, Philippines,
Thailand, Malaysia, Australia and South Africa. Asia/Africa sales
and unit volume as reported rose 3.5% and 5.0%, respectively,
reflecting divestments and favorable foreign exchange. After a
significant increase in commercial investment, dollar operating
profit for the region was relatively flat with third quarter 2003's
record level. Strong growth and market share gains were achieved
across the region. In China, Colgate continues its leadership of
the toothpaste market with its national ACNielsen market share at
32.0%, nearly twelve share points ahead of the number two
competitor. In the Philippines, Colgate's share of the toothpaste
market reached a record high during the quarter and growth momentum
continued in India where Colgate's toothpaste market share reached
its highest quarterly level this year. Successful new products
driving gains include Colgate Herbal Salt, Colgate Total Advanced
Fresh and Darlie Herbal Natural toothpastes, and the relaunch of
Colgate Total toothpaste with new packaging and television
advertising highlighting its 12 benefits and 12 hour protection. In
personal care, Palmolive Naturals Milk & Rose Petals shower gel
and Palmolive Naturals Silky Straight shampoo contributed to
growth. Hill's Pet Nutrition (13% of Company Sales) Innovative new
products and veterinary endorsements continue to drive growth at
Hill's, the world leader in specialty pet food. Healthy results
both domestically and internationally contributed to 3.5% global
unit volume growth in the quarter. Dollar sales rose 9.0% versus
third quarter 2003, reflecting this volume growth, favorable
foreign exchange and the effect of a domestic price increase.
Dollar operating profit declined 4% reflecting the combination of
sharply higher agricultural commodities and a double-digit increase
in commercial investment. New products driving growth in the U.S.
specialty retail channel include Science Diet Advanced Protection
and new Science Diet Large Breed Light and Science Diet Large Breed
Senior, the latest additions to a full line of nutrition specially
formulated for large breed dogs. Marketing support for the new
large breed diets included extensive in-store displays and full
page print ads in pet retailer circulars. Internationally, strong
volume growth was achieved in Australia, Spain, South Africa,
Switzerland, France, Hong Kong, Russia and Japan. Science Plan
Nature's Best and Prescription Diet Feline m/d 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/ . Sales and unit
volume growth, both worldwide and in relevant geographic divisions,
are discussed in this 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 third
quarter results.) Colgate-Palmolive Company Condensed Consolidated
Statements of Income For the three and nine months ended September
30, 2004 and 2003 (Dollars in Millions Except Per Share Amounts)
(Unaudited) Three Months Ended Nine Months Ended September 30,
September 30, 2004 2003 2004 2003 Net Sales $2,695.7 $2,523.8
$7,780.9 $7,330.8 Cost of Sales 1,219.0 1,136.5 3,481.0 3,292.5
Gross Profit 1,476.7 1,387.3 4,299.9 4,038.3 Gross Profit Margin
54.8% 55.0% 55.3% 55.1% Selling, General & Administrative
Expenses 939.0 852.0 2,646.1 2,435.0 Operating Profit 537.7 535.3
1,653.8 1,603.3 Operating Profit Margin 19.9% 21.2% 21.3% 21.9% Net
Interest Expense 30.1 30.4 87.7 95.7 Income Before Income Taxes
507.6 504.9 1,566.1 1,507.6 Provision for Income Taxes 178.6 139.5
524.7 458.4 Effective Tax Rate 35.2% 27.6% 33.5% 30.4% Net Income
329.0 365.4 1,041.4 1,049.2 Net Earnings Per Common Share Basic
$.61 $.67 $1.92 $1.92 Diluted $.58 $.63 $1.83 $1.81 Average Common
Shares Outstanding Basic 530.8 537.9 531.7 537.7 Diluted 568.8
579.1 570.6 580.4 Colgate-Palmolive Company Condensed Consolidated
Balance Sheets As of September 30, 2004, December 31, 2003 and
September 30, 2003 (Dollars in Millions) (Unaudited) September 30,
December 31, September 30, 2004 2003 2003 Cash and cash equivalents
$370.6 $265.3 $256.1 Receivables, net 1,286.7 1,222.4 1,195.4
Inventories 863.4 718.3 772.8 Other current assets 295.2 290.5
250.6 Property, plant and equipment, net 2,529.5 2,542.2 2,502.4
Other assets, including goodwill and intangibles 3,144.2 2,440.1
2,428.7 Total assets $8,489.6 $7,478.8 $7,406.0 Total debt 3,684.7
3,102.9 3,235.7 Other current liabilities 2,067.5 2,027.4 1,915.5
Other non-current liabilities 1,490.3 1,461.4 1,417.6 Total
shareholders' equity 1,247.1 887.1 837.2 Total liabilities and
shareholders' equity $8,489.6 $7,478.8 $7,406.0 Supplemental
Balance Sheet Information: Debt less cash and marketable
securities* $3,292.0 $2,800.7 $2,974.4 Working capital % of sales
3.4% 1.7% 3.0% After-tax return on capital 32.9% 38.0% 37.1% *
Marketable securities of $22.1, $36.9 and $5.2 as of September 30,
2004, December 31, 2003 and September 30, 2003, respectively, are
included in Other current assets. Colgate-Palmolive Company
Condensed Consolidated Statements of Cash Flows For the nine months
ended September 30, 2004 and 2003 (Dollars in Millions) (Unaudited)
2004 2003 Operating Activities: Net income $1,041.4 $1,049.2
Restructuring (14.7) -- Depreciation and amortization 241.2 230.6
Deferred income taxes (1.2) 17.4 Changes in: Receivables (30.7)
(10.4) Inventories (127.8) (74.3) Accounts payable and other
accruals 131.2 75.6 Other non-current assets and liabilities (8.9)
(8.4) Net cash provided by operations 1,230.5 1,279.7 Investing
Activities: Capital expenditures (198.8) (187.1) Payment for
acquisitions, net of cash acquired (765.0) -- Other investing
activities 52.6 50.5 Net cash used in investing activities (911.2)
(136.6) Financing Activities: Proceeds from (payments on) debt
issuances, net 578.8 (414.0) Dividends paid (397.4) (366.4)
Purchases of treasury shares (453.2) (348.7) Proceeds from exercise
of stock options 67.6 71.5 Net cash used in financing activities
(204.2) (1,057.6) Effect of exchange rate changes on cash and cash
equivalents (9.8) 2.7 Net increase in cash and cash equivalents
105.3 88.2 Cash and cash equivalents at beginning of period 265.3
167.9 Cash and cash equivalents at end of period $370.6 $256.1
Supplemental Cash Flow Information: Free cash flow before dividends
(net cash provided by operations less capital expenditures) Net
cash provided by operations $1,230.5 $1,279.7 Less: Capital
expenditures (198.8) (187.1) Free cash flow before dividends
$1,031.7 $1,092.6 Colgate-Palmolive Company Segment Information For
the three and nine months ended September 30, 2004 and 2003
(Dollars in Millions) (Unaudited) Three Months Ended Nine Months
Ended September 30, September 30, Net Sales 2004 2003 2004 2003
Oral, Personal, and Home Care North America $623.3 $600.3 $1,770.7
$1,782.4 Latin America 566.7 549.0 1,652.6 1,591.8 Europe 689.3
601.5 1,915.1 1,710.1 Asia/Africa 465.8 451.0 1,401.0 1,289.5 Total
Oral, Personal, and Home Care 2,345.1 2,201.8 6,739.4 6,373.8 Total
Pet Nutrition 350.6 322.0 1,041.5 957.0 Total Net Sales $2,695.7
$2,523.8 $7,780.9 $7,330.8 Three Months Ended Nine Months Ended
September 30, September 30, Operating Profit 2004 2003 2004 2003
Oral, Personal, and Home Care North America $137.2 $131.0 $409.0
$433.7 Latin America 151.8 153.1 469.9 453.4 Europe 135.0 128.0
395.8 369.6 Asia/Africa 72.0 72.4 235.1 208.0 Total Oral, Personal,
and Home Care 496.0 484.5 1,509.8 1,464.7 Total Pet Nutrition 86.8
90.4 281.6 269.4 Total Corporate (45.1) (39.6) (137.6) (130.8)
Total Operating Profit $537.7 $535.3 $1,653.8 $1,603.3 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 - Third Quarter 2004 vs 2003 September 30, 2004 (Unaudited)
COMPONENTS OF SALES CHANGE 3rd Quarter Pricing 3rd Qtr 3rd Qtr
Coupons Sales Sales Consumer & Change Change Ex-Divested Trade
As Reported Ex-Divestment Volume Incentives Exchange Region Total
Company * 7.0% 8.5% 8.5% -2.0% 2.0% Europe * 14.5% 19.5% 16.0%
-3.5% 7.0% Latin America 3.0% 4.5% 9.0% 0.0% -4.5% Asia/Africa 3.5%
4.5% 6.0% -4.5% 3.0% Total International 7.5% 10.0% 10.5% -2.5%
2.0% North America 4.0% 4.0% 6.5% -3.0% 0.5% Total CP Products 6.5%
8.0% 9.0% -2.5% 1.5% Hill's 9.0% 9.0% 3.5% 1.5% 4.0% COMPONENTS OF
SALES CHANGE 9 Months Pricing 9 Months 9 Months Coupons Sales Sales
Consumer & Change Change Ex-Divested Trade As Reported
Ex-Divestment Volume Incentives Exchange Total Company * 6.0% 7.5%
6.0% -1.5% 3.0% Europe * 12.0% 16.5% 10.5% -3.0% 9.0% Latin America
4.0% 4.5% 6.5% 2.0% -4.0% Asia/Africa 8.5% 10.0% 8.0% -4.0% 6.0%
Total International 8.0% 10.5% 8.5% -1.5% 3.5% North America -0.5%
-0.5% 1.5% -2.5% 0.5% Total CP Products 5.5% 7.0% 6.5% -2.0% 2.5%
Hill's 9.0% 9.0% 4.0% 1.0% 4.0% * NOTE: GABA was acquired June 1,
2004. The impact of GABA on the third quarter for both sales and
ex-divested volume was 2.0% for the Total Company and 8.5% for
Europe. The impact of GABA on the nine months for both sales and
ex-divested volume was 1.0% for the Total Company and 4.0% for
Europe. 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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