Colgate Announces Accelerated Restructuring and Global Business-Building Plan
December 07 2004 - 7:00AM
PR Newswire (US)
Colgate Announces Accelerated Restructuring and Global
Business-Building Plan - Reaffirms External Consensus Estimate -
NEW YORK, Dec. 7, 2004 /PRNewswire-FirstCall/ -- To enhance its
global leadership position in its core businesses,
Colgate-Palmolive Company (NYSE:CL) today announced a four-year
restructuring and business-building plan. The plan's initiatives
will help Colgate ensure continued solid worldwide growth in unit
volume, sales and earnings per share. The three major objectives of
the plan are to: 1. Further increase Colgate's gross profit and
operating profit by generating additional savings throughout the
income statement; 2. Accelerate innovative marketing and new
products, especially in high potential countries by reallocating
and enhancing organizational resources; 3. Maximize the
effectiveness of global advertising and commercial investment funds
to build worldwide market shares by rolling-out proprietary and
innovative global systems, processes and organizational
capabilities. The cost of implementing the four-year program is
projected to result in cumulative charges, once all phases are
approved and implemented, totaling between $550 and $650 million
after tax, beginning with approximately $45 million in fourth
quarter 2004. Savings are projected to be in the range of $250 to
$300 million after tax annually by the fourth year of the program.
The expected savings represent a three year cash payback, on
average, and an estimated after tax rate of return exceeding 30%.
The anticipated impact for full year 2005 is charges totaling
approximately $200 million spread throughout the year. After tax
savings in 2005 should approximate $45 million. Simultaneously with
the restructuring/business-building announcement, Reuben Mark,
Chairman and CEO said, "We are reaffirming the external consensus
estimate for earnings per share for fourth quarter 2004, excluding
the restructuring and related charges. We are also reaffirming the
range of external estimates for earnings per share for full year
2005, also excluding the restructuring and related charges noted
above. "We have already indicated that our E.P.S. growth in 2005
should be in the 6-10% range. With the benefit of this program on
both top and bottom lines, earnings per share, excluding
restructuring charges, is expected to increase at low double-digit
rates in 2006 and beyond. "Our current excellent worldwide sales
and unit volume trends, which have continued into the fourth
quarter, as well as our culture of continuous improvement, provide
a strong base on which to begin this four-year, business- building
and profitability-increasing effort. "Colgate has steadily
increased its gross margin through a myriad of savings programs.
Our confidence in the strength of this initiative, overlaid onto
our already very successful ongoing programs, allows us to raise
our internal goals for annual gross margin growth above the 50-100
basis point goal we have had for many years. After these
initiatives get fully underway towards the end of 2005, we will
increase our annual goal to 75-125 basis points in gross margin
improvement through the rest of the plan years." Mr. Mark said
further, "We are especially pleased that Colgate's leading edge,
end-to-end use of SAP software will enable uniquely faster, more
efficient worldwide implementation of these programs." While there
are almost 100 individual initiatives included in the plan, several
examples are: 1. Further increase Colgate's gross profit and
operating profit by generating additional savings throughout the
income statement. -- Finished products for the 223 countries in
which Colgate does business will be sourced from fewer, more
sophisticated global and regional state-of-the-art manufacturing
centers. It is anticipated that this will involve closing
approximately one-third of the existing 78 Colgate factories
worldwide during the course of the four-year program.
Simultaneously with this release, Colgate is announcing the
anticipated closure or reconfiguration of eight facilities on four
continents. -- Business support functions now in the subsidiaries
and which are not dependent upon local knowledge expertise will be
centralized into regional and global shared-service centers. -- All
purchasing, from office supplies to media, will be managed
globally, completing the centralization of the purchasing function
that is already in place for major raw and packing materials. 2.
Accelerate innovative marketing and new products, especially in
high potential countries by reallocating and enhancing
organizational resources. -- Increase and upgrade sales and
marketing organizations and personnel globally, especially in high
potential markets such as Eastern Europe, Russia, China and parts
of Latin America and Asia, to better serve these fast growing
markets and take advantage of Colgate's rising market shares.
On-the-ground changes in the sales and marketing functions are
already underway in key high potential countries. -- Consolidate
the sales force in mature, slower growing markets and sharpen the
focus on servicing retailers faster, more efficiently and more
profitably. -- Increase the Company's already strong emphasis on
marketing and new product innovation by expanding and upgrading new
product groups both in the U.S. and abroad, as well as
strengthening consumer and in-store shopper insight efforts.
Particular focus will be placed on key competitive, high potential
countries. -- Increase the Company's investment in research and
development, primarily in oral care and Hill's. 3. Maximize the
effectiveness of global advertising and commercial investment funds
to build worldwide market shares by rolling-out proprietary and
innovative global systems, processes and organizational
capabilities. -- Launch new global systems and processes
capitalizing on recently developed, proprietary and innovative
sales and marketing tools that utilize SAP software uniquely
adapted to Colgate's business process. These mechanisms, which
enable an integration of the supply and demand chains, are now in
test overseas and will be expanded more broadly beginning in 2005.
It is anticipated that the net impact of the
restructuring/business- building plan will reduce the number of
employees globally from the current level of 37,000 by
approximately 12%. Mr. Mark concluded, "Many of these initiatives
are already underway, and others will be in the operational phase
shortly. With continuous improvement so ingrained in our
organizational culture, our operational people around the world
feel confident that these initiatives can take place in a seamless
fashion throughout our business operations." Consistent with
current financial reporting requirements, the Company will disclose
restructuring initiatives and the associated charges and expected
savings in future quarters as specific projects are approved and
implemented. At 10:00 a.m. ET today, Colgate will host a conference
call. To access the conference call, the domestic dial-in number is
800-810-0924 and the international dial-in number is 913-981-4900.
Use confirmation code 306939. To access a replay of the conference
call after 2:00p.m. ET, the domestic dial-in number is 888-203-1112
and the international dial-in number is 719-457-0820. Use the same
confirmation code 306939. To access this call as a webcast, please
go to Colgate's web site on the internet at http://www.colgate.com/
. For those unable to participate during the live webcast, a replay
of the webcast will be made available through the For Investors
page of Colgate's website. * * * 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/ . 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/ . 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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