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Colgate-Palmolive: Colgate Announces 3Rd Quarter 2015 Results Strong Worldwide Organic Sales Growth

The following excerpt is from the company's SEC filing.

NEW YORK--(BUSINESS WIRE)--October 30, 2015--Colgate-Palmolive Company (NYSE:CL) today reported worldwide Net sales of $3,999 million in third quarter 2015, a decrease of 8.5% versus third quarter 2014. Global unit volume grew 1.0%, pricing increased 3.5% and foreign exchange was negative 13.0%. Divestments decreased volume by 0.5%. Organic sales (Net sales excluding foreign exchange, acquisitions and divestments) grew 5.0%.

Net income and Diluted earnings per share in third quarter 2015 were $726 million and $0.80, respectively. Net income in third quarter 2015 included an aftertax gain of $120 million ($0.13 per diluted share) from the previously disclosed sale of the Company’s laundry detergent business in the South Pacific and $47 million ($0.05 per diluted share) of aftertax charges resulting from the implementation of the Company’s four-year Global Growth and Efficiency Program (the “2012 Restructuring Program”) and an effective devaluation in Venezuela.

Net income and Diluted earnings per share in third quarter 2014 were $542 million and $0.59, respectively. Net income in third quarter 2014 included $159 million ($0.17 per diluted share) of aftertax charges resulting from the items described in Table 8.

Excluding the above noted items in both periods, Net income in third quarter 2015 was $653 million, a decrease of 7% versus third quarter 2014, and Diluted earnings per share in third quarter 2015 was $0.72, a decrease of 5% versus third quarter 2014. On a currency-neutral basis and excluding the above noted items in both periods, Diluted earnings per share increased double digit.

Gross profit margin was 58.7% in third quarter 2015 versus 58.4% in third quarter 2014. Excluding the above noted items in both periods, Gross profit margin was 58.8% in third quarter 2015, an increase of 20 basis points versus the year ago quarter, primarily as a result of the benefits from cost savings from the Company’s funding-the-growth initiatives and the 2012 Restructuring Program and higher pricing, partially offset by higher raw and packaging material costs, driven by significant foreign exchange transaction costs.

Selling, general and administrative expenses were 33.7% of Net sales in third quarter 2015 versus 34.2% of Net sales in third quarter 2014. Excluding the above noted items in both periods, Selling, general and administrative expenses decreased by 60 basis points to 33.3% of Net sales in third quarter 2015, due to decreased advertising investment as a percentage of Net sales, in part reflecting a shift in advertising investment to in-store promotional activities. Worldwide advertising investment decreased 23% to $328 million versus the year ago quarter, largely reflecting the impact of negative foreign exchange.

Operating profit increased 20% to $1,136 million in third quarter 2015 compared to $948 million in third quarter 2014. Excluding the above noted items in both periods, Operating profit decreased 6% to $1,013 million in third quarter 2015. Operating profit margin was 28.4% in third quarter 2015 versus 21.6% in third quarter 2014. Excluding the above noted items in both periods, Operating profit margin was 25.3% in third quarter 2015, an increase of 70 basis points versus the year ago quarter.

Net cash provided by operations year to date was $2,108 million compared to $2,392 million in the comparable 2014 period, primarily due to lower operating earnings and higher payments related to income taxes and a previously disclosed European competition law matter. Working capital as a percentage of Net sales was negative 1.3%, an improvement of 80 basis points versus the year ago period primarily due to a decrease in inventories and accounts receivable, reflecting the Company’s tight focus on working capital.

Ian Cook, Chairman, President and Chief Executive Officer, commented on the results and outlook excluding the 2015 and 2014 items noted above, “In the face of challenging macroeconomic conditions worldwide, we are pleased to have achieved another quarter of strong organic sales growth, driven by positive unit volume growth and higher pricing.

“The 5.0% worldwide organic sales growth was led by emerging markets where organic sales grew a robust 8.0%, despite economic challenges in certain countries.

“Pleasingly, our profitability also strengthened during the quarter, with gross profit margin, operating profit margin and net income as a percent to sales all increasing versus the year ago period.

“Colgate’s leading share of the global toothpaste market increased to 44.7% year to date, up 0.7 share points versus the year ago period. Our global leadership in manual toothbrushes also strengthened with Colgate’s global market share in that category reaching 34.5% year to date, up 0.7 share points versus the year ago period.”

Recognizing the macroeconomic challenges around the world and the Company’s successful implementation of the 2012 Restructuring Program to date, on October 29, 2015, the Company’s Board of Directors approved the reinvestment of the funds from the sale of the Company’s laundry detergent business in the South Pacific to expand the 2012 Restructuring Program and extend it through December 31, 2017. Initiatives under the expanded 2012 Restructuring Program will continue to fit within the Program’s three focus areas of expanding commercial hubs, extending shared business services and streamlining global functions and optimizing the global supply chain and facilities. The Company expects the initiatives under the expanded program to have a similar aftertax rate of return to the existing program, which on average has been 30%. The Company will update its disclosure to reflect the impact the expansion will have on the range of estimated charges and savings for the 2012 Restructuring Program when the additional initiatives under the expanded Program are approved.

In closing, Mr. Cook commented, “As we look ahead, macroeconomic conditions and foreign exchange volatility remain challenging. Despite that, we anticipate another year of solid organic sales growth in 2015 driven by a full new product pipeline across all categories and geographies. Based on current spot rates, we now plan for full year gross profit margin to be even with the year ago level, and expect a low to mid-single-digit earnings per share decline on a dollar basis, excluding charges related to the 2012 Restructuring Program. This earnings per share decline continues to reflect a double-digit increase on a currency-neutral basis.

“Looking ahead to 2016, we continue to see deterioration in foreign exchange rates. Given such volatility, providing guidance on a dollar basis at this time would be premature. However, as we enter our global budget process, we are planning for a year of gross margin expansion and double-digit earnings per share growth on a currency-neutral basis, excluding charges related to the 2012 Restructuring Program."

At 11:00 a.m. ET today, Colgate will host a conference call to elaborate on third quarter results. To access this call as a webcast, please go to Colgate’s web site at

http://www.colgatepalmolive.com

The following are comments about divisional performance for third quarter 2015 versus the year ago period. See attached Geographic Sales Analysis Percentage Changes and Segment Information schedules for additional information on divisional net sales and operating profit.

North America (20% of Company Sales)

North America Net sales increased 0.5% in third quarter 2015. Unit volume increased 2.5% with 0.5% lower pricing, while foreign exchange was negative 1.5%. Organic sales increased 2.0% during the quarter.

Operating profit in North America increased 8% in third quarter 2015 to $258 million, or 220 basis points to 32.6% of Net sales. This increase in Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit and a decrease in Selling, general and administrative expenses, both as a percentage of Net sales. This increase in Gross profit was primarily driven by cost savings from the Company’s funding-the-growth initiatives, which were partially offset by higher costs, which included higher raw and packaging material costs, and lower pricing due to increased in-store promotional activities. This decrease in Selling, general and administrative expenses was due to decreased advertising investment, in part reflecting a shift in advertising investment to in-store promotional activities.

In the U.S., new product launches are contributing to volume growth. Market share gains year to date were seen in toothpaste, manual toothbrushes, mouthwash, liquid hand soap, body wash and fabric conditioners. Colgate’s share of the toothpaste market strengthened to 35.3% year to date, up 0.4 share points versus the year ago period, driven by strong sales of Colgate Enamel Health, Colgate Optic White Platinum Express White, Colgate Total Daily Repair and Tom’s of Maine toothpastes. In manual toothbrushes, Colgate strengthened its brand market leadership in the U.S. with its market share in that category at 41.4% year to date, up 0.7 share points versus the year ago period. Strong sales of Colgate 360° Enamel Health and Colgate 360° Optic White Platinum manual toothbrushes contributed to volume growth in the quarter.

Successful products driving volume growth in the U.S. in other categories include Colgate Enamel Health and Colgate Kids mouthwashes, Softsoap Fragrant Foaming Collection of liquid hand soaps, Softsoap Fresh & Glow body washes, Irish Spring Signature For Men body wash, Palmolive Soft Touch Almond Milk and Blueberry dish liquid and Suavitel fabric conditioner.

Latin America (27% of Company Sales)

Latin America Net sales decreased 11.0% in third quarter 2015. Unit volume decreased 1.0% with 12.0% higher pricing, while foreign exchange was negative 22.0%. Volume declines in Venezuela and Brazil were partially offset by volume gains in Mexico, Argentina and Colombia. Organic sales for Latin America increased 11.0%.

Operating profit in Latin America decreased 9% in third quarter 2015 to $300 million, while as a percentage of Net sales, it increased 60 basis points to 28.2% of Net sales. This increase in Operating profit as a percentage of Net sales was primarily due to a decrease in Selling, general and administrative expenses, partially offset by a decrease in Gross profit, both as a percentage of Net sales. This decrease in Gross profit was due to higher raw and packaging material costs, driven by foreign exchange transaction costs, partially offset by cost savings from the Company’s funding-the-growth initiatives and the 2012 Restructuring Program and higher pricing. This decrease in Selling, general and administrative expenses was primarily due to decreased advertising investment.

Colgate strengthened its leadership in toothpaste throughout Latin America during the quarter driven by market share gains in Mexico, Brazil, Venezuela, Argentina, Chile, El Salvador, Honduras and Nicaragua. Strong sales of Colgate Total 12, Colgate Luminous White Instant, Colgate Total Professional Breath Health, Colgate Sensitive Pro-Relief Enamel Repair and Colgate Maximum Cavity Protection plus Neutrazucar toothpastes contributed to volume growth throughout the region. Colgate’s leadership in the manual toothbrush category continued throughout the region, driven by strong sales of Colgate 360° Surround Whitening, Colgate 360° Interdental, Colgate Slim Soft and Colgate Triple Action manual toothbrushes.

Products in other categories contributing to volume growth include Colgate Plax Ice Infinity mouthwash, Protex Complete 12, Protex Omega 3, Palmolive Men and Palmolive Naturals Berries and Coconut Water bar soaps, Lady Speed Stick Powder Fresh and Speed Stick Xtreme...


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