10.30.12
Colgate-Palmolive Company reported that net sales were $4.33 billion in third quarter of 2012, a decrease of 1% versus third quarter 2011. Global unit volume grew 2%, pricing increased 3.0% and foreign exchange was negative 6.0%. Organic sales (net sales excluding foreign exchange, acquisitions and divestments) grew 5%.
Net income in third quarter 2012 were $654 million compared to net income in third quarter 2011 of $643 million of aftertax charges resulting from the implementation of the previously disclosed business realignment and other cost-saving initiatives and costs associated with the sale of land in Mexico.
Net income in third quarter 2011 also included an aftertax gain of $135 million from the sale of the Company’s non-core laundry detergent business in Colombia.
Excluding the above noted items in both periods, Net income in third quarter 2012 was $661 million, an increase of 3% versus third quarter 2011, and Diluted earnings per share in third quarter 2012 was $1.38, an increase of 5% versus third quarter 2011.
Gross profit margin was 58.4% in third quarter 2012 versus 56.2% in the year ago quarter. Excluding the above noted items in both periods, Gross profit margin was 58.6% in third quarter 2012, an increase of 180 basis points versus the year ago quarter, as higher pricing and cost savings from the company’s funding-the-growth initiatives more than offset the impact of increases in raw and packaging material costs and negative foreign exchange transaction costs.
Operating profit decreased 1% to $1,027 million in third quarter 2012 compared to $1,035 million in third quarter 2011. Excluding the above noted items in both periods, Operating profit increased 3% to $1,037 million.
Ian Cook, chairman, president and CEO, commented on the results and outlook excluding the 2012 and 2011 items noted above and the costs of the Global Growth and Efficiency Program discussed below, “We are very pleased to have achieved another quarter of strong profitability with gross profit margin, operating profit margin and net income as a percent to sales all increasing versus year ago, despite an intense competitive environment and challenging macroeconomic conditions worldwide.
“Our growth momentum continued on the top line as well, with organic sales increasing a healthy 5.0% during the quarter, led by the emerging markets where organic sales grew a robust 9.5%.
“Colgate’s global market shares in toothpaste and manual toothbrushes are both at record highs year to date. Colgate’s share of the global toothpaste market strengthened to 44.9% year to date, up 0.6 share points versus year ago. Our global leadership in manual toothbrushes also strengthened during the quarter with Colgate’s global market share in that category reaching 32.7% year to date, up 0.8 share points versus year ago.”
He continued, “Overall, we continue to expect diluted earnings per share for 2012 to grow at a double-digit rate, on a currency neutral basis. If average exchange rates in the balance of the year were to remain at current spot rates, currency translation would decrease full year diluted earnings per share growth by approximately 6-7%.”
Separately, Colgate announced a four-year global growth and efficiency program for sustained growth. The program’s initiatives are expected to help Colgate ensure continued solid worldwide growth in unit volume, organic sales and earnings per share and enhance its global leadership positions in its core businesses.
This four-year plan is expected to produce significant benefits in the Company’s long-term business performance, according to Colgate.
Becoming even stronger on the ground through the continued evolution and expansion of proven global and regional commercial capabilities, which have already been successfully implemented in a number of the Company’s operations around the world.
Simplifying and standardizing how work gets done by increasing technology enabled collaboration and taking advantage of global data and analytic capabilities, leading to smarter and faster decisions.
Reducing structural costs to continue to increase the Company’s gross and operating profit.
Building on Colgate’s current position of strength to enhance its leading market share positions worldwide and ensure sustained sales and earnings growth.
Initiatives under the program will focus on the following three areas:
• Expanding Commercial Hubs – Building on the success of this structure already implemented in several divisions, continue to cluster single-country subsidiaries into more efficient regional hubs, in order to drive smarter and faster decision making, strengthen capabilities available on the ground and improve cost structure.
• Extending Shared Business Services and Streamlining Global Functions – Implementing the Company’s shared service organizational model, already successful in Europe, in all regions of the world. Initially focused on finance and accounting, these shared services will be expanded to additional functional areas to streamline global functions.
•Optimizing Global Supply Chain and Facilities – Continuing to optimize manufacturing efficiencies, global warehouse networks and office locations for greater efficiency, lower cost and speed to bring innovation to market.
It is expected that by the end of 2016, the 2012 Restructuring Program will reduce the company’s global employee workforce by approximately 6% from the current level of 38,600.
“This initiative offers us the opportunity to expand many of our already successful programs,” said Cook.” For example, we have seen extended growth in Latin America where we have been managing the division with regional hubs for many years. Additionally, in Europe, our financial shared service center in Warsaw, Poland has significantly reduced structural costs for the region.”
Specifically, reinvestment will be focused in the following four areas:
New Product Innovation and Brand Building – Continuing our strong investment in research and product development to ensure a robust pipeline of new products supported by effective integrated marketing campaigns.
Enabling Technology and Analytics – Intensify the use of existing and new technologies to enhance planning systems, real-time collaboration and paperless interaction, within the Company and with customers and suppliers, and to enhance analytic capabilities in support of consumer insights, brand management and commercial decision making.
Digital Engagement – Increasing consumer engagement and loyalty by expanding our web-based capabilities, including mobile and social media and e-commerce.
Emerging Markets – Seizing the opportunities reflected by this growing consumer base with targeted programs to increase consumer engagement, expand distribution and improve in-store execution.
Cook concluded, “As we look ahead to 2013, while our global budget process is still in its initial stages, based on the Company’s current growth momentum, our confidence in this new efficiency program in addition to our ongoing funding-the-growth and strategic worldwide pricing efforts, we are planning for a return to our long-term target of double-digit earnings per share growth on a dollar basis and another year of gross margin expansion, excluding charges related to the 2012 Restructuring Program.”
Net income in third quarter 2012 were $654 million compared to net income in third quarter 2011 of $643 million of aftertax charges resulting from the implementation of the previously disclosed business realignment and other cost-saving initiatives and costs associated with the sale of land in Mexico.
Net income in third quarter 2011 also included an aftertax gain of $135 million from the sale of the Company’s non-core laundry detergent business in Colombia.
Excluding the above noted items in both periods, Net income in third quarter 2012 was $661 million, an increase of 3% versus third quarter 2011, and Diluted earnings per share in third quarter 2012 was $1.38, an increase of 5% versus third quarter 2011.
Gross profit margin was 58.4% in third quarter 2012 versus 56.2% in the year ago quarter. Excluding the above noted items in both periods, Gross profit margin was 58.6% in third quarter 2012, an increase of 180 basis points versus the year ago quarter, as higher pricing and cost savings from the company’s funding-the-growth initiatives more than offset the impact of increases in raw and packaging material costs and negative foreign exchange transaction costs.
Operating profit decreased 1% to $1,027 million in third quarter 2012 compared to $1,035 million in third quarter 2011. Excluding the above noted items in both periods, Operating profit increased 3% to $1,037 million.
Ian Cook, chairman, president and CEO, commented on the results and outlook excluding the 2012 and 2011 items noted above and the costs of the Global Growth and Efficiency Program discussed below, “We are very pleased to have achieved another quarter of strong profitability with gross profit margin, operating profit margin and net income as a percent to sales all increasing versus year ago, despite an intense competitive environment and challenging macroeconomic conditions worldwide.
“Our growth momentum continued on the top line as well, with organic sales increasing a healthy 5.0% during the quarter, led by the emerging markets where organic sales grew a robust 9.5%.
“Colgate’s global market shares in toothpaste and manual toothbrushes are both at record highs year to date. Colgate’s share of the global toothpaste market strengthened to 44.9% year to date, up 0.6 share points versus year ago. Our global leadership in manual toothbrushes also strengthened during the quarter with Colgate’s global market share in that category reaching 32.7% year to date, up 0.8 share points versus year ago.”
He continued, “Overall, we continue to expect diluted earnings per share for 2012 to grow at a double-digit rate, on a currency neutral basis. If average exchange rates in the balance of the year were to remain at current spot rates, currency translation would decrease full year diluted earnings per share growth by approximately 6-7%.”
Separately, Colgate announced a four-year global growth and efficiency program for sustained growth. The program’s initiatives are expected to help Colgate ensure continued solid worldwide growth in unit volume, organic sales and earnings per share and enhance its global leadership positions in its core businesses.
This four-year plan is expected to produce significant benefits in the Company’s long-term business performance, according to Colgate.
The major objectives of the program include:
Becoming even stronger on the ground through the continued evolution and expansion of proven global and regional commercial capabilities, which have already been successfully implemented in a number of the Company’s operations around the world.
Simplifying and standardizing how work gets done by increasing technology enabled collaboration and taking advantage of global data and analytic capabilities, leading to smarter and faster decisions.
Reducing structural costs to continue to increase the Company’s gross and operating profit.
Building on Colgate’s current position of strength to enhance its leading market share positions worldwide and ensure sustained sales and earnings growth.
Initiatives under the program will focus on the following three areas:
• Expanding Commercial Hubs – Building on the success of this structure already implemented in several divisions, continue to cluster single-country subsidiaries into more efficient regional hubs, in order to drive smarter and faster decision making, strengthen capabilities available on the ground and improve cost structure.
• Extending Shared Business Services and Streamlining Global Functions – Implementing the Company’s shared service organizational model, already successful in Europe, in all regions of the world. Initially focused on finance and accounting, these shared services will be expanded to additional functional areas to streamline global functions.
•Optimizing Global Supply Chain and Facilities – Continuing to optimize manufacturing efficiencies, global warehouse networks and office locations for greater efficiency, lower cost and speed to bring innovation to market.
It is expected that by the end of 2016, the 2012 Restructuring Program will reduce the company’s global employee workforce by approximately 6% from the current level of 38,600.
“This initiative offers us the opportunity to expand many of our already successful programs,” said Cook.” For example, we have seen extended growth in Latin America where we have been managing the division with regional hubs for many years. Additionally, in Europe, our financial shared service center in Warsaw, Poland has significantly reduced structural costs for the region.”
Specifically, reinvestment will be focused in the following four areas:
New Product Innovation and Brand Building – Continuing our strong investment in research and product development to ensure a robust pipeline of new products supported by effective integrated marketing campaigns.
Enabling Technology and Analytics – Intensify the use of existing and new technologies to enhance planning systems, real-time collaboration and paperless interaction, within the Company and with customers and suppliers, and to enhance analytic capabilities in support of consumer insights, brand management and commercial decision making.
Digital Engagement – Increasing consumer engagement and loyalty by expanding our web-based capabilities, including mobile and social media and e-commerce.
Emerging Markets – Seizing the opportunities reflected by this growing consumer base with targeted programs to increase consumer engagement, expand distribution and improve in-store execution.
Cook concluded, “As we look ahead to 2013, while our global budget process is still in its initial stages, based on the Company’s current growth momentum, our confidence in this new efficiency program in addition to our ongoing funding-the-growth and strategic worldwide pricing efforts, we are planning for a return to our long-term target of double-digit earnings per share growth on a dollar basis and another year of gross margin expansion, excluding charges related to the 2012 Restructuring Program.”