Colgate Reports Record Earnings for the Second Quarter

Colgate-Palmolive Company announced record net income and earnings per share in the second quarter. Net income increased 14% to $327 million.

The company also reconfirmed external estimates for both third quarter and full year 2002 earnings per share. Worldwide unit volume increased 4% with every operating division growing. Operating profit increased more than 10%, which is a record.

“We are pleased that our expectations for continued improvement in unit volume and profitability throughout the year are indeed happening,” commented Reuben Mark, chairman and chief executive officer. “Every operating division contributed solid volume gains and this should continue. This volume coupled with our excellent gross profit margin improvement enabled us to increase our total marketing spending here in the U.S. and worldwide, while still exceeding our profit target for the quarter.”

“Our new product process is better than ever and we are optimistic about our extremely full new product pipeline for the balance of this year,” he continued.

Second quarter 2002 net profits, after absorbing a one-time $2 million aftertax loss, comprised of a $13 million aftertax gain related to the settlement of a legal matter, offset by $15 million aftertax of charges associated with unrelated legal proceedings and certain rationalization programs. The quarter also includes a net $6 million aftertax foreign exchange gain related to the strong Euro, partially offset by other exchange negatives, primarily in Latin America.

North American unit volume increased 2.5% during the quarter with the U.S. up 3%. Volume growth in this division is expected to increase more sharply in the balance of the year with a new product schedule heavily weighted to the second half. Sales in North America were down slightly due to modest foreign exchange devaluations in Canada and the Caribbean, and increased promotional spending. Operating profit and operating profit margin were essentially flat.

In the U.S., Colgate’s leadership of the toothpaste market continues with a national ACNielsen market share of 34.2%. New product introductions included Colgate Total Plus Whitening and Colgate Fresh Confidence toothpastes, Colgate 2in1 toothpaste and mouthwash, Palmolive Spring Sensations dishwashing liquid, Irish Spring Vitamins bar soap, Mennen Speed Stick Power of Nature deodorant and Softsoap Vitamins body wash.

The new product pipeline in the U.S. will include Colgate Simply White, an affordable at-home tooth whitener, Softsoap Aromatherapy body wash and liquid hand soap, Palmolive Aromatherapy dishwashing liquid, Colgate 2in1 toothpaste and mouthwash for kids and Colgate Motion battery-powered toothbrush for kids.

In Europe, unit volume rose 4.5% and sales increased 8% as innovative new products drove strong top-line growth throughout the region. Led by double-digit volume growth in the UK, strong volume gains were also achieved in France, Italy, Greece, the Nordic group, Hungary, Russia and Turkey. In local currencies, sales increased 2% and operating profit increased 9%.

In Western Europe, Colgate Total Plus Whitening, Colgate Herbal and Colgate Tartar Control Plus Whitening toothpastes and Colgate 2in1 toothpaste and mouthwash contributed to gains in oral care. New products succeeding in other categories include Palmolive Aromatherapy shower gel and bath foam, Soupline Lily of the Valley fabric conditioner and Ajax glass and all-purpose cleaner wipes.

Excellent volume growth throughout Central Europe and Russia was fueled by the success of Colgate Herbal, Colgate Herbal Plus Whitening and Colgate Total Plus Whitening toothpastes, Palmolive Aromatherapy shower gel, Palmolive Fruit Essentials bar soap and Mennen Speed Stick deodorants, executives said.

Personal care sales grew 1% to $204 million for the quarter and profit fell 55% to $5 million, due to increased advertising and restructuring of brand franchises. The sales growth was chiefly due to new PowerStripe antiperspirants and deodorants in North America, where Gillette market shares rose to their highest levels in three years, according to executives. For the six months, sales of $382 million rose 3%, while profit was down 17% to $16 million.

Latin America achieved 3.5% volume growth from continuing businesses in the second quarter with nearly every country contributing volume gains. Dollar sales from continuing businesses were flat versus the second quarter of 2001 due to local currency weakness. Dollar-operating profit increased 6%. In local currencies, sales rose 10% and operating profit was up 16%.

“It is especially encouraging that our powerful Latin American division exceeded expectations with unit volume and dollar operating profit for the region rising despite currency declines,” said Mr. Mark.

Recent introductions driving oral care growth include Colgate Total Plus Whitening, Colgate Herbal, Colgate Herbal Plus Whitening and Colgate Fresh Confidence Xtreme Red Gel toothpastes, and Colgate Active Flexible and Colgate Premier Ultra toothbrushes. Leading growth in personal care are Palmolive Naturals and Caprice hair care lines, Mennen Power of Nature deodorants and Lady Speed Stick boutique scented deodorants. Fabuloso Vibrante Naturaleza liquid cleaner and Axion Powder Cinnamon Fantasy dishwashing powder are standouts in surface care.

Unit volume in Asia/Africa grew 4.5% in the second quarter. Dollar sales rose 3% during the quarter and dollar-operating profit increased 17%. Successful new products spurring growth in oral care throughout the region include Colgate Herbal, Colgate Herbal Plus Whitening and Colgate Triple Action toothpastes and Colgate 2in1 toothpaste and mouthwash. In China Colgate’s market leadership in toothpaste continues with its national ACNielsen market share now at 29.2% year to date.

Palmolive Naturals shampoo, Protex Herbal soap, talc and shower gel, and Palmolive Naturals bar soap performed well in other categories across the Asia/Africa region.

Mr. Mark also offered expectations for the second half. “Gross profit margin should expand at the high end of our target range of 50-100 basis points and we anticipate another year of growing unit volume and good quality double-digit earnings per share growth in 2002,” insisted Mr. Mark.