) - a global dealer in consumer goods - came up with
third-quarter 2012 adjusted earnings of $1.38 per share, which
was in line with the Zacks Consensus Estimate. However, quarterly
earnings were approximately 5% above the year-ago quarter's
adjusted earnings of $1.31 per share.
Global sales of $4,332 million inched down nearly 1% from the
prior-year quarter's level of $4,383 million, since the benefit
from a 3% upside in pricing and 3% increase in global unit
volumes (excluding divested businesses) were more than offset by
a 6% negative impact from foreign exchange.
Moreover, quarterly revenue remained below the Zacks Consensus
Estimate of $4,387 million. On an organic basis (excluding
foreign exchange, acquisitions and divestitures), the company
recorded sales growth of 5%.
Adjusted gross profit margin expanded 180 basis points to
58.6%, driven by increased prices as well as cost savings from
the company's funding-the-growth initiatives. This was offset in
part by higher raw and packaging material expenses and negative
foreign exchange transaction costs. Selling, general and
administrative expenses, as a percentage of revenue, grew 60
basis points to 34.6%, on account of a 1% rise in advertising
Third quarter adjusted operating profit of $1,037 million
climbed 3% compared to the last year. On a reported basis,
including costs associated with the business realignments and the
sale of land in Mexico, operating profit inched down 1% to $1,027
million while operating margin expanded 10 basis points to 23.7%.
Colgate-Palmolive's market share of global toothpaste and manual
toothbrushes are at record highs year to date at 44.9% and 32.7%,
respectively. Global toothpaste and manual toothbrushes share
represented an increase of 0.6 and 0.8 share points from the
sales (18% of total sales) increased 2.5% in the quarter. The
growth was primarily driven by a 0.5% upside in prices and a 2%
rise in unit volume.
On an organic basis, sales increased 2.5%. Segment operating
profit inched up 3% to $219 million while operating margin
expanded nearly 10 basis points (bps) to 27.5%. The
year-over-year increase in operating profit margin was primarily
driven by increased gross profit, which was partially offset by
higher selling, general and administrative expenses as a
percentage of net sales.
sales (29% of total sales) were flat year over year as 2.5% and
5.5% increase in volume and pricing, respectively, were fully
offset by negative foreign exchange impact of 8.0%. Volume gains
were most prominent in Brazil, Ecuador, Mexico and Central
America. On an organic basis, sales increased 9%.
Consequently, operating profit inched up 2% to $371 million
from the prior-year quarter. Moreover, operating margin expanded
50 bps to 29.8%, primarily due to increased gross profit, which
was partially offset by increase in selling, general and
sales (20% of total sales) dipped 11%, given a decline of 1.5% in
unit volume while pricing and foreign exchange had a 1.5% and
9.0% negative impact on growth, respectively. Volume gains were
primarily led by better performance in Australia, which were more
than offset by volume decline in Western Europe. Organic sales
for the region were down by 2.5%.
Operating profit inched up 1% year over year to $198 million.
Furthermore, the operating profit margin in the region expanded
270 bps to 22.9%, driven by higher gross profit margin and lower
SG&A expenses as a percentage of sales.
sales (20% of total sales) climbed 5%, with a 7.5% increase in
unit volume, primarily led by volume gains in India, China
Russia, South Africa, and Thailand. Pricing contributed 4.0% to
growth, which was offset by a 6.5% negative impact from foreign
currency. On an organic basis, sales grew 11.5%.
Operating profit jumped 14% to $231 million on account of
improved gross margins, which came from higher prices and cost
benefits from the company's funding-the-growth initiatives.
Operating profit margin also expanded 220 bps to 25.8%.
Hill's Pet Nutrition
sales (13% of total sales) inched down 1.5%. Unit volume
decreased 2.5% as volume declines in the U.S., Japan and Europe
overshadowed the volume gains in Russia, Canada and South Africa.
Pricing had a 4.0% positive impact on sales growth while foreign
exchange negatively impacted sales by 3.0%. On an organic basis,
sales grew marginally by 1.5% from the year-ago quarter.
Operating profit increased 16% to $147 million. Furthermore,
the operating profit margin expanded 420 bps to 27.8%, primarily
due to a rise in gross profit margin, which is offset by an
increase in selling, general and administrative expenses, as a
percentage of net sales.
Other Financial Details
Colgate-Palmolive ended third-quarter 2012 with cash and cash
equivalents of $909 million, total debt of $5,246 million and
shareholders' equity of $2,507 million. Net cash provided by
operating activities came in at $2,133 million for the nine
months ended September 30, 2012.
Global Growth and Efficiency Program
Concurrent to its earnings result, Colgate-Palmolive announced
a four-year Global Growth and Efficiency Program or 2012
Restructuring program, with an aim to improvise unit volume,
organic sales, and earnings per share and enhance its global
The program is expected to cost in between $1,100 million and
$1,250 million ($775 million and $875 million after tax). The
company is anticipated to save in the band of $365-$435 million
($275-$325 million after tax) annually from the fourth year of
the program. Moreover, through the implementation of the program,
by the end of 2016, the company may reduce its workforce by
approximately 8% from the current level of 38,600.
Looking ahead, Colgate-Palmolive continue to expect registering
double-digit earnings per share growth for fiscal 2012, excluding
the impact of foreign currency translation. Assuming average
currency rates at current spot prices, the company expects
currency translation to reduce fiscal 2012 earnings per share
growth by 6%-7%. Furthermore, the company still anticipates
achieving its targeted gross margin expansion of 75-125 bps in
Colgate-Palmolive competes with
Procter & Gamble Company
Church & Dwight Company Inc.
). The company retains a Zacks #2 Rank, which translates into a
short-term Buy rating. However, we are maintaining our long-term
Neutral recommendation on the stock.
CHURCH & DWIGHT (CHD): Free Stock Analysis
COLGATE PALMOLI (CL): Free Stock Analysis
PROCTER & GAMBL (PG): Free Stock Analysis
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