Colgate-Palmolive Company (CL)

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Colgate-Palmolive (CL)

Q4 2012 Earnings Call

January 31, 2013 11:00 am ET

Executives

Bina H. Thompson - Former Vice President of Investor Relations

Ian M. Cook - Chairman, Chief Executive Officer and President

Analysts

Dara W. Mohsenian - Morgan Stanley, Research Division

Nik Modi - UBS Investment Bank, Research Division

Wendy Nicholson - Citigroup Inc, Research Division

Joe Lachky - Wells Fargo Securities, LLC, Research Division

John A. Faucher - JP Morgan Chase & Co, Research Division

Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division

William B. Chappell - SunTrust Robinson Humphrey, Inc., Research Division

Javier Escalante - Consumer Edge Research, LLC

Jason M. Gere - RBC Capital Markets, LLC, Research Division

William Schmitz - Deutsche Bank AG, Research Division

Christopher Ferrara - BofA Merrill Lynch, Research Division

Alice Beebe Longley - The Buckingham Research Group Incorporated

Lauren R. Lieberman - Barclays Capital, Research Division

Constance Marie Maneaty - BMO Capital Markets U.S.

Caroline S. Levy - Credit Agricole Securities (USA) Inc., Research Division

Alec Patterson

Mark S. Astrachan - Stifel, Nicolaus & Co., Inc., Research Division

Presentation

Operator

Good day, and welcome to today's Colgate-Palmolive Company Fourth Quarter and Fiscal Year-End 2012 Earnings Conference Call. Today's call is being recorded and is being simulcast live at www.colgate.com. [Operator Instructions] At this time, for opening remarks, I would like to turn the call over to the Vice President of Investor Relations, Ms. Bina Thompson. Please go ahead.

Bina H. Thompson

Thank you, Cameron. Good morning, everybody, and welcome to our fourth quarter earnings release conference call. With me this morning are Ian Cook, Chairman, President and CEO; Dennis Hickey, CFO; Victoria Dolan, Corporate Controller; and Elaine Paik, Treasurer.

This conference call will include forward-looking statements, and these statements are made on the basis of our views and assumptions as of this time and are not guarantees of future performance. Actual events or results may differ materially from these statements. For information about certain factors that could cause such differences, investors should consult our most recent annual report on Form 10-K filed with the Securities and Exchange Commission and available on our website, including the information set forth under the captions Risk Factors and Cautionary Statement on Forward-Looking Statements.

This conference call will also include a discussion of non-GAAP financial measures, which differ from our results prepared in accordance with GAAP. We will discuss organic sales growth, excluding foreign exchange, acquisitions and divestitures. We will also discuss gross profit, gross profit margin, SG&A, operating profit, net income and earnings per share, excluding the impact of certain items described in the press release. And a full reconciliation with the corresponding GAAP measures is included in the press release and is posted in the For Investors section of our website at www.colgatepalmolive.com.

We're pleased with our solid fourth quarter results. Our momentum is excellent in many areas of the world, both developed and developing, and we think we are well-positioned to deliver stronger results in 2013. On a global basis, our market shares are up year-to-date in toothpaste, manual toothbrushes, mouthwash, bar soaps, body wash, deodorants and fabric conditioners. And as you will hear as I review the divisions, innovation has played an important role in increasing market shares, and we have a very robust new product pipeline as we enter this year to help to continue this growth.

As Ian said in the press release, we're encouraged that we achieved our objectives in 2012 in the face of currency, competitive and macroeconomic challenges around the world. For the full year, our organic sales accelerated in almost every division from full year 2011. The exception was Latin America, which even so delivered another year of double-digit organic sales growth despite significant challenges in Venezuela in the fourth quarter. In particular, a labor slowdown in our factory, coupled with ongoing macroeconomic uncertainty, negatively impacted organic sales and gross margin in the fourth quarter. In fact, worldwide organic sales growth in the fourth quarter would have been almost 1.5 points higher, excluding the Venezuelan results, and gross margin worldwide would have been 50 basis points higher.

As Ian also mentioned, our global growth and efficiency program is off to a good start. And as we told you on our last call, we expect after-tax charges this year between $185 million and $220 million, with after-tax savings in the range of $30 million to $40 million. And consistent with what you would expect, we anticipate realizing these savings later in the year. Of course, our ongoing Funding the Growth savings program is continuing to deliver considerable savings as well to allow us to invest behind our full range of new products. In 2012, the program added 2 full points to gross margin line, which helped offset increases in raw material costs. And it provided savings at the SG&A line as well, and we expect this to continue into 2013. From a cash perspective, we had another good year, continuing to pay increased dividends and buying back stocks to deliver more value to our shareholders.

So let's turn to the fourth quarter division results, starting with North America. We're very pleased with the continued momentum in our North American business. Our organic sales growth of almost 4% is very strong for a developed market. And pleasingly, our categories are growing, and we are growing ahead of them. On a year-to-date basis, our market shares are up in 7 categories, even with the year-ago period in 1 and down in 3. Importantly, our year-to-date market shares are up across oral care, fueled by a continued stream of innovative products. In fact, our year-to-date increase in toothpaste share of 1 full point is the largest in 10 years. Our new product pipeline is full, and we are excited about some of the new products launching this quarter.

Read the rest of this transcript for free on seekingalpha.com