Colgate-Palmolive Company (CL)

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Colgate-Palmolive Company (CL)

Q4 2009 Earnings Call

January 28, 2010 11:00 a.m. ET


Bina Thompson - VP, Investor Relations

Ian Cook - Chairman, President, and CEO


Joe Altobello - Oppenheimer and Company

Bill Schmitz - Deutsche Bank

Ali Dibadj - Bernstein

Lauren Lieberman - Barclays Capital

Jason Gere - RBC Capital Markets

Chris Ferrara - Bank of America

John Faucher - JPMorgan

Alice Longley - Buckingham Research

Connie Maneaty - BMO Capital Markets

Bill Chappell - Suntrust

Alec Patterson - RCM

Andrew Sawyer - Goldman Sachs

Doug Lane - Jefferies

Linda Bolton-Weiser - Caris


Good day and welcome to today’s Colgate-Palmolive company fourth quarter year-end 2009 earnings conference call. Today’s call is being recorded and is being simulcast live at Just as a reminder, there maybe a slight delay before the question-and-answer session begins, due to the web simulcast.

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, ma’am.

Bina Thompson

Thank you, Bernice, and good morning everybody and welcome to our fourth quarter earnings release conference call. With me this morning are Ian Cook, Chairman, President, and CEO; Steve Patrick, CFO; Dennis Hickey, Corporate Controller; and, Elaine Paik, who has been elected Treasurer, effective February 1.

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 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 Statements on Forward-Looking Statements.

We will discuss our results excluding charges relating to the 2004 restructuring program, which was completed in 2008. And a full reconciliation with the corresponding GAAP measures is included in the press release and is posted on the Investor Relations page of our website at

And of course we'll be glad to answer any questions you may have including or excluding these items, as you wish.

We are delighted with our fourth quarter results, an excellent finish to a year which had seen momentum building through the previous three quarters. Our financial strategy with which you are all familiar continues to be effective. We were particularly pleased with our volume growth of 3% and our gross margin increase of 320 basis points. As we told you at the beginning of the year, we approached 2009 cautiously as there were so many uncertainties from a global macroeconomic perspective. We said that the balance between volume and price would shift as the year unfolded and that indeed has been the case.

In addition we said that the rate of increase in our advertising spending would improve each quarter and that has happened as well. Our fourth quarter increase of 18% was a healthy one, particularly as we continued to benefit from reduced media costs in many parts of the world.

Our tax rate in the quarter of 32.6 % was somewhat higher than our previous guidance due to an increase in remittances from our overseas subsidiaries. Despite that our EPS increased to 21%, well ahead of consensus. In addition to a healthy income statement our balance sheet is very strong as well. Our operating cash flow was excellent, up 42%, which should enable us to fund increased dividends and stock repurchases. Both receivables and inventory days outstanding have declined resulting in our working capital being at a minus 0.4% of sales, the first time we have seen such a low working capital on a worldwide basis and our return on capital also reached a record 39.1%.

As we look out into this year there are signs that the macroeconomic situation is improving around the world. Happily, we have a robust pipeline of new products which should help continue our volume and share growth momentum. And in the developing markets such as Latin America and Asia, our strategy of offering good value at every price point should help continue to fuel growth there.

I would just like to spend a moment on Venezuela. As you know, the Venezuelan currency devalued early this year. Colgate people, who have extensive experience in managing in high inflation economies, minimized the impact and we have confidence in our ability to manage it effectively going forward. While difficult to estimate precisely, we currently anticipate, the impact of the Venezuelan devaluation will be at a net reduction in 2010 earnings per share of $0.06 to $0.10. This includes a negative $0.16 to $0.24 from translation, a positive $0.05 to $0.08 from lower taxes on accrued but unpaid remittances and a positive $0.03 to $0.05 from revaluation of the local balance sheet.

The company continues to believe our strong top and bottom line momentum should continue which bodes well for another year of double-digit earnings per share growth in 2010.

Now, before I turn to the divisions for a more in-depth look at our results I also wanted to share with you another step in our management development process which realigns responsibilities among several senior managers effective as of February 1. As has always been the case in the past, our goal is to ensure that Colgate’s talented senior management team can bring their deep knowledge and experience to all aspects of Colgate’s global operations and key business functions.

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