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Q3 2010 Earnings Call
October 28, 2010 11:00 am ET
Ian Cook - Chairman, Chief Executive Officer and President
Bina Thompson - Vice President of Investor Relations
Constance Maneaty - BMO Capital Markets U.S.
Victoria Collin - Atlantic Equities LLP
Lauren Lieberman - Barclays Capital
William Chappell - SunTrust Robinson Humphrey Capital Markets
Alice Longley - Buckingham Research Group, Inc.
John Faucher - JP Morgan Chase & Co
Mark Astrachan - Stifel, Nicolaus & Co., Inc.
Joseph Altobello - Oppenheimer & Co. Inc.
Ali Dibadj - Bernstein Research
William Schmitz - Deutsche Bank AG
Jason Gere - RBC Capital Markets Corporation
Douglas Lane - Jefferies & Company, Inc.
Wendy Nicholson - Citigroup Inc
Jon Andersen - William Blair & Company L.L.C.
Andrew Sawyer - Goldman Sachs Group Inc.
Alec Patterson - RCM
Linda Weiser - Caris & Company
Nik Modi - UBS Investment Bank
Christopher Ferrara - BofA Merrill Lynch
John San Marco - Janney Montgomery Scott LLC
Previous Statements by CL
» Colgate-Palmolive Q2 2010 Earnings Call Transcript
» Colgate-Palmoliv Q1 2010 Earnings Call Transcript
» Colgate-Palmolive Company. Q4 2009 Earnings Call Transcript
Thanks, Dana. Good morning, everybody. And welcome to our third 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, Treasurer.
This conference call will include forward-looking statements. And these statements were 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 Statements on Forward-looking Statements.
We will discuss our results and outlook excluding the one-time charge of $271 million related to the transition to hyperinflationary accounting in Venezuela as of the 1st of January 2010. We'll also discuss organic sales growth, excluding foreign exchange, acquisitions and divestitures.
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 www.colgate.com. So we'll be glad to answer any questions you may have, including or excluding these items, as you wish.
We are pleased that our third quarter, again, exhibited solid performance, reflecting the successful implementation of our financial strategy well known to you all. Our gross margin increased and we reduced our overhead expenses. This provided funds to increase our advertising, both absolutely and as a percent of sales, to grow the top line while at the same time increasing our profitability.
And this was particularly pleasing, given the macro economic challenges we faced in the more developed regions of the world, coupled with ongoing competitive activity in all our markets. Importantly, our market shares in many key countries around the world are strong and growing. Often the majority of our categories, including toothpaste, toothbrushes and mouthwash. You'll hear more about specific share performance as we review the regions in more detail.
And as you know, relevant innovation is key, and we continue to launch new products across categories across a range of price points to appeal to all consumers. Our global launch of Colgate Sensitive Pro-Relief continues to do well. As of the end of this quarter, it is now being sold in markets that represent 75% of the sensitivity market world wide.
As well as a strong P&L, our balance sheet is solid. Our strong cash position has amounted to increase our dividend this year, as well as to continue with our share repurchase program, both of which provide a good return to our shareholders.
So let's turn to the divisions for more specifics. Starting with North America. Business in this region remains solid. We continue to launch new products across categories and have an exciting pipeline slated for the first quarter of next year.
As you know, this quarter, we are in the midst of a relaunch of our Colgate Total toothpaste line. This is being accompanied by strong media and trade support. Relaunched with innovative packaging incorporate's very impactful integrated marketing campaign and in-store activity across all retailers. Our MaxFresh line, which is particularly relevant with the Hispanic consumer, will see increased focus on key Hispanic accounts in the fourth quarter.
Our manual toothbrush shares continue to do well, up 150 basis points on a year-to-date basis, to over 30%. The Colgate 360° franchise is doing well, fueled by the ActiFlex line launched earlier this year, and we continue to build trial and repeat for our on-the-go toothbrush with Colgate Wisp.
Another encouraging signs of U.S. business is that private label growth appears to be flattening, and we see consumers reverting to branded products. As you know, private label in toothpaste is virtually nonexistent, and we see the trends in other categories improving.
We've just launched Colgate Sensitive Pro-Relief in Canada. While as early days, results are particularly encouraging. In three weeks, we've achieved 80% distribution, a process which would normally take closer to three months. Acceptance on this part of the trade and the profession has been excellent and we started to see replenishment orders.
So looking ahead in North America, volume growth is expected to be solid in the fourth quarter amid single-digit, and should be up mid-single-digit for the full year as well. Organic sales are expected to be up low-single digits for the fourth quarter and full year. Operating profit is expected to decline modestly for the fourth quarter, but should be up mid-single digits for the full year up both absolutely and as a percent of sales.