Colgate-Palmolive Company (CL)

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Colgate-Palmolive (CL)

Q4 2011 Earnings Call

January 26, 2012 11:00 am ET

Executives

Bina H. Thompson - Vice President of Investor Relations

Delia H. Thompson - Senior Vice President of Investor Relations

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

Analysts

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

Joe Lachky - Wells Fargo Securities, LLC, Research Division

Christopher Ferrara - BofA Merrill Lynch, Research Division

Jason Gere - RBC Capital Markets, LLC, Research Division

Nik Modi - UBS Investment Bank, Research Division

Lauren R. Lieberman - Barclays Capital, Research Division

Linda Bolton-Weiser - Caris & Company, Inc., Research Division

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

John P. San Marco - Janney Montgomery Scott LLC, Research Division

William Schmitz - Deutsche Bank AG, Research Division

Alice Beebe Longley - Buckingham Research Group, Inc.

Javier Escalante - Consumer Edge Research, LLC

Wendy Nicholson - Citigroup Inc, Research Division

Jon Andersen - William Blair & Company L.L.C., Research Division

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

Constance Marie Maneaty - BMO Capital Markets U.S.

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

Lauren DeSanto - Morningstar Inc., Research Division

Presentation

Operator

Good day, and welcome to today's Colgate-Palmolive Co. Fourth Quarter and Fiscal Year End 2011 Earnings Conference Call. Today's call is being recorded, and is being simulcast live via the www.colgate.com. [Operator Instructions] At this time, for opening remarks, I would like to turn the call over to Senior Vice President of Investor Relations, Ms. Bina Thompson. Please go ahead.

Bina H. Thompson

Thank you, Lisa. Good morning, 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,

Corporate 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 Statements on Forward-looking Statements.

We will discuss organic sales growth, excluding foreign exchange, acquisitions and divestitures. We will also discuss gross profit margin, operating profit, net income and earnings per share, excluding the impact of the onetime items described in the press release. A full reconciliation with the corresponding GAAP measures is included in the press release, and is posted on the Investor Relations section of our website at www.colgate.com.

We're very pleased with our fourth quarter results, given the turbulent year just finished. The good momentum in our organic sales throughout the year is encouraging as we enter 2012. The challenge, as you know, has been to balance volume and price, and we have met that challenge. Our market shares are strong and growing, and you will hear more detail by division in a moment.

On a year-to-date basis, our worldwide market shares are up in toothpaste, mouthwash, manual toothbrushes, bar soaps, body wash, shampoo, household cleaners and fabric conditioners. In addition, we are pleased that our gross margin improved sequentially from the third quarter supported by not only positive pricing, but another year of outstanding Funding the Growth results. We told you throughout the year of our renewed efforts to reduce our costs, and that focus continues and is succeeding. This is particularly important in a world of volatile raw material costs. And importantly, we increased our advertising in the quarter, absolutely and as a percent of sales, in support of new product launches around the world. So a strong finish to the year.

In terms of our income statement, our balance sheet is equally solid with strong cash generation and return on capital. As Ian mentioned in the press release, the world remains challenging from a macroeconomic perspective, and is particularly volatile in terms of foreign currency and consumer and competitive dynamics. This has made it increasingly difficult to provide forecasts for specific regions. As a result, we've determined that going forward, we will not provide divisional guidance. We will continue to provide guidance on a total company basis. And for 2012, we expect volume growth in the range of 4 to 7%, and gross margin to increase between 75 and 125 basis points.

Let me turn to the divisions to give you some color regarding their fourth quarter results and more general opportunities going forward, starting then with North America. We're very pleased that this region reported positive volume and price for the first time in over 2 years. We told you at the start of 2011 that North American results would improve as we progress through the year, and that indeed happened. Our second half new product activity has met with good success, and we have more slated for 2012.

In the quarter, our U.S. market shares increased in 6 categories, were level in 3 and declined in only 2. Our leading all-outlet toothpaste share mentioned in the press release of 35.9% was 36.1% in the fourth quarter. We're particularly pleased with the success of Colgate Optic White toothpaste and toothbrush and the all-around value they are delivering. Value to consumers is reflected in good market shares and some very solid repeat rates. Since the launch, the 4-ounce toothpaste and soft toothbrush are the number one SKUs in their respective categories. Value to our trade partners since, as you would expect, the impact on overall average retail selling price for toothpaste has been very positive and will be delivering value to us through higher volumes, share and profits, a truly win, win, win proposition. This quarter, we will be launching another variant, Optic White Cool Mild Mint, thereby further expanding this very successful franchise. Our second half launch of Colgate Sensitive Pro-Relief has also delivered good results. It's been 65% incremental to the Sensitive business, and as such, has driven category growth. To build on this success, we will be launching Colgate Sensitive Pro-Relief Enamel Repair this quarter. This is an exclusive new daily use toothpaste that helps repair vulnerable parts of sensitive teeth and provides long-lasting relief as well.

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