01—Abstract
Summary
Summary of the 10-K filed February 17, 2022. Cited figures are marked; the original filing is the authoritative source.
Colgate-Palmolive's 2021 10-K shows a year of solid top-line growth overshadowed by margin compression and a non-cash impairment.
Worldwide Net sales rose 6.0% to $17,421 milliona, driven by 4.5% organic growth (1.0% volume, 3.5% net selling price) plus 1.5% favorable foreign exchange. Hill's Pet Nutrition was the standout, growing 15.0% with 13.5% organic growth, while Oral, Personal and Home Care grew 4.0% (2.5% organic), with Oral Care gaining and Personal Care softening. Profitability weakened.
Gross margin fell 120 bps to 59.6% as raw and packaging material inflation (about 450 bps) outran pricing and funding-the-growth savings. GAAP operating profit declined 14% to $3,332 millionb, but this includes a $571 million pre-tax impairment of Filorga goodwill and trade name, which the company attributes to COVID-19 effects on duty-free, travel retail and pharmacy channels. Excluding special items, operating margin was 22.3%, down 120 bps, and non-GAAP diluted EPS rose 5% to $3.21.
GAAP diluted EPS fell to $2.55c from $3.14. Cash generation and capital returns remained substantial but softer. Operating cash flow fell to $3,325 million from $3,719 million on working capital changes.
Capex rose to $567 milliond, and the company paid $1,679 million in dividends (up to $1.79 per share) and repurchased $1,320 million of stock. Management plans a 2022 Global Productivity Initiative with pre-tax charges of $200 to $240 million and annualized savings of $90 to $110 million, and expects the cost environment to remain difficult in 2022.
02—Key points
Key Highlights
- Net sales grew 6.0% to $17.4 billion, with organic sales up 4.5%; Hill's Pet Nutrition (+15.0%) was the fastest-growing segment, while Oral, Personal and Home Care grew 4.0%.
- Gross margin declined 120 bps to 59.6% due to roughly 450 bps of higher raw and packaging material costs, partly offset by 210 bps of funding-the-growth savings and 120 bps of pricing.
- A $571 million pre-tax ($518 million after-tax) non-cash impairment on the Filorga skin health business drove GAAP operating profit down 14% to $3.3 billion; non-GAAP operating margin was 22.3%.
- GAAP diluted EPS fell to $2.55 from $3.14; excluding special items, diluted EPS grew 5% to $3.21.
- Operating cash flow dropped to $3.3 billion from $3.7 billion, while capex rose to $567 million (about 3.3% of sales) and free cash flow remained healthy relative to $1.7 billion in dividends.
- Shareholder returns continued with $1.3 billion in share repurchases and a 2.3% dividend increase to $1.79 per share, against a $5 billion authorization program with $526 million remaining at year-end.
- The 2022 Global Productivity Initiative, approved January 27, 2022, targets $90 to $110 million in annualized pre-tax savings against $200 to $240 million in one-time charges.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Colgate-Palmolive kept $0.12.
- Revenue$17.42B100.0%
- Cost of revenue−$7.05B40.4%
- Gross profit$10.38B59.6%
- Operating costs−$7.04B40.4%
- Operating income$3.33B19.1%
- Interest, other & tax−$1.17B6.7%
- Net income$2.17B12.4%
Where FY2021 revenue went
$17.42B- Cost of revenue: $7.05B, 40% of revenue
- SG&A: $6.41B, 37% of revenue
- Net income: $2.17B, 12% of revenue
- R&D: $307.0M, 1.8% of revenue
- Other operating costs: $329.0M, 1.9% of revenue
- Interest, other & tax: $1.17B, 6.7% of revenue
Kept 12% as net incomeNet income $2.17B · 12%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 17, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $17.42B$16.47B | +5.8% |
| Cost of Revenue | $7.05B$6.45B | +9.2% |
| Gross Profit | $10.38B$10.02B | +3.6% |
| R&D Expenses | $307.00M$290.00M | +5.9% |
| SG&A Expenses | $6.41B$6.02B | +6.4% |
| Operating Income | $3.33B$3.88B | −14.2% |
| Interest Expense | $120.00M$184.00M | −34.8% |
| Net Income | $2.17B$2.69B | −19.6% |
| EPS (Basic) | $2.56$3.15 | −18.7% |
| EPS (Diluted) | $2.55$3.14 | −18.8% |
| Shares Outstanding (Basic) | 845.00M856.80M | −1.4% |
| Shares Outstanding (Diluted) | 848.30M859.30M | −1.3% |
05—Questions
Frequently Asked Questions
Why did reported profit fall so much in 2021 if sales grew?
Two main factors. First, raw and packaging material costs rose sharply, compressing gross margin by 120 bps to 59.6%, and logistics costs also increased. Second, GAAP results include a $571 million non-cash impairment on the Filorga business. Excluding that charge and a $26 million Brazilian VAT benefit and a $75 million debt extinguishment loss, non-GAAP EPS rose 5% to $3.21.
How concentrated is Colgate's customer base and geographic exposure?
Walmart and its affiliates accounted for about 12% of 2021 Net sales; no other customer exceeded 10%. Roughly 70% of sales came from outside the U.S., and about 45% came from emerging markets, which exposes the company to foreign currency and political risk.
What is driving the Filorga impairment and is it a sign of broader weakness?
Management attributes the impairment to COVID-19 restrictions and reduced consumer mobility, which hurt consumption in duty-free, travel retail and pharmacy channels. The charge is confined to Filorga, and management states that the estimated fair value of other reporting units substantially exceeds carrying value. Investors should still monitor whether the travel-retail and skin health recovery assumptions prove achievable.
What is the outlook for 2022 costs and margins?
Management expects the difficult cost environment to continue in 2022, with ongoing raw material inflation and logistics pressure. Mitigation relies on the 2022 Global Productivity Initiative, funding-the-growth savings, revenue growth management pricing and cost-containment, though management acknowledges it may become harder to implement these strategies over time.
06—Continue