10-QPeriod: Q2 FY2008

COLGATE PALMOLIVE CO Quarterly Report for Q2 Ended Jun 30, 2008

Filed July 29, 2008For Securities:CL

Summary

Colgate-Palmolive Company reported a strong second quarter and first half of 2008, demonstrating robust sales growth driven by both volume and strategic pricing initiatives, alongside favorable foreign exchange impacts. Net sales increased by 16.5% for the quarter and 16.0% for the first half, with the Oral, Personal and Home Care and Pet Nutrition segments showing significant contributions across all geographic regions. The company's focus on higher-margin businesses and successful innovation in product categories like oral care and pet nutrition continues to drive performance. Profitability also saw a notable increase, with diluted earnings per share rising to $0.92 for the quarter and $1.78 for the first half, up from $0.76 and $1.65 respectively in the prior year. This growth was achieved despite inflationary pressures from raw and packaging material costs, which were largely offset by pricing actions and cost-saving programs. The company is progressing on its 2004 Restructuring Program, which is expected to yield substantial annual savings upon completion, further supporting future profitability and cash flows. The company's liquidity remains strong, supported by robust operating cash flows, although working capital requirements increased due to inventory build-up and higher receivables.

Financial Highlights

20 data points
Beta

Revenue

$3.96B

56.5% Gross Margin

Net Income

$493.80M

12.5% Net Margin

EPS (Diluted)

$0.46

Cash & Equivalents

$622.80M

Free Cash Flow

$1.04B

Financial Statements
Beta
Revenue$3.96B
Cost of Revenue$1.73B
Gross Profit$2.24B
SG&A Expenses$1.42B
Operating Income$788.40M
Net Income$493.80M
EPS (Basic)$0.48
EPS (Diluted)$0.46

Key Highlights

  • 1Net sales increased by 16.5% to $3,964.8 million in Q2 2008 and by 16.0% to $7,677.8 million in the first half of 2008, driven by a combination of volume growth (5.0%), net selling price increases (4.5%), and positive foreign exchange impacts (7.0%).
  • 2Diluted earnings per share (EPS) grew significantly to $0.92 in Q2 2008 and $1.78 in the first half of 2008, compared to $0.76 and $1.65 in the prior year periods, respectively.
  • 3Operating profit increased by 17% to $767.0 million in Q2 2008 and by 14% to $1,490.7 million in the first half of 2008, reflecting improved sales and benefits from restructuring programs, partially offset by higher raw material costs.
  • 4The company is on track with its 2004 Restructuring Program, which is expected to be completed by the end of 2008 and projected to generate annual savings of $425-$475 million pre-tax upon completion.
  • 5Net cash provided by operations increased by 14% to $1,028.9 million in the first half of 2008, demonstrating strong operational cash generation.
  • 6The company repurchased approximately 3.18 million shares of common stock during the quarter under its share repurchase program and increased its annualized common stock dividend by 11% in early 2008.
  • 7Hill's Pet Nutrition segment sales increased by 19.5% in Q2 2008, driven by strong volume and pricing, and a positive foreign exchange impact.

Frequently Asked Questions

Colgate-Palmolive's sales growth in Q2 2008 was driven by a combination of factors: a 5.0% increase in volume, a 4.5% increase in net selling prices, and a significant 7.0% positive impact from foreign exchange rates. This broad-based growth occurred across its major geographic segments.

The 2004 Restructuring Program, expected to conclude by year-end 2008, is progressing as planned. While it incurred charges impacting operating profit in both Q2 and the first half of 2008, the program is designed to yield substantial annual savings. Management expects these savings to enhance future cash flows and profitability once fully implemented.

The company acknowledges increasing raw and packaging material costs. However, it has largely offset these pressures through strategic pricing adjustments, ongoing cost-saving initiatives, and a continued focus on higher-margin product categories. This approach has allowed the company to maintain and even slightly improve its gross profit margins.

Colgate-Palmolive demonstrates strong liquidity, with net cash provided by operations increasing by 14% in the first half of 2008. The company's capital expenditures are focused on high-return projects, and it has managed its debt through note issuances and paydowns. Working capital requirements have increased slightly due to inventory builds and higher receivables, but the company's operating cash flows are expected to fund its restructuring program.