Summary
Colgate-Palmolive Company reported strong top-line growth in the first quarter of 2011, with a 4.5% increase in net sales to $3.994 billion, driven by a combination of volume growth (2.0%) and favorable foreign exchange impacts (3.0%). However, organic sales, which exclude these factors, grew at a more modest 1.5%, indicating some pricing pressure or a challenging sales environment in certain regions. Net income attributable to Colgate-Palmolive Company significantly increased to $576 million from $357 million in the prior year, boosted by the absence of a significant one-time charge related to Venezuela's hyperinflationary accounting in the prior year's first quarter. Excluding this charge, net income would have decreased by 8% year-over-year.
Financial Highlights
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Financial Statements
Beta
| Revenue | $3.99B |
| Cost of Revenue | $1.66B |
| Gross Profit | $2.33B |
| SG&A Expenses | $1.40B |
| Operating Income | $915.00M |
| Net Income | $576.00M |
| EPS (Basic) | $0.58 |
| EPS (Diluted) | $0.58 |
| Shares Outstanding (Basic) | 986.80M |
| Shares Outstanding (Diluted) | 993.20M |
Key Highlights
- 1Net sales increased by 4.5% to $3.994 billion, with volume growth contributing 2.0% and foreign exchange adding another 3.0%.
- 2Net income attributable to Colgate-Palmolive Company surged to $576 million, primarily due to the absence of a $271 million one-time charge from Venezuela's hyperinflationary accounting in the prior year's quarter.
- 3Diluted Earnings Per Share (EPS) rose to $1.16 from $0.69 in the prior year, reflecting the increased net income and exclusion of the prior year's one-time charge.
- 4The Oral, Personal and Home Care segment, the company's largest, saw a 4.5% increase in net sales, driven by volume and foreign exchange, with organic sales growing 1.5%.
- 5The Greater Asia/Africa region showed robust net sales growth of 11.5% with strong volume increases, outpacing other geographic segments.
- 6The company announced an agreement to acquire the Sanex personal care brand from Unilever for approximately $950 million, which is expected to close by the end of the second quarter of 2011, subject to regulatory approval.
- 7Cash flow from operations decreased by 7% to $680 million, primarily due to lower operating profit before considering the prior year's Venezuela-related charge.
Frequently Asked Questions
The substantial increase in net income and EPS was largely due to the absence of a significant one-time charge of $271 million incurred in the first quarter of 2010 related to the transition to hyperinflationary accounting in Venezuela. Excluding this item, net income would have decreased by 8% and EPS by 4% year-over-year, indicating some operational pressures.
Colgate-Palmolive is facing significant challenges in Venezuela due to currency devaluations, high inflation, import authorization controls, and currency exchange controls. The company is mitigating the impact through various measures, including using U.S. dollars obtained from the government, intercompany borrowings, and existing U.S. dollar cash balances. However, the business and ability to repatriate earnings continue to be negatively affected.
The proposed acquisition of the Sanex personal care brand from Unilever for approximately $950 million is a significant strategic move aimed at expanding Colgate-Palmolive's presence in the personal care segment, particularly in Europe. This acquisition is subject to regulatory approval and is expected to close by the end of the second quarter of 2011.
Colgate-Palmolive anticipates a challenging global macroeconomic and market environment. Key challenges include heightened competitive activity from multinational companies, increased promotional spending, and a sharp rise in commodity costs. The company is implementing measures to address these issues but notes they could adversely affect future results if they persist.