10-QPeriod: Q3 FY2018

COLGATE PALMOLIVE CO Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 26, 2018For Securities:CL

Summary

Colgate-Palmolive Company's (CL) third-quarter and year-to-date 2018 results show a mixed performance for investors. While the company reported slight year-over-year increases in net sales and net income attributable to Colgate-Palmolive Company for the nine-month period, the third quarter itself saw a decline in net sales and operating profit. This performance was impacted by negative foreign exchange rates and increased raw and packaging material costs, which pressured gross profit margins. Despite these headwinds, the company continues to execute its "Global Growth and Efficiency Program," aiming to streamline operations and drive long-term growth. The acquisition of professional skin care businesses also contributed to volume growth in North America. Investors should note the ongoing restructuring charges and the impact of U.S. tax reform, which influenced effective tax rates and net income. The company maintains a positive outlook, focusing on innovation, efficiency, and cash flow generation to enhance shareholder value.

Financial Highlights

50 data points
Beta

Revenue

$3.85B

59.0% Gross Margin

Net Income

$523.00M

13.6% Net Margin

EPS (Diluted)

$0.60

Total Assets

$12.57B

Cash & Equivalents

$841.00M

Free Cash Flow

$897.00M

Financial Statements
Beta
Revenue$3.85B
Cost of Revenue$1.58B
Gross Profit$2.27B
SG&A Expenses$1.37B
Operating Income$874.00M
Net Income$523.00M
EPS (Basic)$0.60
EPS (Diluted)$0.60
Shares Outstanding (Basic)868.80M
Shares Outstanding (Diluted)871.10M

Key Highlights

  • 1Net sales for the nine months ended September 30, 2018, increased by 1.5% to $11,733 million compared to the prior year, driven by volume growth.
  • 2Diluted earnings per share for the nine months ended September 30, 2018, increased to $2.05 from $1.91 in the prior year.
  • 3The company acquired professional skin care businesses, Physicians Care Alliance, LLC and Elta MD Holdings, Inc., in January 2018 for approximately $730 million, contributing to volume growth in North America.
  • 4Gross profit margin decreased by 100 basis points to 59.6% for the nine-month period, primarily due to higher raw and packaging material costs.
  • 5The "Global Growth and Efficiency Program" is ongoing, with estimated cumulative pretax charges ranging from $1,730 to $1,885 million.
  • 6The company repurchased approximately $3.9 billion in shares during the third quarter of 2018 under its new share repurchase program.
  • 7Foreign exchange headwinds negatively impacted net sales, particularly in the third quarter, with a negative impact of 4.0% globally.

Frequently Asked Questions

The primary driver of the sales decline in the third quarter of 2018 was negative foreign exchange impact (4.0%) and, in certain regions, volume declines. While net selling price increases provided some offset, the overall net sales decreased by 3.0% globally.

The "Global Growth and Efficiency Program" involves significant restructuring charges, estimated between $1,730 to $1,885 million pretax, which impact operating profit. The program aims to generate annual pretax savings of $560 to $635 million once fully implemented, contributing to future cash flow and margin improvements.

Colgate-Palmolive continued to return value to shareholders. Dividends declared per common share increased year-over-year. The company also authorized a new share repurchase program in June 2018 with an aggregate purchase price of up to $5 billion and repurchased approximately $3.9 billion in shares during the third quarter.

The TCJA, enacted in late 2017, lowered the U.S. corporate income tax rate and introduced a mandatory deemed repatriation tax. The company recorded a provisional charge of $275 million in 2017 and an additional $80 million in the third quarter of 2018 related to this tax reform. This reform is expected to reduce future tax payments due to the lower U.S. corporate tax rate.