10-QPeriod: Q3 FY2020

COLGATE PALMOLIVE CO Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 30, 2020For Securities:CL

Summary

Colgate-Palmolive Co. (CL) reported strong third-quarter 2020 results, with Net Sales increasing by 5.5% year-over-year to $4.15 billion, driven by a 5.0% volume increase and a 4.5% net selling price increase. Organic sales, a key metric excluding currency fluctuations and acquisitions, grew by a robust 7.5%. This growth was broad-based across its segments, with notable strength in Hill's Pet Nutrition (up 11.0%) and positive organic sales growth in Oral, Personal, and Home Care. Diluted Earnings Per Share (EPS) rose to $0.81, up from $0.67 in the prior year quarter, reflecting improved profitability. The company also managed its expenses effectively, with Gross Profit margin improving significantly, showcasing its ability to pass on increased costs through pricing while benefiting from cost-saving initiatives. The company highlighted resilience amidst the ongoing COVID-19 pandemic, noting that many of its products were deemed essential. While some channels like professional sales and travel retail saw declines, increased demand was observed in categories such as liquid hand soap and cleaners, with some of this growth expected to be sustainable. Management reiterated its commitment to driving growth through innovation, expanding online channels, and maintaining a disciplined capital allocation strategy, including a moderate share repurchase program and a recent dividend increase. The company's financial position remains solid, with sufficient operating cash flow and access to credit markets to meet its obligations.

Financial Highlights

50 data points
Beta

Revenue

$4.15B

61.2% Gross Margin

Net Income

$698.00M

16.8% Net Margin

EPS (Diluted)

$0.81

Total Assets

$15.47B

Cash & Equivalents

$989.00M

Free Cash Flow

$962.00M

Financial Statements
Beta
Revenue$4.15B
Cost of Revenue$1.61B
Gross Profit$2.54B
SG&A Expenses$1.52B
Operating Income$1.02B
Net Income$698.00M
EPS (Basic)$0.81
EPS (Diluted)$0.81
Shares Outstanding (Basic)859.00M
Shares Outstanding (Diluted)861.80M

Key Highlights

  • 1Net Sales for Q3 2020 increased 5.5% to $4.15 billion, with organic sales up 7.5%.
  • 2Diluted Earnings Per Share (EPS) rose to $0.81 in Q3 2020 from $0.67 in Q3 2019.
  • 3Gross Profit margin improved significantly to 61.2% from 59.0% in the prior year quarter.
  • 4Hill's Pet Nutrition segment showed strong performance with an 11.0% increase in Net Sales.
  • 5Acquisitions of Hello Products LLC and Filorga continue to be integrated and contribute to growth.
  • 6The company is managing through the COVID-19 pandemic, with essential products seeing sustained demand and a strategic focus on eCommerce.
  • 7Strong operating cash flow generation of $2.76 billion for the nine months ended September 30, 2020.

Frequently Asked Questions

Colgate-Palmolive's Net Sales increased by 5.5% to $4.15 billion in the third quarter of 2020, compared to $3.93 billion in the third quarter of 2019. This growth was driven by a 5.0% increase in volume and a 4.5% increase in net selling prices, partially offset by a 4.0% negative foreign exchange impact. Organic sales, which exclude these factors, grew by a strong 7.5%.

Colgate-Palmolive's essential products, such as oral care and hygiene items, continued to see strong demand during the COVID-19 pandemic. While some channels like professional sales and travel retail experienced declines, categories like liquid hand soap and cleaners saw increased consumption. The company maintained operations by implementing health and safety measures for employees and observed a shift in consumer purchasing patterns towards online channels. Management expects some of the increased demand for certain products to be sustainable.

Profitability improved significantly. Gross Profit increased to $2.54 billion, and Gross Profit margin expanded by 220 basis points to 61.2%, driven by cost savings from 'funding-the-growth' initiatives and higher pricing, which more than offset increased raw material costs. Diluted Earnings Per Share (EPS) rose to $0.81 from $0.67 in the prior year's quarter, reflecting these operational efficiencies and sales growth.

In January 2020, Colgate-Palmolive acquired Hello Products LLC, an oral care business, for $351 million. In September 2019, they acquired Laboratoires Filorga Cosmétiques, a premium anti-aging skin health brand, for approximately $1.71 billion. The company is integrating these acquisitions and notes their contribution to growth, particularly Filorga's impact on European sales. The goodwill associated with Filorga was assessed for impairment due to COVID-19 and was found not to be impaired as of March 31, 2020.