10-QPeriod: Q2 FY2021

COLGATE PALMOLIVE CO Quarterly Report for Q2 Ended Jun 30, 2021

Filed July 30, 2021For Securities:CL

Summary

Colgate-Palmolive Company reported solid performance for the second quarter and first half of 2021, demonstrating revenue growth driven by a combination of volume, pricing, and favorable foreign exchange rates. The company experienced a 9.5% increase in net sales for the quarter, reaching $4.26 billion, with organic sales up 5.0%. This growth was particularly strong in the Pet Nutrition segment, which saw an 18.0% increase in net sales. However, gross profit margin faced pressure, decreasing to 60.0% from 60.8% year-over-year, primarily due to significantly higher raw and packaging material costs, partially offset by cost savings initiatives and increased pricing. Despite margin headwinds, the company saw an increase in diluted earnings per share to $0.83 for the quarter, up from $0.74 in the prior year, reflecting effective management of expenses and a favorable tax impact. Geographically, Latin America and Africa/Eurasia showed robust organic sales growth, while North America experienced a slight decline. The company continues to navigate a challenging cost environment and heightened competition, but remains focused on its strategic priorities of innovation, brand building, and expansion in high-growth channels.

Financial Highlights

48 data points
Beta

Revenue

$4.26B

60.0% Gross Margin

Net Income

$703.00M

16.5% Net Margin

EPS (Diluted)

$0.83

Total Assets

$16.00B

Cash & Equivalents

$937.00M

Free Cash Flow

$627.00M

Financial Statements
Beta
Revenue$4.26B
Cost of Revenue$1.70B
Gross Profit$2.56B
SG&A Expenses$1.57B
Operating Income$996.00M
Net Income$703.00M
EPS (Basic)$0.83
EPS (Diluted)$0.83
Shares Outstanding (Basic)845.60M
Shares Outstanding (Diluted)849.40M

Key Highlights

  • 1Net sales increased 9.5% to $4.26 billion in Q2 2021, driven by volume (2.5%), pricing (2.5%), and foreign exchange (4.5%).
  • 2Organic sales grew 5.0% in Q2 2021, indicating underlying business momentum.
  • 3Hill's Pet Nutrition segment demonstrated strong performance with an 18.0% increase in net sales (15.0% organic growth) in Q2 2021.
  • 4Gross profit margin declined to 60.0% from 60.8% due to significant increases in raw and packaging material costs, despite cost savings and pricing actions.
  • 5Diluted EPS increased to $0.83 in Q2 2021 from $0.74 in Q2 2020.
  • 6SG&A expenses as a percentage of net sales increased by 100 bps to 36.8% in Q2 2021, driven by higher logistics costs and increased advertising investment.
  • 7Latin America and Africa/Eurasia segments showed strong organic sales growth of 8.5% and 13.0% respectively in Q2 2021.

Frequently Asked Questions

The primary driver for the decrease in gross profit margin was significantly higher raw and packaging material costs, which negatively impacted the margin by 370 basis points in the second quarter of 2021. This was partially offset by cost savings from the Company's funding-the-growth initiatives and higher pricing.

The company noted that many of its products are considered essential, allowing continued operation. While there was a significant increase in demand for categories like hand soap and cleaners in 2020, demand in these areas declined year-over-year in Q2 2021 but remained above historical levels. The company also experienced disruptions in certain channels like travel retail and noted ongoing changes in consumer purchasing patterns, including a shift to online shopping. Uncertainty related to the pandemic's impact on the global economy, supply chains, and consumer behavior continues.

Colgate-Palmolive expects the challenging cost environment, with significantly higher raw and packaging material costs and increased logistics costs, to continue for at least the remainder of the year. The company is implementing strategies to mitigate these effects.

The company is experiencing heightened competition from local and multinational companies, as well as new entrants. Strategies include innovating core businesses, improving brand building with an elevated brand purpose model, investing in high-growth segments and channels, and expanding eCommerce capabilities. The company also notes increased promotional activity from retailers as they aim to drive consumer traffic.