10-QPeriod: Q2 FY2022

COLGATE PALMOLIVE CO Quarterly Report for Q2 Ended Jun 30, 2022

Filed July 29, 2022For Securities:CL

Summary

Colgate-Palmolive Company's Q2 2022 filing shows a 5.5% increase in net sales to $4.484 billion, driven by a 0.5% volume increase and 8.5% price hikes, with organic sales up 9.0%. The Oral, Personal, and Home Care segment saw a 3.0% sales increase, while Hill's Pet Nutrition reported a strong 14.5% sales jump. However, gross profit margin declined by 300 basis points to 57.0% due to significantly higher raw and packaging material costs, which outpaced pricing and cost savings. Diluted EPS decreased to $0.72 from $0.83 in the prior year's comparable quarter, reflecting these cost pressures and the impact of the 2022 Global Productivity Initiative. The company is navigating a challenging macroeconomic environment characterized by inflation, increased logistics costs, and supply chain disruptions, further exacerbated by the war in Ukraine and ongoing COVID-19 impacts. Despite these headwinds, Colgate-Palmolive is focused on strategic pricing, cost efficiencies through its productivity initiatives, and investing in brand support and digital capabilities to drive long-term growth and shareholder value.

Financial Highlights

48 data points
Beta

Revenue

$4.48B

57.0% Gross Margin

Net Income

$603.00M

13.4% Net Margin

EPS (Diluted)

$0.72

Total Assets

$15.71B

Cash & Equivalents

$858.00M

Free Cash Flow

$528.00M

Financial Statements
Beta
Revenue$4.48B
Cost of Revenue$1.93B
Gross Profit$2.55B
SG&A Expenses$1.66B
Operating Income$884.00M
Net Income$603.00M
EPS (Basic)$0.72
EPS (Diluted)$0.72
Shares Outstanding (Basic)836.80M
Shares Outstanding (Diluted)839.40M

Key Highlights

  • 1Net sales increased 5.5% to $4.484 billion, driven by price increases (8.5%) and a modest volume increase (0.5%). Organic sales grew by 9.0%.
  • 2Hill's Pet Nutrition demonstrated robust growth with a 14.5% increase in net sales and an 18.0% rise in organic sales.
  • 3Gross profit margin compressed by 300 basis points to 57.0% due to significantly higher raw and packaging material costs, which were only partially offset by pricing and cost savings.
  • 4Selling, general, and administrative expenses as a percentage of net sales increased slightly to 37.0% due to higher logistics costs, despite efforts to improve overhead efficiencies and reduced advertising investment as a percentage of sales.
  • 5Diluted EPS decreased to $0.72 from $0.83 in the prior year's quarter, impacted by margin compression and charges related to the 2022 Global Productivity Initiative.
  • 6The company continues to face macroeconomic challenges including inflation, supply chain disruptions, and the impact of the war in Ukraine, leading to higher costs.
  • 7Colgate-Palmolive is implementing a 2022 Global Productivity Initiative, aiming for annualized pretax savings of $90-110 million, with initial charges recognized in the quarter.

Frequently Asked Questions

Net sales growth was primarily driven by net selling price increases of 8.5%, with a smaller contribution from volume growth of 0.5%. Negative foreign exchange also had a dampening effect of 3.5%.

The gross profit margin decreased by 300 basis points to 57.0% primarily due to significantly higher raw and packaging material costs, which rose by 800 basis points. While pricing increases and cost savings initiatives provided some offset, they were not enough to fully mitigate the cost inflation.

The 2022 Global Productivity Initiative is a targeted program approved in January 2022 aimed at reallocating resources, driving operational efficiencies, and streamlining the supply chain to reduce structural costs. For the three months ended June 30, 2022, the initiative resulted in pretax charges of $8 million ($5 million after-tax). The company expects annualized pretax savings of $90-110 million once fully implemented, with an estimated total pretax charge of $200-240 million.

Colgate-Palmolive is implementing revenue growth management strategies, including additional pricing actions, to offset higher raw and packaging material and logistics costs. They are also continuing with their funding-the-growth initiatives and the 2022 Global Productivity Initiative to drive efficiencies. The company is also managing inventory levels to mitigate supply chain risks.