01—Abstract
Summary
Summary of the 8-K filed October 25, 2024. Cited figures are marked; the original filing is the authoritative source.
Colgate-Palmolive reported third-quarter 2024 results on October 25, 2024 that beat its own expectations on both top and bottom line.
Net sales rose 2.4% to $5,033 milliona, while organic sales grew a stronger 6.8% (against an 8.8% organic gain in the prior-year quarter), with volume up 3.7% and pricing contributing 3.1%. Foreign exchange was a 4.4-point headwind. GAAP diluted EPS rose 5% to $0.90, and Base Business (non-GAAP) EPS rose 6% to $0.91.
GAAP gross margin expanded 260 basis points to 61.1%, marking the sixth consecutive quarter of gross margin expansion, and advertising spending rose 16% to $694 millionb. Hill's Pet Nutrition was the standout division, with operating profit up 28% and margin up 390 basis points, while North America operating profit fell 9%. Management raised its full-year 2024 guidance.
Net sales growth is now expected at 3% to 5% (up from 2% to 5%), including a mid-single-digit negative FX impact; organic sales growth is now 7% to 8% (up from 6% to 8%); and Base Business EPS growth is now 10% to 11% (up from 8% to 11%). Year-to-date operating cash flow was $2,838 millionc, and free cash flow before dividends was $2,461 million, up from $2,101 million a year earlier. Total debt declined to $8,436 million.
Separately, under Item 8.01, the company realigned its skin health business, moving it from the Europe segment into North America effective July 1, 2024, following management changes. Historical geographic segment data has been recast accordingly.
The company states this has no effect on consolidated results or financial position and is not a restatement. Investors comparing segment trends should use the recast figures, since North America and Europe results are not directly comparable to previously reported numbers.
02—Key points
Key Highlights
- Q3 2024 net sales rose 2.4% to $5,033M; organic sales grew 6.8%, with positive volume growth in every operating division for the second straight quarter.
- GAAP diluted EPS increased 5% to $0.90; Base Business EPS increased 6% to $0.91, with GAAP gross margin up 260 bps to 61.1%.
- Full-year 2024 guidance raised: net sales growth now 3%-5%, organic sales growth 7%-8%, and Base Business EPS growth 10%-11%.
- Hill's Pet Nutrition led results with 6.3% net sales growth and a 28% increase in operating profit, while North America operating profit fell 9%.
- Advertising spend rose 16% in Q3 to $694M, and management expects continued strong investment through year-end.
- Year-to-date operating cash flow reached $2,838M, with free cash flow before dividends of $2,461M, up roughly 17% year over year.
- Skin health business moved from Europe to North America segment effective July 1, 2024; historical segment data was recast with no impact on consolidated results.
03—Questions
Frequently Asked Questions
How did Colgate perform in the third quarter of 2024?
Colgate reported net sales of $5,033 million, up 2.4%, and organic sales growth of 6.8%. GAAP EPS was $0.90, up 5%, and Base Business EPS was $0.91, up 6%. Gross margin expanded 260 basis points to 61.1%. Foreign exchange reduced reported sales growth by about 4.4 points.
Did Colgate change its full-year 2024 outlook?
Yes, the company raised its guidance. Net sales growth is now expected at 3%-5% (previously 2%-5%), organic sales growth at 7%-8% (previously 6%-8%), and Base Business EPS growth at 10%-11% (previously 8%-11%). Management still expects gross margin expansion and increased advertising investment, and it now expects GAAP double-digit EPS growth.
Why is the skin health segment reorganization significant?
The reorganization moved skin health businesses from the Europe segment into North America, effective July 1, 2024, following management changes. This changes how segment results are reported going forward, so year-over-year comparisons for North America and Europe are affected. The company says there is no impact on consolidated results, and the recast historical data is not a restatement. The recast figures in Exhibit 99.2 should be used for trend analysis.
Which divisions drove performance, and which lagged?
Hill's was the strongest, with net sales up 6.3% and operating profit up 28%, with margin expanding 390 basis points. Latin America's organic sales grew 14.2% but reported sales fell 3.2% due to a 17.4-point FX headwind. Europe's operating profit rose 10%. North America was weakest, with net sales down 2.1% and operating profit down 9%, pressured by pricing declines of 3.2%.
How strong is Colgate's cash generation and balance sheet?
Net cash from operations for the first nine months of 2024 was $2,838 million, up from $2,609 million, and free cash flow before dividends rose to $2,461 million from $2,101 million. Total debt fell to $8,436 million from $8,549 million at year-end 2023, and net debt (debt less cash and marketable securities) decreased to $6,942 million. Dividends paid and share repurchases increased during the period.
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