The FINANCIAL -- Colgate-Palmolive Company reported worldwide Net sales
of $4,267 million in second quarter 2012, an increase of 2.0% versus
second quarter 2011.
Global unit volume grew 5.0%, pricing increased 3.5% and foreign exchange was negative 6.5%. Excluding divested businesses, global unit volume grew 5.5%. The Sanex acquisition contributed 1.0% to sales and volume growth. Organic sales (Net sales excluding foreign exchange, acquisitions and divestments) grew 8.0%.
As Colgate-Palmolive Company reported, net income and Diluted earnings per share in second quarter 2012 were $627 million and $1.30, respectively. Net income in the quarter included $14 million of aftertax charges ($0.03 per diluted share) resulting from the implementation of the previously disclosed business realignment and other cost-saving initiatives and costs associated with the sale of land in Mexico. Net income and Diluted earnings per share in second quarter 2011 were $622 million and $1.26, respectively.
Excluding the above noted items, Net income in second quarter 2012 was $641 million, an increase of 3% versus second quarter 2011, and Diluted earnings per share in second quarter 2012 was $1.33, an increase of 6% versus second quarter 2011.
Gross profit margin was 57.7% in second quarter 2012, an increase of 30 basis points versus the year ago quarter. Excluding the above noted items, gross profit margin was 57.9% in second quarter 2012, an increase of 50 basis points versus the year ago quarter, as higher pricing and cost savings from the Company's funding-the-growth initiatives more than offset the impact of increases in raw and packaging material costs and negative foreign exchange transaction costs.
Selling, general and administrative expenses were 34.3% and 34.0% of Net sales in second quarter 2012 and 2011, respectively. Excluding costs associated with the business realignment initiatives, Selling, general and administrative expenses were 34.2% of Net sales in second quarter 2012, driven entirely by increases in advertising. Worldwide advertising spending increased 4% versus the year ago quarter to $457 million.
Operating profit increased 1% to $982 million in second quarter 2012 compared to $968 million in second quarter 2011. Excluding costs associated with the business realignment initiatives and the sale of land in Mexico noted above, operating profit increased 3% to $1,001 million.
Net cash provided by operations year to date was $1,193 million compared to $1,154 million in the comparable 2011 period. Net cash provided by operations for 2012 includes higher income tax payments and the payment for the previously disclosed competition law matter in France related to a divested detergent business. Working capital as a percentage of Net sales was 2.8%, up 30 basis points versus the year ago period. This increase was primarily due to the timing of income tax payments. Both accounts receivable days sales outstanding and inventory days coverage improved versus the year ago period.
Ian Cook, Chairman, President and Chief Executive Officer, commented on the results and outlook excluding the 2012 items noted above, "We are very pleased that our top and bottom line growth momentum continued this quarter, with net sales, gross profit, operating profit, net income and diluted earnings per share all increasing versus year ago.
"The excellent 8.0% organic sales growth, which was the largest increase we have seen in eight quarters, was driven by unit volume gains and higher pricing on a worldwide basis. The robust growth was led by the emerging markets where organic sales grew 13.0% in the quarter, and we are encouraged by the 2.5% organic sales growth in the developed markets.
"Pleasingly, the higher pricing combined with the benefits of our cost-savings programs in all areas of the business allowed for higher advertising spending behind Colgate's brands worldwide, both in absolute dollars and as a percent to sales.
"Colgate's global market shares in toothpaste and manual toothbrushes are both at record highs year to date. Colgate's share of the global toothpaste market strengthened to 45.0% year to date, up 0.6 share points versus year ago. Our global leadership in manual toothbrushes also strengthened during the quarter with Colgate's global market share in that category reaching 32.8% year to date, up 0.6 share points versus year ago.
"Looking ahead, we continue to be sharply focused on our aggressive funding-the-growth programs and our strategic worldwide pricing initiatives. We anticipate that the combined benefits from those programs will help us offset the transaction impact of negative foreign exchange and achieve gross margin expansion in 2012, allowing for even higher levels of advertising support behind a full pipeline of new products planned for launch in the balance of the year.
"Overall, we continue to expect diluted earnings per share for the year to grow at a double-digit rate, on a currency neutral basis. If average exchange rates in the balance of the year were to remain at current spot rates, currency translation would decrease full year Latin America Net sales rose 3.0% during second quarter 2012 with unit volume increasing 6.5%. Excluding the divested detergent business in Colombia, Latin America unit volume grew 9.5%. Volume gains were led by Brazil, Venezuela, Mexico and Colombia. Higher pricing added 6.0% and foreign exchange was negative 9.5%. Organic sales for Latin America increased 15.5% during the quarter.
Operating profit in Latin America increased 2% in the second quarter of 2012 to $367 million, while as a percentage of Net sales it decreased to 28.9%. The decrease in Operating profit as a percentage of Net sales was due to a decrease in Gross profit and higher advertising, both as a percentage of Net sales. This decrease in Gross profit was due to higher raw and packaging material costs, negative foreign exchange transaction costs and higher costs due to inflation in Venezuela, which were partially offset by higher pricing and cost savings from the Company's funding-the-growth initiatives.
Colgate's strong leadership in oral care throughout Latin America continued during the quarter with toothpaste market share gains year to date led by Mexico, Brazil, Central America, Chile and the Dominican Republic. Strong sales of Colgate Luminous White, Colgate Sensitive Pro-Relief Multi-Protection, Colgate Total Pro Gum Health and Colgate Triple Action Extra Whitening toothpastes contributed to growth throughout the region. Colgate strengthened its leadership of the manual toothbrush market throughout the region, driven by strong sales of Colgate 360° Surround, Colgate 360° Luminous White and Colgate Triple Action manual toothbrushes. In mouthwash, Colgate's year-to-date market share is at a record high in the region with gains driven by Colgate Luminous White mouthwash and the relaunch of Colgate Plax mouthwash.
Products in other categories contributing to market share gains included Palmolive Naturals Relaxing Softness Cream and Lavender and Protex Advanced Clean bar soaps, Lady Speed Stick pH Active and Speed Stick X5 Multi-Protect deodorants, Suavitel Good-Bye Ironing fabric conditioner and Axion with Ajax dish liquid. Europe/South Pacific Net sales decreased 1.0% during second quarter 2012. Unit volume increased 9.5% with 1.5% lower pricing and 9.0% negative foreign exchange. The Sanex acquisition contributed 6.5% to Net sales and volume growth for the region. Volume gains were led by France, Iberia, Australia, the United Kingdom and the GABA business. Organic sales for Europe/South Pacific increased 1.5%.
Operating profit in Europe/South Pacific increased 5% in the second quarter of 2012 to $179 million, or 21.1% of Net sales. The increase in Operating profit was due to an increase in Gross profit and a decrease in Selling, general and administrative expenses, both as a percentage of Net sales. The increase in Gross profit was driven by savings from the Company's funding-the-growth initiatives, which were partially offset by lower pricing and higher raw and packaging material costs. The decrease in Selling, general and administrative expenses was driven by lower overhead expenses.
Colgate strengthened its oral care leadership in the Europe/South Pacific region with toothpaste share gains across the region led by Germany, Sweden, Spain, Denmark, Poland, Austria, Norway and Portugal. Successful premium products driving share gains include Colgate Sensitive Pro-Relief Enamel Repair, elmex Sensitive Professional plus Gentle Whitening, Colgate Total Pro Gum Health, Colgate Max White Shine and Colgate Max White One Active toothpastes. In the manual toothbrush category, Colgate 360° Surround and Colgate Max White manual toothbrushes contributed to growth throughout the region.
Recent premium innovations contributing to strength in other product categories include Colgate Total Pro Gum Health and Colgate Sensitive Pro-Relief mouthwashes, Sanex Dermo Repair shower gel, Palmolive Ayurituel shower gels and liquid hand soaps inspired by ancient Indian Ayurvedic rituals and ingredients known traditionally to help restore the wellbeing of body and mind and Ajax Pure Home liquid cleaner. Greater Asia/Africa Net sales and unit volume increased 5.0% and 7.5%, respectively, during second quarter 2012. Volume gains were led by India, Russia, South Africa, the Philippines and Thailand. The Sanex acquisition contributed 0.5% to Net sales and volume growth for the region. Pricing increased 5.0% and foreign exchange was negative 7.5%. Organic sales for Greater Asia/Africa increased 12.0%.
Operating profit in Greater Asia/Africa increased 11% in the second quarter of 2012 to $220 million, or 25.6% of Net sales. This increase was a result of an increase in Gross profit as a percentage of Net sales. This increase in Gross profit was due to higher pricing and cost savings from the Company's funding-the-growth initiatives, partially offset by higher raw and packaging material costs.
Colgate continued its toothpaste leadership in Greater Asia, driven by market share gains in India, China, Malaysia, Singapore and Hong Kong. Successful new products including Colgate Total Pro Gum Health, Darlie Expert White, Colgate Sensitive Pro-Relief Enamel Protect, Colgate Sensitive Pro-Relief Multi-Protection and Colgate Max Fresh Ice toothpastes contributed to growth throughout the region.
Successful products contributing to growth in other categories in the region include Colgate 360° Surround and Colgate Slim Soft manual toothbrushes, Colgate Plax Fresh Tea and Colgate Plax Fruity Mint mouthwashes and Protex for Men and Palmolive Thermal Spa Coco-Jojoba shower gels. Hill's Net sales decreased 1.0% during second quarter 2012. Unit volume decreased 3.0%, pricing increased 5.0% and foreign exchange was negative 3.0%. Volume gains in France were more than offset by volume declines in the U.S. Hill's organic sales increased 2.0% during the quarter.
Hill's Operating profit increased 4% in the second quarter of 2012 to $145 million, or 27.3% of Net sales. This increase in Operating profit as a percentage of Net sales was due to an increase in Gross profit, which was partially offset by an increase in Selling, general and administrative expenses, both as a percentage of Net sales. This increase in Gross profit was driven by higher pricing and cost savings from the Company's funding-the-growth initiatives, which were partially offset by higher raw and packaging material costs. This increase in Selling, general and administrative expenses was primarily due to higher advertising expenses.
Recent new product introductions contributing to sales in the U.S. include Science Diet Ideal Balance canine and feline, which combine natural ingredients with the power of advanced nutrition in one balanced package, Science Diet Savory Stew canine, Science Diet Senior 11+ Age Defying feline, Prescription Diet y/d Feline Thyroid Health, Science Diet Tender Dinners feline and Prescription Diet i/d Low Fat GI Restore Canine, specially formulated to help manage gastrointestinal disorders.
New pet food products contributing to international sales include reformulated Prescription Diet r/d Canine and Feline, the relaunch of Prescription Diet c/d Multicare Feline Bladder Health with evidence of improved efficacy and taste, Science Diet Mature Adult Light Canine and Feline, Prescription Diet y/d Feline Thyroid Health, reformulated Science Plan Adult and Mature Adult Canine and Feline with improved taste and the relaunch of Nature's Best with upgraded ingredients and package design. diluted earnings per share growth by approximately 6-7%."