Palmolive Had a Mixed Bag in 2010 CL
Colgate Palmolive Company (CL) posted fourth quarter earnings of $1.24 per share marginally outpacing the Zacks Consensus Estimate of $1.23 and prior year quarter earnings of $1.21 per share.
For fiscal 2010, the company reported earnings per share of $4.31. It lags behind the Zacks Consensus Estimate of $4.81 due to a one time non cash after adidas outlet tax charge of $271.0 million resulting from a required accounting change.
Global net sales fell 2.5% year over year to $3,978 million as pricing remained flat while unit volume rose 1%, countered by a negative foreign exchange impact of 3.5%. On an organic basis (excluding foreign exchange, acquisitions and divestitures), sales increased 1.0% in the quarter. Global net sales also fell short of the Zacks Consensus Revenue Estimate of $4,058 million.
For fiscal 2010, Global net sales increased by 1.5% to $15,564 million from the previous fiscal 2009. But it failed to surpass the Zacks Consensus Estimate of $15,647 million.
Gross profit decreased marginally by 3.0% to $2,350 million. Gross profit margin also declined by 40 basis points to 59.1% compared to the prior year quarter, due to adverse foreign exchange translations, higher material costs and higher promotional investments.
Gross profit for the year came in at $9,204 million compared with $9,008 million reported a year ago. Gross margin improved by 30 basis points to 59.1% compared to the previous year margin of 58.8%.
Colgate Palmolive notified that its share of the global toothpaste market has increased to 44.2% year to date, led by better performance across Brazil, China, India, Venezuela and the United Kingdom. Colgate market share in manual tooth brushes has increased to 31.6%.
Segment Discussion North America sales (18.0% of the total sales) declined 2.0% in the quarter, primarily due to 4.0% lower pricing, partially offset by a 1.5% unit volume growth and 0.5% favorable foreign exchange. On an organic basis, sales declin adidas outlet ed by 2.5%. Operating profit decreased by 8.0% due to increased promotional investments and higher material costs, partially offset by cost saving initiatives.
Latin Americasales (29.0% of the total sales) declined 7.5% during the quarter as unit volume declined by 1.5%. Volume gains in Mexico, Colombia, Argentina, Dominican Republic and Central America, were fully offset by a volume decline in Venezuela.
In addition, pricing contributed 5% to the top line, countered by a negative foreign exchange impact of 11.0%. On an organic basis, sales increased by 3.5%, whereas operating profit slipped 14% during the quarter.
Europe/South Pacific sales (20.0% of the total sales) dropped 7.0% as pricing was down 3.0% and foreign currency translation made a negative contribution of 4.0%. On an organic basis, sales fell 3.0%, whereas operating profit plunged 19% in the quarter.
Gr adidas outlet eater Asia/Africa sales (19.0% of the total sales) climbed 11.0%, with increase in volume by 9.0%, primarily led b adidas outlet y volume gains in India, the Greater China region, Philippines, Russia and South Africa. Pricing dropped marginally by 1.0% but foreign currency translation made a positive contribution of 3.0%. On an organic basis, sales grew 8.0%, whereas operating profit rose 11.0%.
Hill sales (14.0% of the total sales) tumbled 2.0%. Unit volume fell 1.0%, due to volume declines across Russia, Germany and the United Kingdom. On an organic basis, sales slipped 2.0% and operating profit decreased 1%.
Other Financial Details Colgate Palmolive ended the quarter with cash and cash equivalents of $490.0 million, total debt of $3,424 million and shareholders equity of $2,675 million. Year to date, net cash provided by operating activities came in at $3,211.0 million.
Colgate Palmolive, which competes with Procter Gamble Company (PG) and Church Dwight Company Inc. (CHD), maintains a Zacks 3 Rank, which translates into a short term Hold” recommendation. However, our long term recommendation for the stock remains “Neutral”.