Colgate-Palmolive’s EM Growth Delivers Despite Macro Headwinds

by Trefis Team
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Despite a difficult economic climate and rising commodity costs, Colgate-Palmolive (NYSE:CL) continued to grow its top-line and bottom-line with an impressive mix of 5% global unit volume growth and 3.5% higher pricing for Q2. Global organic sales grew at 8%, which is the highest growth seen by the company in the last eight quarters.

The robust performance was led by double digit growth in the emerging markets despite a 6.5% negative impact from adverse currency exchange rates. With this, the oral care giant maintained its 2012 forecast of double digit earnings growth, but expects the adverse currency scenario to offset some of its earnings gains. Colgate-Palmolive competes with other leading personal care companies such as Procter & Gamble (NYSE:PG) and Unilever (NYSE:UL).

View our detailed analysis for Colgate-Palmolive

Robust Volume Growth Led By Latin America

The organic sales growth for Colgate-Palmolive was led by the emerging markets that grew at 13% last quarter compared to 2.5% observed in the developed markets. The strongest growth came from Latin America (30% of Colgate’s sales) where volumes grew 6.5%. Sales in Europe (20% of total sales) fell 1% due to 1.5% reduction in prices, but the price cuts helped the market share with 9.5% improvement in sales volume. North American (18% of total sales) sales rose 2% helped by 3% pricing, but was offset by a slight volume decline.

Excluding the divested businesses, global unit volume grew 5.5%. The Sanex acquisition contributed 1% to sales and volume growth. With this growth, Colgate also continued to expand its global market share in toothpaste to 45% (up 0.6 points), while its market share in manual toothbrushes rose to 32.8% (up 0.6 points).

The oral care giant also continued to improve its bottom-line, supported by higher pricing and cost savings from the company’s funding-the-growth initiatives, which more than offset the impact of the increases in raw and packaging material costs, increased advertising spend and a negative currency impact.

We are in the process of revising our $98 Trefis price estimate of Colgate-Palmolive stock.

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