Global Growth And Restructuring Will Boost Colgate-Palmolive’s Results

by Trefis Team
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Colgate-Palmolive (NYSE:CL) will release first quarter results on April 25, 2013, after delivering a stupendous performance in 2012. The net income of the company in Q4 2012 registered 6% growth over the same period in 2011, supported by cost savings due to the restructuring program and higher prices. You can see a complete analysis of the 2012 results here.

In the first quarter earnings, we expect the company to maintain its profit margins on the back of new product launches in developed markets and a shift in product mix towards premium products in the emerging markets. Launched last year, the restructuring program will impact the bottom line, as the cost savings of about $40 million are expected to accrue towards the end of this year. The company will maintain its strong position in the global oral care market as it has launched new and improved products in the oral care segment. The company’s gross profit margin was 58.4% in Q4 2012, compared to 57.4% in the year ago quarter, and we expect it to deliver similar margins in the first quarter results.

See our full analysis for Colgate-Palmolive

Global Growth And Restructuring Program To Impact Bottom Line In Q1

In the fourth quarter of 2012, Colgate-Palmolive launched the Global Growth and Efficiency Program which aims at reducing the structural costs in order to improve gross and operating profit, standardizing processes to improve decision making process and enhance the company’s market share positions worldwide. Over the course of the four year program, the company will spend about $1.1 billion pre-tax, which would result in expected savings of about $400 million annually, from the fourth year onwards.

We estimate the company to spend about $75 million on the restructuring program during the first quarter, out of the total expected spending of about $300 million for the entire year, which will enable it to save about $40 million during the second half 2013.

Innovation To Drive Growth

The company has invested consistently in research and development to launch new product categories and variants. New product activity is especially important in developed and slow growing markets like Europe/South Pacific to increase revenues. In Q1 2013, the company has launched a number of products in different regions which will help it to add to its top line.

In North America it has launched Colgate Total Zx ProShield Plus Sensitivity, which helps protect against sensitivity, prevent cavities, fortifies enamel and fights plaque and germs. The company has also introduced Colgate Optic White Dual Action toothpaste, which contains sodium acid pyrophosphate in addition to hydrogen peroxide that whitens and shines teeth. In addition to this, Colgate-Palmolive also launched an all new line of antibacterial hand soap under the Softsoap brand in their personal care segment. Similarly, in Europe/South Pacific region it has launched Colgate Total Pro-Interdental, Colgate Plax Complete Care, and has changed the packaging of Elmex and Meridol toothpaste, which were a part of the GABA acquisition and have strong market shares in the Germanic countries.

Despite slowing growth in the Chinese economy, the company has been able to register a strong growth with the toothpaste market share up by 1.2%, while the mouthwash market share is up by 2.4% in 2012. To help boost market share, the company has has come up with 360° Pro Gum Health toothpaste along with an integrated marketing campaign targeted at gum care for this market.

We will update our $106 price estimate for Colgate-Palmolive based on the earnings results.

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