Colgate hit by separation of Venezuela business and currency headwinds

01-May-2016 - Last updated on 02-May-2016 at 14:39 GMT

Colgate-Palmolive revealed a significant fall in its first quarter results, but despite the downwards trend, a healthy increase in unit volumes point to a healthier underlying performance.

The company said the revenues in the first quarter fell by 7.5% to reach $3.76bn a figure that was impacted by 8.0% from negative currency translations, while costs from the deconsolidation of the Venezuelan business also had a significant impact on restructuring costs for the quarter.

On the positive side, unit volumes increased by 3.5% while pricing increased by 1.5%, which contributed to a 5.0% growth in organic sales.

The increase in overall costs did impact the bottom line though, with net income falling to $533m, compared to $542m in the corresponding period last year.

Organic sales increase “encouraging”

Colgate-Palmolive CEO Ian Cook said he was encouraged by the 4.0% increase in organic sales, stressing that gains had been made thanks to its continued leadership in the toothpaste category, while gains were also noted in the global market for manual toothbrushes.

“As we look ahead, macroeconomic conditions and foreign exchange volatility remain challenging. Despite that, we anticipate another year of solid organic sales growth in 2016, driven by a full new product pipeline across all categories and geographies,” Cook said.

“Based on current spot rates, we continue to plan for a year of gross margin expansion, and now expect earnings per share to be flat with 2015 on a dollar basis, excluding charges related to the 2012 Restructuring Program.”

Big organic gains in Latin America

Looking at the results on a regional basis, there were some huge differences, especially as many of the developing markets were particularly hard hit by negative currency translations against a strong US dollar.

This was most evident in the company’s biggest market, Latin America, where net sales decreased 22% to $848m. However, the figure was impacted by a 19% negative impact from currency translations, while volume gains in Brazil, Mexico and Colombia, combined with a 7% increase in pricing, meant that organic sales were up 9.5%.

For Latin America personal care sales it was noted that Softsoap Pure foaming hand soap, Softsoap Luminous Oils and Irish Spring Signature For Men body washes were behind volume gains.

In the company’s second biggest market, North America, sales increase by 1.5% to $800m, thanks to a volume increase of 4%. A 0.5% negative impact from currency exchange meant that organic sales increased by 2%.

In North American Personal care gains it was noted that Protex Pro-Hidrata shower gel, bar soap and liquid hand soap and Lady Speed Stick and Speed Stick Clinical deodorants were behind volume gains.