Colgate-Palmolive Co CL
Q2 2011 Earnings Call Transcript

Transcript Call Date 07/28/2011

Operator: Good day, and welcome to today's Colgate-Palmolive Company Second Quarter 2011 Earnings Conference Call. Today's call is being recorded and is being simulcast live at Just as a reminder, there might be a slight delay before the question-and-answer session begins due to the web simulcast.

At this time, for opening remarks, I would like to turn the call over to the Senior Vice President of Investor Relations, Ms. Bina Thompson. Please go ahead, Ma'am.

Bina H. Thompson - SVP, IR: Thank you, Elizabeth. Good morning, everybody, and welcome to our second quarter 2011 conference call. With me this morning are Ian Cook, Chairman, President and CEO; Dennis Hickey, CFO; Victoria Dolan, Corporate Controller; and Elaine Paik, Treasurer.

This conference call will include forward-looking statements, and these statements are made on the basis of our views and assumptions as of this time and are not guarantees of future performance. Actual events or results may differ materially from these statements. For information about certain factors that could cause such differences, investors should consult our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission and available on our website, including the information set forth under the captions Risk Factors and Cautionary Statement on forward-looking statements.

We will discuss organic sales growth, excluding foreign exchange, acquisitions, and divestitures. A full reconciliation with the corresponding GAAP measures is included in the press release and is posted on the Investor Relations section of our website at We're pleased with our results for the second quarter, which exhibit acceleration from the first quarter across the lines of the P&L, higher volume and organic sales growth coupled with a greater increase in advertising, operating profit, and EPS growth.

Looking specifically at organic sales growth, we see particular momentum in our emerging markets, which as you know represent more than half of our sales worldwide. Organic sales growth in these markets was strong high-single-digit and was the highest quarterly growth in a year. Our longstanding presence, deep distribution, and leading market shares in this part of the world provide a strong balance to the continued macroeconomic challenges, which we and our competitors face in the more mature markets of North America and Europe. Given the continued rise in commodity costs worldwide, gross margin declined in the quarter, and as Ian said in the press release, we still expect gross margin to remain at first quarter levels for the full year as pricing will play a greater role in the second half of the year to offset cost increases and as we continue to realize accelerating savings from our funding the growth initiatives.

Additionally, we are beginning to see progress on our overhead line. Fixed cost within SG&A in the quarter declined by 30 basis points, which freed up money to invest in advertising, and as we've told you on previous calls we periodically undertake projects to further reduce fixed expenses and these initiatives are generating strong savings. Again as planned, advertising in the quarter was up absolutely and as a percent of sales in support of new product launches around the world. We expect even more new product activity in the second half here in the U.S. in particular and that will be backed by continued healthy increases in advertising. As previously announced, we closed on the acquisition of the Sanex business in the second quarter and expect that we will complete the divestment of our Colombian detergent brand tomorrow July 29th.

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