COLGATE-PALMOLIVE Q3 2024 $CL (-1.99%)

Financial Performance:

Colgate-Palmolive reported sales growth of 2.4% in the third quarter of 2024, while organic sales increased by 6.8%. This growth was driven by a balanced increase in both volume and pricing across all businesses, marking the second consecutive quarter of positive volume growth for the company.

Balance sheet analysis:

As of September 30, 2024, Colgate-Palmolive's total assets were $16.774 million, with total liabilities of $15.938 million. Shareholders' equity amounted to USD 435 million and shows a decrease compared to previous periods.

Income statement:

The company reported a 270 basis point increase in gross profit margin on a core basis, marking the sixth consecutive quarter of gross margin expansion. Operating profit for the quarter increased 4% year-over-year to $1.065 million.

Cash Flow Analysis:

Colgate-Palmolive generated record cash flow from operations with a net amount of $2.838 million for the first nine months of 2024. Free cash flow before dividends increased to $2.461 million, compared to $2.101 million in the same period last year.

Key figures and profitability:

Return on capital employed increased by over 600 basis points to 34.7%. The company also maintained a strong gross profit margin and increased advertising spend by 16% in the quarter.

Segment Analysis:

• North America: Recorded a -2.1% decline in net sales, but with a 1.2% increase in organic sales volume.
• Latin America: Achieved significant organic sales growth of 14.2 %.
• Europe: Net sales rose by 8.0%, while organic sales increased by 6.3%.
• Asia-Pacific and Africa/Eurasia: Also reported positive developments in net sales and organic sales.

Competitive analysis:

Colgate-Palmolive maintained its leading position in the global toothpaste market with a market share of 41.0% in 2024 year to date. Through increased advertising and innovation, the focus remains on market penetration and strengthening brand awareness.

Forecasts and management comments:

The company has updated its forecasts for 2024 and expects sales growth of 3% to 5% and organic sales growth of 7% to 8%. Both the gross profit margin and investment in advertising are expected to increase and double-digit growth in GAAP earnings per share is anticipated.

Risks and opportunities:

Challenges exist due to moderate increases in raw material and packaging costs, mainly due to exchange rate effects. However, strong cost-saving initiatives should largely offset these burdens.

Summary and strategic implications:

Colgate-Palmolive's solid performance in Q3 2024, with robust organic sales growth and improved profit margins, confirms the effectiveness of its strategic actions. The focus on innovation, brand building and operational efficiency positions the company well for sustainable growth. Nevertheless, it must successfully overcome external challenges such as exchange rate and raw material cost increases in order to maintain its competitiveness and achieve its updated financial targets. Hot for me to keep watching and hope that the share price falls at some point.

Positive highlights

• Strong organic sales growth: Colgate-Palmolive delivered strong organic sales growth of 6.8% in the third quarter of 2024, driven by balanced volume and price increases across all business units
• Gross profit margin expansion: Core gross profit margin increased by 270 basis points, marking the sixth consecutive quarter of margin improvement
• Market leadership: Colgate-Palmolive defended its leading position in the global toothpaste market with a market share of 41.6% year to date.
• Strong operating cash flow: The company reported record cash flow from operations for the current year, generating a net amount of USD 2,838 million in the first nine months of 2024.
• Return on capital employed improved: Return on capital employed increased by more than 600 basis points to 34.7%, indicating increased operational efficiency.

Negative highlights

• Exchange rate effects: Sales growth was negatively impacted by mid-single-digit exchange rate effects, which weighed on the growth forecast for the full year.
• Decline in sales in North America: There was a decline in sales of -2.1% in North America, indicating challenges in this key market.
• Increased advertising costs: Advertising spend increased by 16%, which supports brand strength but also represents a significant increase in costs.
• Decrease in shareholders' equity: Shareholders' equity fell to USD 435 million, below previous periods, which could indicate potential financial stress or strategic investments that have not yet yielded returns.
• Pressure from raw material costs: The company is facing moderate increases in raw material and packaging costs, which could put pressure on margins if these costs are not managed effectively.