Colgate results continue to slide on currency headwinds

By Simon Pitman

- Last updated on GMT

Colgate results continue to slide on currency headwinds

Related tags Organic sales United states dollar Currency

Colgate-Palmolive has reported its fourth consecutive quarter of falling revenues as it continues to battle a strong US dollar against international currencies.

The company said that second quarter revenues came in at $4.07 billion, a fall of 6.5% compared to the same period last year, and a figure that was hard hit by a negative foreign currency exchange of 12.0%.

Like competitor Procter & Gamble, the company has attempted to offset the negative currency exchange with price increases that averaged 2.5%. To some extent this has worked, with volumes up 3.0% and organic sales up 5.5%.

The ongoing battle against currency headwinds

The underlying performance underlines the significant battle US-based personal care companies are currently facing, with current financial results for both Procter & Gamble, as well as Avon revealing the same story last week.

Net income was down from $622m in the corresponding period last year to $574m, a figure that was also impacted by an $85m aftertax charge related to the company’s 2012 restructuring program.

Excluding the charges, the company said that net income was down 5% to $639m, while the figure was also noted as being considerably more favorable on a currency neutral basis.

Regional performance

On a regional basis sales in North America, which account for 19% of revenues, increased by 1.5%, while organic sales were up 2.5%, reflecting foreign revenues outside of the US.

In Latin America, which is the company’s biggest business region accounting for 27% of total revenues, sales fell by 8.5%. This figure reflected a 9.0% increase in pricing against a negative currency exchange of 18.0%.

In Europe/South Pacific, which accounts for 18% of total business, sales fell 16.5%, while organic sales increased 2.0%. And in Asia, net sales increased 2%, while organic sales were up 5.0%.

Personal care brands

With respect to the company’s personal care brands, Sanex Advanced line of shower gels, deodorants, hand creams and body lotions, Palmolive Aroma Sensations shower gel performed well in Europe, whereas in Latin America Men’s Naturals Berries and Coconut Water bar soaps and Lady Speed Stick Powder Fresh and Speed Stick Xtreme Tech deodorants also did well.

In North America, the company noted that gains were seen in sales for the liquid hand soap and body wash categories.

CEO describes conditions as 'challenging'

Ian Cook, chairman and president of Colgate-Palmolive, described the macroeconomic conditions as ‘challenging’, but stressed the more positive performance with respect to the organic revenues.

“All operating divisions contributed to the 5.5% worldwide organic sales growth, led by emerging markets where organic sales grew a strong 7.5%, despite economic challenges in certain countries,” ​said Cook.

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

Given that the US dollar is expected to remain strong against foreign currencies, the company said that the impact of exchange rates is expected to continue to impact the business for the rest of the financial year.

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