Q4 2023 Earnings Summary
- Colgate-Palmolive is achieving strong market share gains in Oral Care globally, driven by successful innovation and increased advertising investment, which is expected to continue supporting growth in 2024. Noel Wallace highlighted that oral care was up double digits in the quarter, translating into strong market share growth, particularly in regions like Latin America, Europe, and Africa/Eurasia, with improved scanner data in the U.S.
- Hill's Pet Nutrition is poised for growth, with expectations of more balanced volume and pricing in 2024, and moderation of agricultural prices benefiting margins. The company is focusing on increasing household penetration, which was up roughly 10% in the U.S., their biggest and largest market.
- Strong volume growth and market share gains in Latin America, with positive category inflection and double-digit volume growth in key markets like Brazil and Mexico. This performance demonstrates Colgate's ability to lead in pricing and successfully see volume return, providing confidence for continued balanced growth in 2024.
- Colgate-Palmolive's guidance for 2024 indicates potential deceleration in both organic sales growth and EPS growth compared to strong results in 2023, raising concerns about slowing momentum.
- Weakness in China, particularly in the skin health category, could negatively impact the company's growth prospects, leading to cautious investment until market conditions improve.
- Exceptional productivity gains achieved in Q4 2023 may not be sustainable, and with expected modest inflation in certain raw materials like fish oil, future margins might face pressure.
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Argentina Devaluation Impact
Q: How will Argentina's devaluation affect your financials?
A: We have an experienced team managing Argentina's hyperinflationary environment, taking proactive measures to mitigate volatility. While not immune to devaluation, we'll see impacts unfold over the next quarters, more on the margin line than profit line. We'll continue to take pricing to offset transaction impacts and do not anticipate a major impact on our results from Argentina. -
Gross Margin Outlook
Q: Is gross margin strength sustainable into 2024?
A: We expect gross margin expansion in 2024, driven by pricing, cost moderation, and productivity. Pricing has been a big part of our gross margin expansion but will be more balanced going forward. Raw materials will remain inflationary but more benign, offering opportunity for margin improvement. -
Hill's Business Outlook
Q: What are your expectations for Hill's volume and pricing?
A: We'll see a more balanced volume and price as we move into 2024. Agricultural prices are beginning to moderate, which is good for costs. As pricing settles, we anticipate volume will return. With stabilizing costs and modest pricing, we'll continue to expand margins in Hill's portfolio. -
China Sales Performance
Q: How did your business perform in China?
A: We're seeing a slowdown in China, with our business down low to mid-single digits, in line with category declines. On the skin health side, categories declined more acutely. Long-term market fundamentals remain intact, and we're building share. We'll be prudent on investments until categories recover. -
North America Innovation
Q: What are your plans for innovation in North America?
A: We have a strong innovation pipeline across all categories. We're accelerating advertising to support our businesses strategically. We're in a better place to support categories that had declining advertising. With moderated pricing and thoughtful promotions, we aim to drive market share growth in 2024. -
Latin America Volume Growth
Q: Will Latin America's strong volume growth continue?
A: We anticipate balanced growth as categories inflect positively. Volume growth has generated good market share gains. In key markets like Brazil and Mexico, we've seen double-digit volume growth. Our strategy of innovation across price points and increased advertising is driving recovery. -
Marketing Investments
Q: How are you approaching advertising and promotions?
A: We've accelerated advertising meaningfully over the last few years and will continue into 2024. The promotional environment is constructive, about 75–80% of pre-COVID levels. We'll be selective in promotions, aiming to drive healthy volume growth through increased advertising. -
Raw Material Inflation
Q: What's the outlook for raw material costs?
A: We expect modest inflation in 2024. Some specialty products like fish oil have increased significantly. Commodities remain elevated versus pre-COVID levels, but we may see some benefit. We'll drive productivity across all areas to support margin expansion. -
India Market Performance
Q: How is your business performing in India?
A: We're excited and bullish on India, with 9% organic growth and sequentially better volume. We expect the rural segment's vitality to boost volume. We have strong innovation planned around our core businesses. The team is expanding distribution to capitalize on our investment strategy. -
Europe Pricing Strategy
Q: Will you continue taking pricing in Europe?
A: We've learned much about pricing in Europe, working closely with retail partners. Significant inflation over recent quarters helped in taking more pricing. As inflation declines, we'll see a more balanced view of pricing and volume. We believe we have the tools to accelerate category growth and margin expansion.