Toothpaste maker Colgate-Palmolive has reported third-quarter profits down on higher advertising spend, despite net sales rising 3% to $3,974m with global unit volume up 1.5%.
The company said selling, general and administrative expenses were 36.0% of net sales in third quarter 2017 versus 34.2% in third quarter 2016.
“Selling, general and administrative expenses increased by 140 basis points to 35.4% of net sales in third quarter 2017 as a result of increased advertising investment. Worldwide advertising investment increased 19% to $405m versus $339m in the year ago quarter,” it said.
Highlights 2017 (2016)
- Net sales $3,974m ($3,867m)
- Cost of sales $1,591m ($1,543m)
- Gross profit $2,383m ($2,324m)
- Gross profit margin 60.0% (60.1%)
- Selling, general and administrative expenses $1,429m ($1,322)
- Operating profit $927m ($1,071 )
- Operating profit margin 23.3% (27.7%)
- Income before income taxes $900m ($1,046)
- Net income attributable to Colgate-Palmolive Company $607m ($702m)
Earnings per common share
- Basic $ 0.69 ($ 0.79)
- Diluted $0.68 ($0.78)
The company claimed its Global Growth and Efficiency Program had eaten into profits. “Gross profit margin was 60.0% in third quarter 2017 versus 60.1% in third quarter 2016. Excluding charges resulting from the Global Growth and Efficiency Program in both periods, gross profit margin was 60.4% in third quarter 2017, even with the year ago quarter,” it said.
It also said cost savings from the company's funding-the-growth initiatives were offset by higher raw and packaging material costs.
Operating profit fell more than 13% to $927m. But the company said Q3 21016 profits included a gain on the sale of land in Mexico and a charge for a previously disclosed litigation matter. Excluding these operating profit was $985m in third quarter 2017, a decrease of 4% versus third quarter 2016.
Advertising accelerating sales
Ian Cook, chairman, president and chief executive officer, said: "We are pleased that our stepped up advertising investment is indeed contributing to the acceleration of top-line growth worldwide.
“Net sales in the third quarter increased 3.0% and organic sales grew 1.5%. This growth was driven by healthy volume increases across Latin America, North America and Europe.
"Advertising investment increased both absolutely and as a percent to sales versus third quarter 2016 across every operating division. This increased level of spending should continue over the balance of the year in support of new products, our base businesses and longer-term consumption-building activities.
"Colgate's leadership of the global toothpaste market continued during the quarter with our global market share now at 43.5% year to date. Our global leadership in manual toothbrushes also continued with Colgate's global market share in that category now at 32.6% year to date."