Colgate Palmolive Sales Fall due to Higher Costs

Colgate-Palmolive Co. (NYSE: CL) forecast a surprise drop in 2019 profit on Friday, blaming higher raw material costs and a stronger dollar, sending its shares down 3%.

Like other consumer goods companies, the world’s largest toothpaste maker has struggled with rising commodity and transportation costs, forcing it to raise prices in regions like Latin America, where it makes the bulk of its revenue.

Higher prices hurt demand, especially in Brazil and Argentina, where Colgate faces stiff competition from Procter & Gamble Co.’s (NYSE: PG) Oral B and Unilever NV’s (NYSE: UN) Close Up.

To keep its market share, the Company said it would spend more on advertising in fiscal 2019, but expects that, along with higher raw materials costs and fluctuating foreign exchange rates, to lead to a mid-single digit decline in earnings per share for the year.

Analysts were expecting a 2.4% rise in earnings per share for this year, according to data from Refinitiv.

“Our outlook reflects an increase in raw material prices, an increase in our tax rate year-over-year and the uncertainty surrounding the global economy, exchange rates and pricing,” Chief Executive Officer Ian Cook said in a statement.

Even in North America, where Colgate recorded strong fourth quarter sales, economists have predicted that a consumer boom could be fading due to the U.S. government shutdown, higher interest rates, and trade tensions. The Company, with a 42% share of the global toothpaste market, expects net sales for 2019 to be flat to up low-single digits, compared with analysts’ expectations of a 0.1% fall.

For the fourth quarter, Colgate reported an adjusted net income of USD 638 million, down 3% from a year earlier. On a per-share basis, it earned 74 cents, beating analysts’ estimates of 73 cents.

Net sales in three months ended Dec. 31 fell 2.1% to USD 3.81 Billion, but beat estimates of USD 3.77 Billion, according to Refintiv. Shares of the Company were set to open down 2.7% to USD 60.50 in early trading, adding to a 19% decline its stock has seen over the past year.

1 Comment
  1. George M. 3 months ago
    Reply

    I did notice my toothpaste cost has been higher recently.

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