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Colgate-Palmolive Company (NYSE:CL) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.
Double-Digit EPS Growth Guidance
Dara Mohsenian – Morgan Stanley: So, Ian, it sounds like Venezuela clearly had some massive sales and profit declines in the quarter given the impact you quantified on the corporate results. Can you give us more detail on exactly what’s occurring there, how long you think those issues will linger? Then also separately on the same subject, can you discuss your ability to hit your double-digit EPS growth guidance in 2013 if there is the devaluation in Venezuela and how managing through that situation might be different than past devaluations just given the price controls in place?
Ian M. Cook – Chairman, President and CEO: Clearly, questions on Venezuela given what we have already said are entirely appropriate and I will answer it in a moment, but I do want to underscore what Bina said when you think about our Company in total. We delivered at the low end of our organic sales for the year 6%. We delivered 8% dollar EPS growth year-on-year absorbing a 6% headwind from foreign exchange which means that we delivered our currency neutral earnings per share growth and we expanded our gross margin at the low end of our expectations given Venezuela, and more importantly, we believe the strategic initiatives that we have been deploying for several years continue to be effective. We have a global growth and efficiency program now in place behind a very strong innovation stream to continue to grow our business going forward. But yes, indeed, in the fourth quarter after our last call and based on the uncertainty between elections and inauguration, we did see a slowdown in our Venezuelan business, as you say, partly due to uncertainty at retail level and partly due to the slowdown in our factory. As Bina said, our global organic sales would have been up 150 basis points if it were not for that’ indeed our emerging markets sales would have been up some 300 points from the 6% you saw in the results. But I can tell you that after considerable dialog and collaboration with our workforce, with support from local government ministries, we entered this year with our operations in Venezuela basically back to historical levels and our top line progress has bounced back to the levels the pre the event and consistent with our thinking about Venezuela for this year. Now, as we discussed on the last call when I said that a significant devaluation (incident) in Venezuela, along with price controls would weigh heavily on our results, we were quite straightforward in our release in saying that the double-digit in dollar terms guidance was absent a macroeconomic devaluation in Venezuela, and that continues to be our view. Now, clearly, there are many different scenarios there, and in some ways it’s not just the management of the devaluation, which as I had said before, would take just over $0.5 billion of monetary assets there and reduce them by whatever the devaluation level is, but the effect is potentially larger in terms of what does happen in pricing, and what may happen in terms of social or rather macroeconomic actions. Our view on that as it was the last time, and we have many years in Latin America and other parts of the world experiencing these kinds of things, is that we would, as we were before, be very prompt and fulsome in becoming public in terms of how we would react to the devaluation and whatever comes with it should that time come. Now, while that is out there, you know well that in terms of the way our business is being managed in Venezuela, we have made the business much more simple, we are focusing on our SKUs, we are making cash decisions wisely, so we are managing responsibly, understanding that we are in businesses and geographies for the long-term. So, that would be I think a confidence in the overall Company. I have confidence in our ability to manage Venezuela. A statement of what we went through in the fourth quarter has corrected in January and that we will deal with any macroeconomic event in Venezuela swiftly and advice people accordingly.
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