Colgate-Palmolive Company Q4 FY2025 earnings call

• 2025 saw stronger-than-expected Q4 results despite volatility. Delivered growth in various metrics despite challenges. • Completed 2025 strategy with $5B in sales and transitioned to 2030 strategy. • Key areas of 2030 strategy: strong global brands with global reach; accelerating investment in new innovation models with science-based innovation across price tiers; harnessing omnichannel demand generation; continuing to invest in scale capabilities, digital, data, analytics, and AI; developing a high-impact culture. • 2026 marks the start of the new strategy with optimism despite a volatile environment, with emerging markets performing well, Q4 momentum, and stabilization of category growth but low rates and uncertainty.

In 2025, Colgate-Palmolive achieved organic sales, net sales, gross profit, base business earnings per share, and free cash flow growth despite lower-than-expected category growth, higher raw material inflation, and tariff impacts. In Q4, organic sales grew across all 4 categories, with sequential improvement in most divisions except North America, and modest volume growth excluding the Prime 100 acquisition and private label exit. Emerging markets performed ahead of developed markets, and Hill's business showed strong volume growth excluding private label.

• Provided a wide range for 2026 net sales and organic sales growth guidance, incorporating various levels of category growth. If categories worsen, it's at the low end of the range; if stable, mid-range; if improve, higher end. • FX is a low single-digit benefit to revenue in 2026, focused on the first half of the year, and used as flexibility in the business model for investing back in the business and contributing to the bottom line.

• Category growth rates remain low, leading to higher promotion and competitive activity. • Foreign exchange has been a negative impact for 8 of the past 10 years and is volatile. • Geopolitical environment, including tariffs, is volatile, particularly in Latin America. • U.S. market remains sluggish with uncertainty about a big rebound.

Q: So nice sequential progress on organic sales growth in Q4. 1% to 4% guidance for '26 is a wide range, understandable in this environment. But Noel, I'd just love to get your perspective on category growth within that guidance as you look at key regions around the world...

A: Noel Wallace responded discussing momentum exiting 2025, underlying organic growth excluding private label, stabilized but low category growth rates, month-to-month swings in the U.S., regional performances including Europe, Latin America, Asia, Hill's business, and Canada's Buy Canadian impact.

Q: I wanted to follow up on Hill's. I wanted to ask about Hill's, and you kind of alluded to this now a strong quarter on the volume front despite a pretty tough category backdrop...

A: Noel Wallace talked about Hill's strong quarter with volume growth excluding private label, broad-based growth, therapeutic as a growth driver, science-based innovation delivering results, category challenges but premiumization and supply chain benefits.

Q: You had a tremendous amount of success turning around and then growing the Colgate brand in China. I'm wondering if you could kind of reflect on the learnings from that, to what extent you can transfer those learnings to Hawley & Hazel...

A: Noel Wallace explained the transfer of learnings from Colgate China's omni demand success to Hawley & Hazel, replicating brick-and-mortar to e-commerce, new product entry success, and structural changes for Hawley & Hazel.

Q: I had a question on your ad spend. Consumer backdrop remains challenged and your ad spend was slightly down last year following increases in the prior couple of years...

A: Noel Wallace said advertising acceleration was a key driver, scaled back due to category headwinds, but dollar spend was up, with a focus on omni demand optimization and efficiency, and areas benefiting from increased advertising.

Q: Noel, I wanted to dig into your comments a little bit on North America specifically...

A: Noel Wallace discussed the tough North America quarter with improvement, category growth lag, government shutdown impact, declines in home care and fabric softener, uncertainty, a strong innovation pipeline, and revenue growth management.

Q: I want to touch on the emerging market business that saw a pretty significant improvement in Q4, especially Latin America and Africa, Eurasia...

A: Noel Wallace talked about emerging markets' strong Q4 growth, Latin America's strong quarter, growth in Mexico and Brazil, challenges in the Andina region, and the focus on strategic growth markets.

Q: Hoping you guys could talk a little bit about India, just with the GST change and just some volatility there have been in that market overall...

A: Noel Wallace said India's organic sales were up in the quarter, with sequential improvement, underlying demand soft in low-income urban areas, focus on the premium urban market, new product launches, and expected execution improvement in 2026.

Q: I guess digging into maybe even a little bit more on what's behind the slowdown in the category. You mentioned a bit of pantry destocking, but for how long can that continue?...

A: Noel Wallace said the U.S. category slowdown was due to uncertainty, expected the category to bottom out and slowly return, and emphasized the need for innovation across price points and pricing opportunities.

Q: So just if I could just follow up on Rob's question. Just how do you think about portfolio construction in this kind of K-shape world we're living in?...

A: Noel Wallace talked about core business revitalization, the importance of the core, focus on the super premium side, and organizational structure change to omni demand generation, with the SGPP plan enabling optimization.

Q: I just wanted to come back to North America pricing. You've gained some steam there and it was positive again. You've touched on just the need for flexibility and the consumer uncertainty...

A: Noel Wallace said there's a balance between pricing and volume, revenue growth management capabilities, focus on premiumization, innovation, matching competitive activity, and the expectation of category recovery in the U.S. after the elections.

Q: I know you mentioned FX has only been a tailwind in 2 of the last 10 years. But can you remind us what happened to pricing promo in the past in emerging markets...

A: Noel Wallace and Stan Sutula responded on FX, past pricing promo in emerging markets, no reliance on FX for plans, experienced teams managing, flexibility in the P&L, and the ability to execute pricing.

Q: Congrats on the results. Noel, I wanted to pivot back to the Fat food business, but thoughts specifically around fresh, really from a couple of angles...

A: Noel Wallace talked about the Prime 100 acquisition results ahead of plan, the science-driven brand fit, learning from the business, its profitability, and focus on Australia.

Q: The balance sheet is in very good shape. Leverage is reasonably low or very low. And I guess I just wanted to ask, what is the kind of the state of the union on how Colgate is thinking about using the balance sheet, perhaps more specifically with M&A...

A: Stanley Sutula and Noel Wallace responded on the balance sheet strength, cash flow, flexibility, capital allocation priorities (investing in the business, returning to shareholders, M&A), discipline in M&A, past investments in Hill's and Prime 100, and looking for complementary opportunities.