高露潔 (CL) 2005 Q2 法說會逐字稿

Good day, everyone, and welcome to today's Colgate-Palmolive, second quarter 2005 earnings conference call. (Operator Instructions). At this time, for opening remarks, I'd like to turn the call over to the Vice President of Investor Relations, Ms. Bina Thompson, please go ahead.

Thanks, Millicent. Good morning, everybody, and welcome to our second quarter earnings release conference call. With me this morning are Reuben Mark, Chairman and CEO; Ian Cook, Chief Operating Officer; Javier Teruel, Vice Chairman; Steve Patrick, CFO; Anna Tikky (ph), Corporate Controller; and Ed Phillips (ph), Treasurer.

Our remarks this morning will refer to our results and expectations excluding the impact of the previously announced 2004 restructuring, which in the quarter was a charge of $29 million after tax, which was included in our numbers as reported in this morning's press release and accompanying financial statement. The reported GAAP results with reconciliation to the results, excluding the restructuring charge, are included with the press release and posted on Investor Relations page of our Web site at www.colgate.com

Obviously during the Q&A, we will answer any specific questions, including or excluding the restructuring as you may wish. So we're delighted to review with you our second quarter earnings and the strong resurgence in our business. As we said in the press release, we had record top line results and our unit value is strong across all operating units. Worldwide new products have played an important role and their launches have been supported by vigorous business building efforts.

Market shares are healthy and growing in our full focus categories, both our ongoing savings programs and our restructuring programs are proceeding as planned. And we look forward to generating even more savings as we move to the second half of the year.

Let's look in more detail at the quarterly P&L. Worldwide sales increased 10.5%, the largest quarterly increase in almost 10 years with volume up 8%. Sales and volumes excluding the effects of the Gaza acquisition were up 9% and 6.5% respectively, an acceleration from the strong results in the first quarter.

Our top line was very strong in Latin America, North America, Eastern Europe and Africa. Worldwide pricing was even with last year, a continuation of the improving trend we have seen since 3rd quarter 2004 and the first time pricing has been flat in seven quarters. This is very encouraging for our business going forward and we expect this improving trend to continue in the second half.

Currency added 2.5%, pretty much where we had expected, as strengthening currencies in Latin America offset the weaker euro. Gross margin also, as expected, declined slightly down 30 basis points. This shows some improvement from the 50 basis point decline in the first quarter, and we were able to generate a strong 120 basis points in savings from our ongoing funding the growth project, which was offset by the continued pressure from the increased raw material cost, but it's encouraging to note however, that our estimates of raw material and packing cost while still up for the year, does look somewhat better to the year as whole versus our expectations when we spoke to you on the first quarter conference call.

Advertising in the quarter increased 16%, up 50 basis point since the percent to sales, and media was up even more strongly. We expect that these healthy levels of spending support will continue through the balance of the year. As Reuben mentioned in the press release, while our heavy advertising spending will continue, we're also pleased that there appear to be early indications of a moderation in the amount of promotion spending required. Our overhead expenses increased very slightly as a percent of sales, excluding the effects of higher freight costs, due to increased fuel expense and the effects of high overhead in our GABA business, our global overhead was down as a percent of sales.

Operating profit, as expected, was down a little over 1% to $577 million. The tax rate was 32% in line with previous guidance of 31.5 and 32.5. And our expectation going forward is that our tax rate will be 31-32% in the second half, resulting in a full year rate of about 32%. Net profit after tax was down 0.5% to $372 million. EPS was up 1.5%. to $0.67 reflecting a slightly lower share cut. Turning for a moment, to cash flow in the balance sheet. Cash from operations was excellent, up 13% even after the cash spending for restructuring. Working capital was even with last years levels of 4.3%. As the company's receivable days outstanding ratio improved slightly, while the inventory days were essentially in line with the year ago levels.

So all in all, we view these results as a very solid quarter with excellent momentum, setting the stage for a strong second half of 2005 and a good year in 2006. And as Reuben said also in the press release, we are optimistic, with strong sales momentum. And excellent results from our cost savings initiatives should enable us to achieve our expectations of high single digit EPS growth for this year, and allow us to return to double digit EPS growth in 2006.

So I'd like now to spend a moment updating you on the progress of our restructuring program. The most significant projects approved during the quarter relate to the consolidation of two phase production in Europe, which is currently located in five plants, the closure of our Kansas city plant and outsourcing of that plant's manufacturing to an established US third party, along with the initiations of other organizational streamlining activity. As noted in the press release, total after tax charges in the quarter were $28.7 million, somewhat lower than our previous guidance as a result of a change in the accounting recognition of one major project.

This change spreads cost over future periods but has no impact on the actual implementation of the project or savings, and as expected, restructuring savings in the second quarter were less than $0.01 per share, but as you know, third quarter, fourth quarter, in 2006 we'll see an accelerations of the savings.

Let's turn to the divisions. North America. Volume in North America increased 8% with the US up slightly more. We are delighted that pricing in North America was even with last year, the third quarter of sequential improvement. Currency added a modest benefit, resulting in a field gain of 9%. Total commercial investment increased and media was up double digit as planned. Operating profit was down very slightly, less than 1%.

The excellent volume gain reflects very good share progress in the quarter. National all outlets dollar market share as measured by AC Nielsen, was up in toothpaste, toothbrushes, dishwashing liquid, fabric softeners, bar soaps, liquid hand soaps, all purpose cleaners, automatic dish detergents and scouring cleansers. Our national US toothpaste share was up more than a point and a half year over year, and our manual toothbrush share reached a record quarterly share of 23%, up over 200 basis points from the year ago period.

As you know, we recently announced the sale of our heavy duty detergent business in North America, consistent with our strategy to focus on the higher margin categories of oral, personal and pet care. We expect the sale to close sometime in the third quarter. We recently launched several more new products in the US, which should continue to drive our volume in the second half of this year.

First is New Colgate Luminous, an enamel strengthening toothpaste. The fluoride mineral formula reinforces enamel layers by rebuilding weak spots on the teeth while the silica whitening technology safely lifts off yellow and surface stains and restores the natural shine and whiteness of one's smile. Comes in three impactful flavors; Crystal clean mint, Cinnamon and Paradise fresh. And in addition, it has innovative new stay clean cap with a special valve closer that cleanly cuts off product flow as soon as you stop squeezing. It's priced at a premium, and we'll ship late in August.

In our liquid hand soap line, we've just launched Soft Soap's Kitchen Fresh Hand. The first and only anti bacterial soap that actually helps neutralize food odor on hands, with a citric scent that leaves hands smelling fresh. And in the dish liquids category, we've introduced Palmolive with Bleach Alternative, which is formulated to remove the toughest baked on grease and unseen food residue while still being mild on hands.

We expect this new dish washing detergent to resonate strongly with our consumers, particularly in the Hispanic community, where our market share is well over 50% verses just under 40% in the general market. Volume in North America is expected to be up in the mid single digit range for the balance of the year. Operating profits should be at mid single digit as well.

Turning to Europe, volume in Europe increased 10.5%. Excluding the effects of the GABA acquisition, volume increased 4.5 %. This is particularly notable since it was on top of the strong 7.5% increase in volume in the year above quarter. Volume was up in both Eastern and Western Europe with or without GABA. The net of pricing in currency was positive 1% resulting in a sales increase of 11.5%.

Total commercial spending increased double digits, with media up double digits as well, up absolutely and of a perfected sale, operating profits increased 6%. The Maxwell Economic environment in Western Europe continues to be challenging, particularly in Germany, France and Italy. So we're particularly pleased with the positive volume in that region this quarter.

Continued success with new products in oral care and personal care has contributed to this good performance. Our toothpaste market share is up year over year in almost all Western European countries. In May, we reached a record 47.2% share in the UK. And we've told you previously about how our very successful testimonial ads for Colgate Total toothpaste have increased our share. Now we've become similar advertising behind our Colgate Sensitive and Sensitive Pearl Whitening toothpaste, and that has been good results as well. In manual tooth brushes, shares are up virtually everywhere in Western Europe also. With Italy reaching record level in the most recent period. This is as result of the on going success of 360 degree clean. The launch of Microsomic in the powered segment has also been successful, gaining a 15% share at that which is nearly all incremental.

In the personal care category, our regional launch of Palmolive deodorant continues to meet with success. Launched last year in some of our smaller subsidiaries, we expanded it to France and the UK earlier this year. We supported the UK launch with a comprehensive 360 degree marketing campaign during the Wimbledon matches, with Maria Sharapova as our spokesperson. Shipments of deodorants are up over 20% and our share is up almost 2 points in the most recent period.

In the home care category, we've recently launched an innovative new cleaning product in grease, Ajax forever 2-in-1. This is the first liquid cleaner with an air freshener in the cap. Both the liquid cleaner and the air freshener are designed to last for the same time. Initial results are very encouraging with initial trial resulting in a 2.7% value share in the first month. Volume in Eastern Europe increased double digit driven by successful new product launches across the region.

Shares increased in toothpaste, toothbrushes, liquid hand soap and deodorant. In fact, our toothbrush share reached a record high. Our new 360 degree clean toothbrush has been a success in many countries adding incremental share just about everywhere it has been launched.

Our Russian business continues to grow at a very rapid pace. We reached a record share in toothbrushes in the most recent period, maintaining our leadership position, and our toothpaste share continued to increase up 700 basis points year over year, benefiting from the success of both Colgate with Reprufus (ph) and Colgate Total. So we're very encouraged by the volume improvement in Western Europe this quarter and by the continued strength across Eastern Europe. Of course, we will have launched the GABA acquisition in the 3rd and 4th quarter, and we expect internally generated European volume to be up mid single digit to the balance of the year. European operating profits is also expected to be up to the balance of the year.

Latin America. Volume in Latin America was up 11% excluding divestment, continuing the strong momentum that we have seen over the past few quarters, the volume increases in every single country in the region. Positive pricing and currency resulted in the top line dollar sales team of 19.5 %. Total commercial investment increased strongly, of absolutely added to percent sales with media up similarly.

Operating profit was up a little over 12%,.The overall macroeconomic picture across Latin America is certainly very encouraging and is reflected in this quarter's very strong results. There also has been a marked appreciation of most currencies against the US dollar. This in turn has curbed inflation, increased reserve, boosted purchasing power and bolstered economic growth.

In addition as else where, we've launched a number of new products, and provided ample market support behind these as well as the base business, all this has resulted in good market share progress. Across the division market shares are up in toothpaste, toothbrushes, soaps, deodorants, liquid cleaners and fabric softeners.

In Mexico, where volume increased 6%, the underlying fundamental to the economy continued to be strong, and as you know the peso has strengthened and is quite stable. GDP growth continues to be strong at a round 4%, which is considerably better than the last several years.

There have been a number of competitive battles in Mexico in toothpaste, shampoos and fabric softeners. In the toothpaste category where our share is about 80%, we just launched Colgate Max Fresh. That has resulted in share gain. Colgate Max Fresh already has a 2.5% share. We've seen share gains also in shampoo, subsequent to the launch of a new Caprice variance.

In fabric softeners, where we are the clear market leader, we introduced Swavitel No Rinse late last year. That introduction has been supported by media and point of sale advertising through the first half this year, and our market share has increased to 54.3% in the latest read versus 52.8% for 2004.

In Brazil, volume was up strong double digit. Our toothpaste share is up over 1.5 for the year go period, with Colgate at its highest share level in nine years. Our Brazilian soap business is also benefited in new products and our share is up over a point year over year. Elsewhere in the region, new products introduced produced excellent results. A re-launch of Colgate Sensitive toothpaste added incremental share to all countries where it was launched.

The best results were in Venezuela, where the 1.2% share surpassed its nearest competitor in that segment and helped stride the overall Venezuelan toothpaste share to a record 86.7%. Colgate Sensitive will continue to grow as distribution expands across all countries, especially in the drug store channel which presents the biggest opportunity.

In deodorants our new multi form, spray and roll-on as well as stick, has driven growth as they have in Eastern Europe. Volume in Latin America should be up at least in the single digits for the balance of the year and operating profit should be up high single digits.

Asia Africa. Volume in Asia Africa increased 4%. The net of pricing in currency added 0.5% resulting in a sales increase of 4.5 %. Total commercial investment was up double digits and operating profit was down 6.6% versus a very strong increase in the year ago period.

As elsewhere, new product activity across the region contributed to good market share gains. Shares increased in toothpaste and toothbrushes with toothbrushes achieving a record share of over 21%. In China, toothpaste market shares is up year over year based on the most recently available data, the launch of Colgate Tropolis (ph) has driven growth in the premium segment of that category while Colgate Herbal has driven growth in the low price segment. And we just announced the introduction of Colgate Max Fresh with shipment starting in May July and trade reaction has been very positive.

In India, our leading toothpaste share is up almost a full point from the year ago period. Our new successful advertising campaign, Parents Today, in addition to a strong 360 degree marketing program helped draw us the business. And in the low priced category, our Civaca brand has gained leadership at the expense of several local competitors.

In Australia, toothpaste shares have reached record levels of 66% and Colgate Total is now the number one sub-brand in the market with a 22% share, up almost three points from the year ago period. Manual toothbrush share was at its record high of 39% up 5.4 points. The launch of our 360 degree clean toothbrush is responsible for the strong results with a share that is completely incremental. And in the power toothbrush segment, our new micro-sonic toothbrush has also added a completely incremental share of 5.2%.

New products in the personal care category -- shampoos, and conditioners and bar soap -- have resulted in share gains in the Philippines, Malaysia and Thailand. We expect volumes to accelerate somewhat in Asia Africa from the 2nd quarter, with increases in the mid to high single digits. Operating profits should be up at least in the high single digits for the balance of the year.

And finally, Hill. Hill's global volume increased 3.5%. Positive pricing and currency added another 2.5 % resulting in the overall sales increase of 6%.Total commercial investment was up strongly up absolutely and as a percent of sales. Operating profit increased 3%. Volume was up both domestically and overseas with particularly strong growth in some of the newer international geographies. In the US, new products continue to play an important role for Hill. Our new Diet to fight arthritis pain, Prescription Diet K9JD has met with overwhelming success in the vet channel, exceeding expected volume shipments by over 60%. This is a diet which was developed using our new innovative neutrogenomics scientific techniques.

In the pet kennel, we are also seeing some renewed momentum. Consumption in the large format retailers was up substantially in the 2nd quarter from the 1st. In addition, Hill's US focus on re-energizing our investment in the neighborhood pet retail environment has fueled stronger growth. An innovative nutritional focus has been key to our success. Prescription Diet JD was also launched in Europe and Japan, in Japan where the overall pet category has been slightly declining, we are still experiencing positive volumes and share growth and new products have helped to achieve these results. So we're quite encouraged by the momentum we see building in Hills and expect to see good mid single digits buying growth in the 2nd half. Operating profit should be up high single digits for the balance of the year.

So in summary, we're very pleased with the way this year is unfolding. Our planned investments are resulting in good top line momentum and market share gain. And in addition, the expected savings from our researching program in the 2nd half will ensure continued strong results. This will position us well for return to double digits earn growth in 2006. That's all I have for my prepared remarks. Now Millicent if we can turn it over to Q&A.

(Operator Instructions). Our first question will come from Wendy Nicholson with Smith Barney.

Hi good morning. My first question has to do with Asia , it seems like that area is getting an awful lot of reinvestment as evidence by the profit decline but the top line isn't responding the way some of the other regions are. Is that a market share issue or is it just tough category growth? Why we are still seeing sort of low single digit volume growth and not better?

Yeah, its, I think its mid shift -- region as a whole -- its 3 1/2 of 4%. I think the expectation is for, Wendy, for volume in the next two quarters to be up form that to the 5, 7% range.

The primary thing here in this particular quarter was -- there was a -- you may have read about it - it was publicized in this country, a publicity problem with regarding Colgate toothpaste in China which didn't affect the market share actually our market share is up over point year on year but it temporarily hurt shipments for abut six weeks during the quarter seems to be back on track now. Specifically the volume which in the China region which was up strong double digit in the first quarter was only up about 4% in the 2nd quarter and for the year it's expected to be up about 14%. So the expectations are laid in there and they appear to be in the last few weeks coming true. That was simply a temporary hiccup based on that publicity story that I think was circulated here as well. The overall Asian forecast, as I mentioned for the year, is as Bina, said volume we see positive volume in a 5 to 7% range in the next 2 quarters. We see operating profit of as Bina said as well.

I'm sorry. I must have missed the publicity problem. Was that the triclosin (ph) fears or was that something else specific to China?

No, that was the, yes it was the triclosin fear. There was an article in -- a researcher in this country that made some connection between triclosin in soap products and water purification plants, the combination of chlorine and -- in high concentrations with triclosin. And it turned of course that (A) he didn't mean that, it had nothing to do with toothpaste and he retracted that aspect. And beyond that he uses Colgate total, so we thought that was a pretty good end of the story.

But, somehow that you said that affected shipments to China?

Yes, not to, when you say to China. There was in the newspapers in China, as I think many people do know, there was a fair amount of publicity about this and therefore the wholesalers and the various elements in the supply chain and the demand chain stopped buying, temporarily, to see what happened. Is there really a problem? Turned out there was no problem there was -- the dental association got involved. We, obviously, had a plan that we put into effect. And as a result, it did not affect actual consumption, it did affect run down of inventories in the various places in the chain. Now they say the market share is -- our market share is up in China and the business is healthy.

Okay, so it sounds like it was a sort of unique phenomenon, not that any competitive activity is representing a permanent shift in that market, from where you're sitting.

No, absolutely not, and I can give you the shares if you want, but our market share is up meaningfully year on year in China, without question, and in the great majority of the cities that is true as well as on a national basis.

Okay, terrific. And then my very last question is on the inventory levels. I remember it was in the second quarter of '04 that we actually saw pretty significant tick up in the inventory levels and I think it's a time that was explained away by things going on in Mexico, but that sort of served a little bit of a warning sign for some bad things to come, if you will, on -- yet the inventory too pretty much remained at that high level we haven't seen them start to come down. Is that because the restructuring program is kind of causing a lot of noise in the system? And when should we see those inventory levels come back to their historical levels?

I think it's important to put that into context Wednesday -- Wendy -- it's Wednesday, no its Thursday, just my thoughts -- that into second quarter 2004 our inventory was 66 days. In the 1st quarter of this year was 67.5 i.e. a day and a half higher, and now its 66.7, 0.7 of a day higher than last year. But yes you are absolutely right, Wendy, that we had said and that is indeed happening -- actually, a little less even than we expected was that there were a number of plant closings around the world as you know from the structuring program and that is accompanied by a slight bill. That's pretty slight, it's less than a day on a 66 day base. So, the working capital, as you know, is at -- totally at 4.3%, identical to second quarter of last year. A good level and I don't think anything to be concerned about.

Okay, fair enough. Thanks very much.

Thanks Wendy.

And our next question comes from Amy Chason (ph) with Goldman Sachs.

Good morning. Question on promotional activity, I guess sort of a two-part question. You mentioned that you expect promotional activity to come down and I am wondering whether that's because of your stated strategy to reduce to gross to net and the efforts you put in place there, or whether it's more because you're seeing in the market place companies and competitors pull back as a way to offset the rising raw material environment.

Obviously a vital question because it's a big item on everyone's P&L. I have to say that what we are seeing, and I will go into some detail, Amy, because it's a complex subject on a worldwide basis. But what we are seeing really is before this strategy that you're mentioning i.e. as you remember we staffed up a -- basically, a global department to be worrying about gross to net globally and employing the new SAP techniques that were used -- tested in Mexico and now expanding around the world. This, what we are seeing really is before that starts to bite. So that's, to me, quite encouraging because this is -- for several reasons. How do we know that this is happening?

Number one, it's just empirical we know subsidiary by subsidiary what is happening to the dealing patterns and so on. That's obviously -- because when spending increased a year and a half or 2 years ago and then it continued throughout last year, a lot of money was put against these programs and now under our concept of continuous improvement, it gets better. Then the second way we know is gross to net, which is a measurement obviously we have in every operating unit around the world and if you look at the world, the gross to net was lower in the first half of '05 than it was in the second half of '04, which is a very good trend and we expect that to continue through out the year. Also, the average selling price, which is to a certain extent another way of measuring the same aspect, the amount of promotional spending, as you know was flat which is better than recent history in the last x number of quarters.

And finally on a somewhat more sophisticated basis, we do a bunch of things -- one of which I'll just share with you in general terms -- is that we've taken a, among other types of analytical work, taken a ratio between the increase in commercial spending and increase in sales and try to relate the two by region of the world and by -- on overall. And simplistically, to summarize a very sophisticated analysis, basically in all of last year it took double the percentage increase in commercial spending to generate 1% increase in sales it took double that much incremental commercial spending, with more in the second half than in the first half. During the first half of this year, it took about 1.5 times as compared to 2 times and with the full year its going to be, this year is going to be approaching 1.

So again that's sort of a very simple summary of sophisticated analysis, but there are a number of aspects that lead to our conclusion and, fortunately, we have not yet really been, seen the effect of this world wide programs that are just now being put into effect. So we're assuming we'll keep spending the level that we have been but there is some encouragement that we may not have to spend that much and still get good volume trends out of it.

But I'm just a little bit confused because if I recall in the first quarter conference call, you had said that you were starting to see some early benefits from this program realizing that they were very -- it was very early days and so, again, just back to the original question. Is it just that the market place is changing or did I misread what you had said at the time of the first quarter conference call?

I think I said that in our pilot areas we were seeing results and there were some indications of market place trends. Now, what we are seeing is through our own activity a modest reduction in the amount of promotional activity required to get sales gains, number one. There is although, you cannot generalize unless we are hearing from various locations that there is some, at least, modest diminution of external pressure. And third, I think mostly on the come, we will have these more sophisticated mechanisms based on our Alliant (ph) analysis that should add to it.

Okay, so it's a little bit of both.

A little bit of every thing, yes.

Do the comments in the press release, and maybe I'm reading too much into it, but it is suggested that you are accelerating your mix shift. Can you just flesh that out a little bit more?

Sure, and basically we're talking about the high margin categories right?

Yes.

And interestingly there was, that word in the press release accelerated -- one of the directors, just -- we have a disclosure committee and obviously one of the directors said well how do you know it's accelerated -- when we had our board committee meeting yesterday, I responded to that. Let me read you the combination of growth, as you know oral care and personal care are the higher margin categories, our focus categories, and home care and detergents are the lower priorities.

Here are over the last several years the growth in sale of those two categories, this is oral care and personal care. In 2001 a worldwide they grew, and I can give you by division, everything else. But those two high margin grew by 2%, in 2002 in grew 2 plus %, in 2003 in grew 5.6%, in 2004 it grew 9.2% and in 1st half of 2005 it grew 13.1%. So that is an accelerated trend and obviously the reciprocal is happening with the detergents and the lower margin products.

And is there something special that you are doing to drive that, or it's just sort of happening? And if you are doing something special what is that?

Well as you know for a long time, our investment in R&D and every other aspect in new products and so on, have been devoted to those high priority categories. Our strategy is clearly one of focus on a limited number of categories and trying to dominate them.

What has happened is that we've had increased success in market share, so that accelerates it, number 1. Number 2, as noted in the press release, also there is some interesting information that indicates some of these heavier levels spending. I don't mean promotions spending but spending on the profession and consumer advertising, has accelerated market growth in a number of countries so that's a 2nd factor. And 3rd is we are progressively selling off as you know our detergent businesses. And this of course was before we sold the US business which will accelerate that trend even further.

Okay thank you.

Thank you Amy.

And our next question this morning will come from Bill Sherpel (ph) with Sun Trust Robinson Humphrey.

(audio gap) upon that you have mentioned that raw material costs seem to be easing from what you saw in the 1st quarter. Is there any way to quantify that? Is it resin? Is it other raw material costs as we see oil stay at pretty high levels?

Okay Bill let me just give you a summary. So - and this is on the Colgate side of the business -- Hills is very different because its based on primarily agricultural commodities. But going back in the history, if you look at 2003 verses 2002, our costs - extra incremental costs from all raw and packing materials was slightly less than 1%. Last year, 2004, it was 3.5% .

We had a budgeted 3.7 and given $60 oil and everything else our estimate is now 4.3. It was a couple of tenths higher than that earlier. In terms of specific -- on cartons has had a -- we had an exceptional saving projects in North America and Central Europe to help off set that, and that will be good going forward. Laminates which have gone up, laminates used in toothpaste tubes are largely oil based but we have some very significant cost programs there that will impact that.

The hethaline (ph) increase in the first quarter, have reduced in the second quarter and resulting in a less onerous on cost than previously forecasted. Obviously high-energy clause continued to resist -- be a risk and could result in a resurgence but it is across the board on an and a lot of things and that is aided by Hills, which, -- after the enormous cost increase of 6% last year. We had budgeted a cost drop of just under 2% in the budget and it's coming in over 3%. So that combination leads us to be - while being conservative somewhat optimistic although we are not planning on any savings other than what we already have in the bag.

So it is more a Colgate specific than just the overall macro environment.

Some of them are -- I mean everybody uses packing materials and anybody who makes our similar products uses those. Many of these are Colgate specific relating to our own savings programs but as franchised at hetheling is a industry wide thing that came off some extraordinary first quarter highs.

Okay. And this, second on the divestures. Is their any way or have you quantified what impact that will have to gross margins going into next year?

Which - - I am sorry I didn't hear the first part of the question.

Divestures of the North American detergent businesses.

I mean we have the number; my recollection is that it would be about 20 basis points worldwide and 100 basis points for the US.

Great. And then just finally any commentary on just the expected divesture from Proctor on the spin brush business overseas or what might happen if they are not, if they don't have to divest anything in the US. How that might impact on your business in the underarm category to the oral category?

Well I really have very little comment on the spin brush. We didn't want to buy it the first time around and we didn't want to buy it the second time around. Now being the second time around and I don't think that's going to have any appreciable affect either way. I guess you will have to get the comment from Proctor and Gamble. I have no idea what's going to happen in the underarm business. Our underarm business worldwide is growing nicely, that's a major factor of that personal care jump that I explained to Amy earlier.

Okay. Thank you.

Thank you.

Lauren Lieberman (ph) with CFSC.

(inaudible)

Thanks. Good morning. A couple of things. First would be on the Hills business. The margin decline there is that primarily raw material costs? Or is it also stepped up marketing?

Well, their gross profit increased quite substantially, Lauren. I think it was a point and a half or thereabouts, 150 basis points, because their big jump in raw materials, as I mentioned earlier, was last year when they went up 6% and it's improved since then.

But they have spent a very considerable amount on advertising, sampling, marketing programs and some infrastructure programs where they've increased their bid coverage in a number of other things, which will ultimately reward us, we think, with market share. So their net margins which are still very high are down slightly because of that spending.

Okay. And then turning to Western Europe. Big swing I guess, versus the first quarter and I know Bina did give a lot of detail. But I wanted to know if I could maybe get a sense for where you saw the biggest changes. Whether it's by business units, sort of product area and by geography. And then was it anything in the macro environment or your relationship or work with retailers that allowed that turn around or was it just a matter of timing of new products?

As you remember, Lauren, that it was two halves of Europe, East and Central rule very nicely in the high teens in volume. And the encouraging thing is Western Europe did actually grow by itself about a point and a half. Most of the major companies did well, the one exception was Germany where the macro economic situation is pretty tough. If you take out Germany, you can't take out Germany but if you take out Germany the rest of Western Europe grew almost 5% which was -- in volume, which was very good. That is largely as a result of market share increases and we just did a mid year review a while back of Europe. And there's some interesting resurgence in market shares in several categories.

And how about GABA? Because some of the stuff that we see marketing markets here looks like GABA, actually particularly in Germany has been very strong and has been --

GABA is indeed performing ahead of what we had our acquisition plan on both top and bottom lines and they are not contributing very much to profit even though their gross profit is about 73%. Their EBIT percent is in the mid teens versus about 20 for the company primarily because we are running at a very high advertising level. It is very successful and we are expanding. So the GABA situation looks quite good.

Okay. And is the -- the head of plan is that in pharmacies, or is it in mass market or both?

It is in pharmacies.

Okay. Finally, there is a little bit of GABA in sort of mass markets?

I am sure there is but - -yes. But the share is much more it's tough to measure in the mass market. But the real progress is additional new products and widening distribution further.

Okay. Great. And then to the final question, you usually give the break down of gross margin raw material cost savings et cetera. I was hoping we could get that?

Sure, okay Lauren. As Bina mentioned, we are very pleased that our what we call funding the growth our year in, year out savings programs which obviously have, we have attempted to accelerate given the wrong patent material aspect. We are at very good lead. It was plus 120 basis points for that. This is way -- starting at second quarter last year at 55.4 so, plus 120 basis points. Restructuring was plus 10 basis points. And raw and packing material minus 150 basis points and all other changes minus 10. And that gets us to the 30 basis points below next year.

Okay answer that raw and packing, it sounds like you expect it to be less negative going to the rest of the year?

That is correct and our expectations for gross profit, obviously, always a dangerous projection because of oil costs and everything else. But let me give you that so - hang on one second. We would expect in the third quarter to be again about flat plus or minus 20 basis points or thereabouts and up in the fourth quarter 30 or 40 basis points.

Okay great. Thanks a lot.

Okay

We'll go next to Bill Ticolero with Morgan Stanley.

Morning Reuben. First question on the $120 million in charges you've taken since the fourth quarter. How many of the savings have you realized so far, on those charges? And then are you still looking for $45 million range on the full year?

Okay. Bill, as Bina mentioned just in passing, quickly, that the plan -- we are proceeding as planned. Javier, who runs the host program among other things is right here in the room with us. The charge is somewhat less this quarter, again I think as Bina mentioned, than we had originally anticipated precisely the same projects -- you will see everything else but a different accounting treatment which accounts for virtually every dollar of the difference between the plan and it's simply -- it's actually - it's headcount reductions being - staff leaving indemnities being written off over two years rather than immediately based on specific account changes.

The savings in the first half -- in this last quarter essentially is 0 in the first quarter. In the second quarter as mentioned it was less than $0.01 share. And between the third and fourth quarter, we expect that somewhere between $0.06 and $0.08 per share which translates to your $35 to $50 million in that range.

And then in terms of the - as you're lapping the big step up in commercial spend that began in the back half last year and you want to keep the market share and the top line going. You're talking about how you see more efficiencies in the spending as well as the competitive environment. What are you targeting in the back half in terms of increase in that commercial spend to continue those -- the top line momentum?

Well, it will continue to increase. If you take for example, if we take what's in the P&L - because -- concurrent with that list -- if you take what is in the P&L the total advertising line that we would expect to increase double digit in both the third and the fourth quarter. If you take total commercial spending, that will increase less than that because total commercial spending includes a lot of the promotional aspects we discussed earlier. So the gross to net which is down in the first half of this year versus the last half of it, of last year should also be down in the second half.

Great. And any further update on, with the dish liquid increase that was going through. How are you factoring that into your guidance on the balance of the year?

Well as you know in this country the only pricing increases that were taken -- have been taken -- were due to liquid that you are referring to and an automatic dish washer detergent and cleanser which is a very small business. Those are -- have gone in I think it is 9/1 is the effective date I believe, and everything is as copasetic. That is a very, very small part of this overall world wide flat pricing. I mean literally that's probably not 2 basis points out of a whole amount, I don't think, that's a more of a macro trend. Fortunately, I have got, this is interesting Bill that while Bina has talked about the world wide trend, the actual trend in the United States -- it says here on the sheet that you got this morning Bill - hang on one second - it's flat for North America, but interestingly enough it is up 1% for the United States. Including North America is Canada, Puerto Rico, Colgate oral pharmaceuticals but for the Colgate US business is what -- which most of you follow it's actually up about 100 basis points which is good.

And then just a last question on the Colgate oxygen you were planning to launch in the US in the back half. Have there been any changes on the plans that you had mentioned in the last conference call and not in today's release?

Oxygen what Bill, toothpaste?

Yes.

We have just announced the launch of Colgate Luminous which is a very well tested concept which is going to be our focus for the second half of this year.

Great. So that was the - - originally you were looking at maybe the Oxygen for the US for the second half and you switched the pipeline?

As I said before, Bill when we develop products, we develop products in parallel. We go through a whole battery of consumer testing and Colgate Luminous came out as the strongest possible product for us in the second half

And the -- there is a Colgate -- a Palmolive Oxygen that you may be referring to, in the light duty liquid market that is out there and doing well we just got some good shares. The Max Fresh which is the product you remember with the little breath strips in it which is now going around the world is doing well. I just saw a share of over 3% which ties into a one week share of 40% but we won't even talk about that. Anyway thanks Bill.

Thank you

And we'll go next to Bill Schmidt, with Deutsche Bank.

Good morning. Do you have any intentions to consolidate this share purchase in the bank half the year and then in 2006?

Well we-- let me tell you what we have done so far Bill and then I'll (inaudible) the future. In the first half of last year we bought about 6 million shares. And in the half of this year we bought 9.5 million shares primarily because we thought they were somewhat undervalued and the average price was several dollars less this year than last.

We are -- don't forget we are working to make sure that the expenditure that we made last year of about three quarters of $1 billion for GABA -- our ratios get back to where they should be for our strong double A rating. But we will be continuing to buy perhaps not precisely at the rate at the first half but not far from it.

Right. Thank you. And then just back to Hills briefly. How much of that impact is from Nestle getting very aggressive in the mass channel. Has that kind of knocked on into the special channel where you compete?

Well for the -- interestingly enough for the US and the International, normally the volume pattern in Hills is that the international business grows substantially more than the domestic business. This time they were both around 3 or 4% both International and domestic. So the domestic was pretty good and I think they expect their volume to ramp up in the next two quarters. But as far as I know and as far as I can see from the market shares there's - it's always a very competitive market I am not sure there is any great difference.

Then one last one if I may. What has changed so far after the restructuring charge. Have you implemented some of the R&D moves you talked about? Have you hired more sales people in the developing markets which is more a focus for you? Some of the things you talked about when you first introduced the restructuring charge in December.

Javier had mentioned - -

Yes, we have expanded our sales coverage in different parts of the world, particularly in the high growth areas such as Russia and Eastern Europe and China. We have also increased our people working behind new products in different parts of the world, in our category innovation centers. So yes, both of those things are happening.

Right, thanks very much.

And also just to build on to that a bit Bill. That, I noticed in looking over some of the data that we have initiated 51 projects in the restructuring, which account for basically two thirds of the ultimate savings, even though some of them are going to take a number of years. The actual projects have been initiated for about two-thirds of the scheduled activities.

What's the return hurdle on those projects? You used to talk about finally grow up. And you had 25% or something.

Sure. The -- again it's a return on both the P&L and on the cash basis. But if you look at it on the cash basis, our regular capital expense program has a rate north of 40%. The restructuring itself has a rate just about 40%, actually 39 and a fraction. So it's very high - that's there for tax -- very high returning projects.

Thank you.

We'll go now to Linda Voltenwiser (ph) for Voltenheimer (ph)

Thank you. You had mentioned that total spend I think was up 16% and media advertising was up double digits. Can you indicate if media advertising spend was up more or less than 16%.

It was up more. And I would guess Linda, it was in the second half it will be. Hang on I'll give you some specifics if you want them. Hang on. It was up more than 16% in the second quarter. And it will be up slightly more than 16% for the year.

So then the increase - okay the increase in media was bigger than the increase in total spend?

That's right.

Okay. And secondly, Reuben, I don't know if you would just kind of share your thoughts on what you think about potentially combining Colgate with another company?

What did you have in mind, General Motors?

No, just your general thoughts. What would be the pluses, the minuses? Do you think Colgate could benefit from combining with another company?

Well without being a wise guy, if we were combined with a company that complimented our abilities and skills and geography, it would probably be good. If we didn't it probably wouldn't be good. But obviously over many years, many potential candidates have been examined. If that should present itself, who knows what would happen? The only thing I can tell you is that we, like other consumer goods companies feel very strongly that we can very effectively compete irrespective of size of some of our competitors, by utilizing the strategy that we have selected and recently implemented.

You saw earlier and there's been- - with the focus that not only is our market penetration i.e. market share growing in the categories that we have chosen, but the growth of the categories themselves is being accelerated by our very focus. So my sense is that -- is for a couple of decades competing with a number of companies that are our size or bigger we have been able to generate an average of 12 or 13% profit increase on good top line. I think we will be able continue to do that at -- pretty much at historic rates. And the very encouraging parts -- I think -- are that our volume momentum, as we clear away some of the slower growing and lower margin products, is indeed accelerating and it provides us with additional money for business building projects. Not simply commercial aspects, but working with the profession in both Hill and in the oral care category.

So it's very tough to comment on it. There have been a lot of things explored over many years. Nothing came to fruition I feel that we can stand. I really strongly feel, and the next generation of management is sitting right here in the room with me. I know that they feel strongly that our profitable growth can continue into the future. I said that -- in the last quarterly review, that I hadn't seen in 20 years the fundamentals of the business -- by that I mean market share, volume trends, health -- hadn't seen it as good and I think this quarter and I think the rest of the year will be a - - is indeed a demonstration of that. The business is fundamentally quite sound.

Okay great.

I didn't answer your question but, I can't believe Linda you really expected me to answer it anyway.

No, no. But what you said was helpful. Thank you. I appreciate it.

Thanks Linda.

We'll go now to Connie Manidy (ph) with Prudential.

Hi, I'd like to follow up on Linda's question. Could you just review for us what the acquisition criteria are that you have? What you're discipline is and just what the running rules are internally?

I don't think, if I understood Connie. I don't think Linda's question was on acquisitions such as GABA (ph), or Connie Ellis, or Mennen. It was a question about merger with another company.

Right.

So I'll take it you mean acquisitions.

Right.

Well historically we have made our acquisitions to increase market share in our existing categories. And then on occasion we have made acquisitions to expand our reach into near categories, examples of those over the years obviously are Soft Soap, where we are the world market leader and that allowed us to make acquisitions of liquid soap businesses and launch our own brands around the world. Another example is Mennen, which got us into the underarm business which is now expanding very nicely internationally. Several examples of the market share examples are the recent GABA, Callino and so on (ph) and Hazel and so on that has increased our world share on top of our internal gains for Colgate.

We have, as you'd expect a discounted cash flow model that we think is proprietary -- it's called Colgate's Basics analysis and it takes all the various streams, combines them to present values then through the present. And candidly there have been any number of acquisitions where we have been involved, but determined that whoever was buying them -- or the price that it would take to buy them was simply too high. And sooner or later the buyer was going to suffer for -m by paying such a high price, so we have backed away. And the very positive thing about that is that has caused us to focus even more heavily on building our own internal business. And you can see the results because these really good volumes that we've been having are clearly the function of internal growth with market size being spurred forward and market share growth.

Are bankers presenting you with more or fewer ideas since the P&G and Gillette merger was announced?

Well, you guys work for -- have associates or the sell side lease (ph) in investment banking so we only know what we see. I think the procedure is whenever there's a big merger like that, all the bankers immediately make phone calls and propose waste disposal companies and everything else. But -- so I think you can assume that, yes, people have approached us. That doesn't mean our attitude is any different than it historically has been.

Okay, if I could ask you one question, your pilot program in Mexico to reduce gross to net? Can you give us what-sort of like the progress you know before you started it? You said that there was improvement. But what does it look like now? I mean how much has gross to net been reduced?

Well as I said earlier that some of the reductions now aren't even related to that, they are just continuous improvement and market forces. My recollection is that the new organization has a target of several hundred million dollars after tax at least. I'm not sure we want to publicize that because it's nowhere in any of those numbers -- but we have now, I guess. But there are very significant objectives that will be measured over the next several years.

So I mean, you can't quantify like in Mexico you saw a 10% reduction in gross to net or you're at a run rate of --

It is a highly complex thing that I would not want t -- because a lot of it also will be -- is diverting money from one particular type of promotion to another, which will have a greater gain in sales and a greater therefore return on investments. So I would not want somebody to think that all of that money will drop. It's a very sophisticated mechanism and it is working, we think quite well and will continue to.

Okay great, thanks.

We are -- for what its worth and I read everything about credibility and everything -- we as a company are very good at working on things and improving them over time. We don't get distracted by a lot of acquisitions and a lot of other things as we are able to work on the various ratios, extract the extraneous monies, put them to better use and end up okay.

And one final question, what's the premium going to be on Colgate Luminous?

Same as Colgate Total

Okay, thank you

Thank you Connie.

John Soshe with JP Morgan

Yes, I guess it's just over good afternoon now. Very quickly, you talked about some of the positive impacts on gross margin. If I remember correctly your Latin business has a lower gross margin and also a lower SG&A ratio leading to a higher operating margin. How should we think about the impact of the much faster growth in Latin America in terms of looking at those line items on your P&L? Thanks.

Yes. The gross margin in Latin America, its several -- 200 or 300 basis points below the total company. What I think, its important John and you already know this, of course, that the net margin in Latin America is higher than the rest of the company. So therefore, while a surge in Latin America may have a slightly depressive effect on gross profit , it has a very positive effect on net margin. And that, if anything -- the net margin difference is improving because we do have monolithic market shares. Any efforts that have been made to dislodge us have not to date been the least bit successful and I think you'll see Latin America go from success to success.

Is it having a material impact on the gross margin year to date? Or, I guess the question is, is it something we need to be more vigilant about forecasting that over the next six to18 months?

I don't have that particular analysis, John, but hang on one sec -- if you take the - -I think it's a measurement in -- I was going to pull out of my head,10 basis points and the Chief Financial Officer just wrote 10 basis points. I would say that if its 10 basis points, it would be a lot --

Okay

-- simply because each time there's a different mix.

Got it, thank you very much.

We'll go next is Joe Othobello with CIBC (ph) World Markets

Thanks, just wanted to follow up on John's question regarding the gross margin. I think the last quarter Reuben, you had said that gross margin for '05 would be up 20 to 30 bps for the full year. And then based on the numbers you gave out, this morning for the 3rd quarter and the 4th quarter, IT looks like its going to be flat or slightly down. And since 1Q, we've had positive pricing trends and a premium raw impact on material costs and acceleration of the positive mix shift, and you'll be having the North American detergent business going away in 4Q. So I'm not sure why the gross margin should be down year over year given all that.

Well, I think that when we had the first quarter meetings, oil was in the low 40s. Oil is now in the high 50s and 60s. And there's been a lot of changes since then. But the figures I have here show gross profit for the total company up in the second half and since - - candidly -- I was being conservative before, this shows that up several --slightly in the year -- I was candidly using Kentucky winnage on these figures to be conservative, but the numbers that I see here aren't very different even with the higher oils than they were.

We were down 50 basis points in the first quarter, we're down 30 basis points in the second quarter as I say, it should be flat to slightly up in the third quarter and up more meaningfully in the fourth quarter. And that comes out to be on average 10, 20, 30, 40 basis points for the year. So there's not much difference I think, Joe, from what we said before and what we're saying now.

Okay, great, fair enough, and then second question on the $0.06 to $0.08 of savings in the back half of this year, I think previously you had said that probably half of that would be reinvested and half off the bottom line. Does that still stay the same?

That's still our basic ground hold. Yes.

Okay, great, thanks.

Christopher Pharell (ph) with Meryll Lynch

Hi, just wanted to talk a little bit more about the gross to net reductions. Can you, I guess, give a little more detail specifically about what's going away and what's being rammed. I mean, , is it easy to think of couponing as probably the biggest form of gross to net promotion that has been reduced and it has endeavored more grass root type programs. I'm just trying to get a little more color on it.

Its really not a couponing, there are some coupon values that are different but its really not the amount of couponing and again, you have to understand that in 200 plus countries, there's a different promotional pattern in each country and so you can't use the U.S as a reference. It is a number of things, in a number of categories where we have been attacked by competition in an attempt to get market share and then the market share has not materialized for them and our market shares have gone up. There is to a certain extent a pull back in spending because they're not getting the results. That is one factor.

A second factor is this idea of continuous improvement, people are even on a rudimentary basis doing a return on investment analysis to determine how, quite aside from the sophisticated SAP aspects, what will do the best. And number 3, that there is a lining up of priorities on gross to net spending in each country and we're --and they're being very careful about the spending. Volume is good so they're able to pull back. Usually, I mean -- and this is an overgeneralization -- but the things that are less what you expect would be that the monies that go to the trade for which we get no activity that generates consumer movement. That's an over simplification and it's a magic panacea. But nonetheless that is clearly the objective.

Okay and then just to follow up I guess on the oversimplification. Is there any impact to relationships with any specific retailers over the change in spending patterns?

That's part of the art in it hopefully, is that having been in this business for 40 years, I have seen the result of roughly cutting back promotion and suffering for years from the relationship with the trade. By definition this has to be in a cooperative partnership kind of method or it simply doesn't work. You remember that -- the problems that one of our competitors went through maybe a decade ago, I don't remember when, when they tried to radically change promotional terms and did it by dictot -- you really do suffer for it. We have obviously been very careful.

And it is one last one on raw materials. I know that, obviously oil was -- where oil is sitting and with some industry forecasts out there saying that polyethylene prices, while they've eased a little bit, will be going back up into the first half of '06. Are you guys seeing that? I mean, is that what your forecast tell you and is that baked into your estimates on where materials pressure will be in the next couple of quarters?

Well, we have done a fairly sophisticated analysis that says that if oil would stay at $60 a barrel for this whole second half, it would not have an appreciable effect on our -- of course I mean, we have assumed that discounted it, put into place programs. If oil for 2006 were on average to be over $60 a barrel, obviously that forces us to take another look at pricing and everything else that goes on, but that's a long time in the future. But we feel we're covered for $60 oil in the second half.

Perfect. Thank you very much.

We'll go now to Ann Gillen with Lehman brothers

Hi there. I'm fascinated by the ratio that you're doing on commercial spending. Two questions, is it that independent that you can run it relative to sales? And secondly, have you done a similar one for just pure advertising?

The answer is, everything that moves we do a ratio on, so we have done that. I have had enough experience marketing people sitting around the table to know that a ratio on media advertising simply doesn't work, because you can have a negative relationship if the copy is bad and so on. But this is a little more straight forward in the promotional aspect, and you are right Ann. There's a certain chicken and egg kind of thing involved in it. But its one mechanism out of many that we are trying to validate our intuitive feel and the empirical observations. The -- probably the most important measure -- objective measure is gross to net because that's an actual number that you can track by subsidiary and by division and overall and there's no question that, that is lower in the first half of this year than in the second half of last year.

And would your benchmarking tell you that it's lower for the categories? And was your competitor doing something similar on gross to net?

Its hard to conclude that, I think that varies so much by country because in some countries we are the only really worldwide force in the particular market, we're talking about in toothpaste and oral care. And that in some countries the competition is in retreat and some countries particularly in the newer countries they are spending aggressively. So its very difficult to generalize on it.

Fair enough. Okay, just switching gears slightly, I am wondering if you can disclose if there is any impact to EPS from the US detergent sales?

No. What I mean to say is that, I think, when we made the announcement we said that the profit, specifically said that the profit was a one time gain of $60 million which will be recorded whenever it exactly comes out in the third quarter, also in the third quarter there will be a $35 million tax charge for the repatriation of that $800 million under the Jobs Creation Act. And there will be a restructuring charge, so it will all be identified as to where it is, I mean, whatever targets you guys have for us, obviously will not be impacted by that.

Okay. I'm sorry the ones that were disclose, seems to be more one off. I'm asking if there was any recurring delusion from this sale?

Well, clearly we are making profit on detergents in the United States and that means US company will have to make up that profit, and that is assumed in the estimate. I mean, sure there is dilution because I don't know what the figure is, but X number of millions of dollars, probably $15 or 20 million of profit, is lost because we don't have that business anymore. But that doesn't let -- the way we set goals in the way we operate that doesn't let the US of the hook, what is the number? It's not far from that?

From the 15 to 20?

Annual.

Annually, perfect. Okay, and then the Colgate Luminous I was interested that you noted that the top was patented, Is there anything about the enamel protection that's patented?

It is a silica formula which is patented to us, yes

So unlikely that we'd see a quick follow on offering from competitors?

You can see an advertising follow on, but whether you can see the actual product who knows.

Okay terrific, last question for you Reuben. just there has been some noise about some of your board members. I'm wondering if there has been any thoughts to changes in board membership?

Certainly, the references to a couple of newspapers, a number of newspaper articles involving two of our board members, unrelated to Colgate obviously. The obviously both the governance committee and the board as a whole have discussed those and reviewed it quite carefully. No allegations have been made, either of these directors. And, obviously, we will keep very much on top of it. Thank you for bringing it up.

Thank you.

No, no. I do and I'm sure and they will thank you as well,

This late in the conference call you are very kind.

Okay, why don't we take one more, if there is one more.

And our final question will come from Andrew Mcquillan (ph) with Sal Harvey Essay Management

Thanks, how are you Reuben?

how are you doing Andrew?

Well thanks. Just if you could characterize, its seems back in half of '04 obviously a lot of your spending was very defensive in nature. And it seems like especially in this quarter you took all the overage out of Mexico and spent it back competitively, it seems in Europe and in China. And it seems all very offensive -- new product activity. Would you like to highlight some of your favorite market share gains? And if you could talk about what competition is like right now, let's say, in toothpaste, Central Eastern Europe and in China?

Our market share is up in Eastern Europe. It's up in Russia meaningfully. It's up in China meaningfully. It's up in the United States about a point and a half versus last year. It's up in Mexico -- I saw a number this morning, that it broke back up through 80, it was down as low -- God forbid -- at 78 and it's now back up to 80. Shares are up throughout Latin America. My recollection is that, in out of the 60 biggest countries in the world, 40 countries or thereabouts have up market shares in the quarter. So it's a pretty wide spread thing. And it's interesting Andrew that -- I must say that I have that same feeling, as there was a bit of defensiveness just right or not last year and now my sense is we're winning a fair amount and there is a world wide feeling of being on the offense.

So when are going to let them off the ropes?

Well if they would admit they are on the ropes, we would let them off. But me, Andrew, let me use that as a giggle for a little summary if you're done. Because I do think that there are -- it's a good segue -- is that where we see ourselves obviously there is raw packaging materials problems and obviously there is competitive pressures. But we feel that we do have quite strong momentum in the fundamentals and by that I mean market shares and volume, and it's there for anybody look at it, and it is real.

Certainly we have to be at least modestly encouraged by the pricing trend as its' positive in the last few quarter's versus resent history, and that's good. The other end of the same stick to a certain extent is promotion maybe, moderating but we are not counting on it until we see some additional quite big possibilities there as we move to the next couple of years.

We're firing all cylinders as far as our regular savings programs are concerned, and we're pretty good at that as you know -- we've done it over many, many years. And the 120 basis points that we got this quarter is quite good and we think we'll be able to continue that and in the second half restructuring will be kicking in. So, I think that's, all of that is reason to be at least cautiously optimistic and we thank you for your interest and we are delighted in your shareholding and we'll attempt to continue the progress. Many thanks. Bye bye.

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