高露潔 (CL) 2007 Q3 法說會逐字稿

Good day, and welcome to today's Colgate-Palmolive Company third quarter 2007 earnings conference call.

Today's call is being recorded and is being simulcast live at www.colgate.com.

Just as a reminder, there may be a slight delay before the question-and-answer session begins due to the web simulcast.

At this time for opening remarks, I would like to turn the call over to the Vice President of Investor Relations, Ms.

Bina Thompson.

Please go ahead.

Thanks, Sheila.

Good morning, everybody and before I get started with my remarks I think you all know that one of our core values is continuous improvement at Colgate, and we're trying to make our call more efficient.

So, today we are going to limit questions to one question per person, and if you have a follow-up, we will ask you to get back into the queue.

And when we say one question, we don't mean multi-part questions, we mean one question.

Anyway, good morning, and welcome to our third quarter earnings release conference call.

With me this morning, are Ian Cook, President and CEO, Steve Patrick, CFO, Dennis Hickey, Corporate Controller, and Ed Filusch, Treasurer.

We will discuss the results for the third quarter this morning, excluding charges relating to the 2004 restructuring program, $36.3 million after-tax, and a $10 million noncash after-tax pension charge under SFAS 88.

As a result of lump sum payments of normal retirement benefits associated with the nonqualified retirement plan in the U.S.

The reported GAAP results and reconciliations to the results excluding the restructuring and pension charges are included in the press release and accompanying financial statements and are posted on the Investor Relations page of our Web site at www.colgate.com.

Comments about expectations will also exclude restructuring charges, and during the Q&A, we will answer any questions including or excluding these items as you may wish.

We're very pleased with the momentum of our first half is continued into the second half.

Our restructuring and business building programs are on track.

Volume and sales growth have continued to be strong across our divisions.

Our ongoing funding the growth program as well has contributed to a good gross profit increase along with a decreased in our fixed expenses.

And this has allowed us to continue to support our business with a double digit advertising increased in every region while growing the bottom line double digit as well per our plan.

As you know our gross margin increased 80 basis points, which is in our target range, even after absorbing 40 basis points related to very steep increases in agricultural commodity costs by our Hill's business.

The worldwide implementation of our Colgate business planning, and the savings to begin rated from that gives us further confidence that gross margin will increase in our target range of 75 to 125 basis points for the remainder of this year as well as for 2008.

Now, we told you on the last conference call that our advertising increases in the second half would be somewhat below those of the first half.

That's just what has happened.

Advertising increased a healthy 12% versus over 20% for the first half, to support our many new product launches around the world as well as our base business, resulting in very good market share increases in every division.

Our balance sheet is strong as well.

Which gives us comfort in the current uncertain credit environment.

And our cash generation are continues to be solid, allowing us to continue our share repurchase program on a consistent basis.

Our return on capital is at 34.3%, up from 27.6% in the year-ago period.

And as in previous quarters, our volume growth is greater in our higher margin categories, which have a higher strategic priority.

While worldwide, our volume in the quarter grew 6.5%, oral care volume grew over 11%.

So let's turn to the divisions.

Our business in North America remains solid, and is referenced in the press release we achieved record shares this quarter in a number of categories.

The substantial benefits from the restructuring, we are beginning to see here in North America, have resulted in a gross profit increase significantly above the company average, which allowed us to both increase advertising, and deliver very strong operating profit growth.

We have said on our previous conference call that we would increase our spending behind our toothpaste franchise and that has in fact happened.

Our most recent all outlet monthly share is tracked by AC Nielson was at 37.4%, up 1.2 points from the year-ago period and up over 3 points from the prior month.

The latest advertising featuring Brooke Shields is just now coming on air.

Day in the life.

With a message that Colgate Total fights germs for 12 hours day and night.

Consistent with our integrated marketing approach, this theme will also feature in print, Internet and instore advertising.

Our manual toothbrush business is exhibiting very good momentum with an overall year to date share with a new record.

The Colgate 360-degree toothbrush alone now has a 7.7% market share, benefiting from the incremental share provided by Colgate 360 Sensitive.

But notably, our toothbrush franchise strength extends beyond Colgate 360 with baseline growth for Colgate adult toothbrushes across all price tiers.

Our manual toothbrush strength is particularly noteworthy this quarter given the launch of a number competitive new products and we will be launching some exciting new products in this category in the beginning of 2008 to build on the existing momentum.

New product activity across all of our categories is expected to result in continued solid results in North America.

For the fourth quarter, we expect volume growth around third quarter levels, with operating profit increasing double digits, up absolutely and as a percent of sales. Looking to 2008, we expect volume in this division to grow mid single digit accompanied by solid operating profit growth.

Europe/South Pacific.

Europe, solid mid single digit volume growth was aided by a high consumer confidence level in Western Europe and strong economies in Central Europe.

GDP growth for next year is expected to be at roughly at current levels which bodes well for continued strong results.

Our regional market shares are up year-over-year in toothpaste, manual toothbrushes, mouth rinse, liquid body cleansing, and hand soaps.

Our toothpaste business across the region is doing well.

In fact, we're the overall market is virtually flat, our sales increased double digits and our market share increased almost a full point year-over-year.

Colgate Max Fresh has helped these good results.

Through our shopper insight work, we learned that many young men in France still live at home and that their mothers frequently do their shopping for them.

As a result, the subsidiary conducted a very strong marketing campaign not only toward the targeted user, young males but also their mothers.

In Germany, Max Fresh contributed to an almost 3% increase in our toothpaste share.

In the U.K., the launch of ow near Colgate total weekly clean continues to perform well.

The market share has been largely incremental and trial rates have been very good.

Looking ahead, volume in Europe/South Pacific has been expected to be up mid single digit, both the fourth quarter and full year 2008.

Operating profit is expected to be up mid to high single digit for the fourth quarter as well as 2008.

Turning then to Latin America, business across this region continues to be very robust.

We're seeing excellent market share gains in virtually all categories.

Macro economic climate in those countries is also positive, further adding to the strong momentum.

Our strategy to trade the consumer up to higher priced value-added products is meeting with great success.

A good example is Colgate Total, which is now represent 20% of our regional toothpaste business and also have been renewing our effort behind that mouth wash business results in exceptional growth.

Brazil has been the lead market on this initiative.

We'll launched a Plax alcohol free and Plax ice earlier in the year.

The most recent share is almost 30% and at a record level.

And we expect to see similar results through the entire region as these variants are rolled out.

In Mexico, our largest subsidiary, our toothpaste share has risen to 84% in the latest period.

Total professional clean was launched in this market, and now has over a 3 shares more than half of which is incremental.

In the shampoo category, we introduced a line extension of Palmolive Caprice hair fall, along with a new bottle and better esthetics which has resulted us taking brand leadership.

And in bar soaps Palmolive has now become the number one soap brand.

In fabric conditioner our market share is up 2.5 points versus a year-ago period.

Solid performance across all our Suavitel lines, new line extensions and a strong commercial plan in both the direct and indirect trade have contributed to these results.

So, prospects for this region continued to be strong.

We expect volume growth for the remainder of this year and next to continue in a high- single digit range.

Operating profit for the fourth quarter of this year and full-year 2008 should increase double digits.

Greater Asia/Africa.

As elsewhere, new products supported by focused advertising, contributed to the strong results in this region.

And as referenced in the press release, our toothpaste share was up in 11 of 14 countries and is up 100 basis points year-over-year to almost 40%.

In toothbrushes, our share increased in 11 of 12 markets up 240 basis points from the year-ago period to over 36%.

The strong share growth in toothbrushes was mainly driven by the excellent on the ground execution of our 360-degree toothbrush anniversary campaign, as well as the growth of the base business.

Volume and greater China increased double digits, continuing the good momentum we have witnessed throughout this year.

Our market share is up year-over-year, at over 31%.

Our recent launched of Max White toothpaste is doing well and in addition, we are now just shipping Colgate Herbal Gel, the first major gel launched in a lower price segment and this should bode well for future share gains.

In Russia, our market shares are up in five of eight categories.

In toothpaste, our share is up almost 4 points to over 33% driven by both base business and new products such as Max White.

And a Herbal Herbal Seabuckthorn.

And our toothbrush share is up over 2 points to over 35%.

And in India, which also continues to exhibit solid volume growth, our shares are up in both toothpaste and toothbrushes to 48.2 and 34.6 respectively.

So looking ahead, volume in greater Asia/Africa is expected to increase at current levels for both the fourth quarter and full-year 2008.

Operating profit is expected to increase double digits both for the fourth quarter and a full-year 2008.

Hill's.

Both our domestic and international businesses att Hill's had a good solid mid-single digit volume growth in the quarter.

New products both in the wellness and therapeutic segments have contributed to the solid growth and this of course has helped us increase market share.

Year to date, our share is up 20 basis points, and is even a higher in the most recent monthly reading, up almost a full point year-over-year.

In August, in response to strong customer-and-consumer demand, we introduced a new line of hypo-allergenic treats to compliment our existing prescription diet derm products which are designed to combat adverse food reaction in pets.

As a result, that line of products increased volume double digits, further helped by focused programs to gain distribution among clinics, as well as trial among pet owners.

Our international business is doing well as well.

And we continue to make further distribution gains in Russia, where our volume is growing very strongly.

So looking forward, we expect volume at Hill's to increase mid single digit for the fourth quarter and a full-year 2008.

Operating profit is expected to increase mid single digit for the fourth quarter, and double digit next year.

So in summary, we're very pleased with the continued strong results across our divisions.

Our four strategic initiatives with which you are all familiar, getting close to the consumer, customer and the profession, effectiveness and efficiency in everything we do innovation everywhere and a focus on building strong leadership are all working well.

We fee confident that we have the people and the programs in place to continue to deliver a solid-double digit earnings for the balance of this year as well as in 2008.

So, Sheila that's the end of my prepared remarks.

We can now open that up to questions.

Yes, ma'am.

Thank you.

Today's question-and-answer session will be conducted electronically for the telephone audience.

If you would like to ask a question, you may do so by pressing the star key followed by the digit one on your touch-tone telephone.

We also ask that if you are listening to the conference on the Internet, that you please turn down the volume on your computer speakers when asking a question.

We also ask that each person limit themselves to one question.

If you would like to ask a follow-up question, please resignal.

Once again, we would like everyone to limit themselves to one question.

If you have a follow-up question, please resignal.

And that's star one.

We will pause for just a moment.

We will take our first question from Connie Maneaty, CMO Capital Market.

Please go ahead.

Good morning.

Given that you know what your shipments to Walmart and Costco are, can you give some indication of what your market share in toothpaste in the U.S.

would be in an all outlet basis as opposed to just what we can see from Nielson.

Connie, this is Ian.

Yes, our market share on an all outlet basis would be up similar to the Nielson share, would be slightly lower than that share, but still up.

I think you know, talking to the U.S.

business in genera.

Let me make a few remarks.

We are really quite pleased with our performance in the U.S.

this year.

We have a business that is up just over 5% on a volume basis, on top of a strong 7% last year.

As I said on the last call, we're very pleased with our innovation stream on toothpaste, with the Colgate Total Advanced Clean having one of the highest repeat rates that we have ever seen, and we are beginning to build trial on that with the advertising and marketing programs as being mentioned, and seeing it in the Nielson and the all outlet share, and of course we have adjusted our promotional activity, which is just now beginning to impact the marketplace.

I think going forward, what is pleasing in the U.S., when you look at the categories in which we do business, particularly toothpaste, we see growth rates, very much in line with historical levels, no slowdown, and we see private label at the lowest level in many years on the half a percentage point.

So, we feel very confident about the future growth of both our toothpaste business and our U.S.

company.

Thank you.

We will take our next question from [Ali Dibadj].

Please go ahead.

With Sanford Bern Stein.

Hi, guys.

Just wanted, I guess continue on the U.S.

team.

I wanted to understand the interaction, I guess between the top line again being I guess a little lower than we had expected, a little lower than I think your guidance last quarter on as far I understand on volume at least and then the increased in operating margins.

What is the inter-play there?

How would you describe that going forward?

And in particular, you mentioned that you had -- we're just now seeing from the impact of increased promotions that you're putting into place.

Did you see that toward the back end of the quarter?

How should we think about that going forward?

Again, the inner-play of the top line and kind of the margin expansion going there on North America.

Yes, I think the answer to that, ALI, is gross profit.

We have seen in our U.S.

business, as being said, with a combination of restructuring benefits, our trading up strategy, the Colgate business planner, and our traditional funding the growth programs, a gross profit expansion in the United States substantially ahead of the world average.

And while for the year, our advertising will be up double digit, and on a ratio to sales basis, that still allows the expansion in operating margin that you are referring to.

We will it take our next question from Bill Schmidt, Deutsche Bank.

Please go ahead.

Hi, good morning.

Can you just give us an update on the restructuring savings in the quarter and then also the Colgate business planning saving.

And also, kind of what the outlook is for Colgate business planning for the full year and next.

I guess that was a one question Bill?

(LAUGHTER) I did my best.

I was scared of Bina.

Let me remind you of the total program, Bill, and then come to your specific questions.

The Total Program now on an after-tax basis, has the charges at 675 to 775, and the savings at 300 to 350, which you will be very well aware of.

In terms of the restructuring savings, after tax, in this quarter, around $23 million.

For the year, we expect between 90 and 95 million this year, and of course, the balance about 100 to 105 in 2008.

Restructuring is on track.

All of the major programs well managed.

And the savings, as I've just outlined.

Colgate business planning, turning to that, again, continues to be very much on plan.

As I said the last time, we will have the full Colgate business planning solution supported by the SAP software in about two-thirds of our company sales by the end of this year.

It will be in over 70% of the sales as we enter next year.

We have done many of these so-called deep dive analytic programs in 10 of our major markets, accounting for 50% of our trade spending.

And this year, you will recall, Bill, we said that we thought the savings from CVP would be around $50 million.

It turns out the savings are coming in nearer $75 million.

And the 50, and you recall also, that we said that we expected $100 million of savings from Colgate business planning in 2008.

And we're still sticking with that, although perhaps a little bit more optimistic given the performance this year.

Great.

Thank you very much.

We will take our next question from Bill Chappell, SunTrust.

Please go ahead.

Good morning.

Just kind of a simplistic question, but in the past you said that every dollar change in oil is a penny to EPS.

So, if I look at the $20 move over the last three months, does the math not still work that way, is restructuring just fully offsetting that?

When you look at double digit EPS growth next year, is it just lower double digit versus higher double digit?

Well, let me go through the gross profit, if I can find it.

So, Bill, if I took the third quarter, just to do the traditional roll-forward that we do, just to put it in perspective, obviously last year, the gross profit was 56.5, and now 57.3 this year, we're up 80 basis points, and essentially we face a head wind of about 2.1 percentage points of material prices, which was a combination of our traditional funding the growth savings, restructuring, and then the pricing mix benefit which can trace to CBP, offset that and more to the tune of the 80 basis points difference.

So as we look, going forward, we remain, based on the budgeting activity we have conducted thus far, we remain confident of the 75 to 125 basis points expansion increased in our gross profit for next year.

On the average, we're looking at oil at about $75 a barrel, and that, you know, that we will see our role in packing material costs up between 5 and 6%, but with all of the programs we have in restructuring, funding the growth, and CBP, we see ourselves offsetting that, and still being within the 75 to 125 basis points increased that we have talked too.

So that is getting it right down to the planning level.

I think, as we have evolved at our discussion on oil, you know, we have said that about a third of our business is directly affected about a third, you know, half, and about a third, not really affected.

So from a detailed modeling point of view, we feel quite comfortable with that projection next year.

I would add one thing.

That when we had previously spoke of this, it was oil up by $2, is a penny of EPS.

And we will take our next question from Lauren Lieberman, Lehman Brothers.

Please go ahead.

Thanks.

I think I didn't really catch all of that, actually.

So, as I understanding, you're budgeting oil at $75 right now for '08?

On the average, yes.

Okay.

And then can you go through the more specific components of gross margin?

Could you give aus big bucket of raw material costs being a minus 210.

Right.

And you really got a get of funding that goes bucket of price promotion bucket and so on.

Okay.

Let me answer regarding to that Lauren.

Thank you.

Okay.

So, with the same (inaudible) last year and from material price as you say negative 2.1.

Funding the growth of positive 1.4.

Restructuring, positive .6.

And then pricing, half a point.

And mix, et cetera, .3.

Okay.

That's great.

Thank you.

We will take our next question from Wendy Nicholson, Citigroup.

Please go ahead.

Hi, my question has to do with Latin America profit margins.

It seems like so many of the other regions there are seeing huge margin increases but that's our region where we've seen margins go down two quarters in a row and I'm just wondering is that because -- I mean that region is so incredibly profitable to begin with, and there hasn't been as much restructuring there, we should sort of expect margins to flat it out or is there something going on from a competitive standpoint that you're needing to spend more in that region?

Nothing from a competitive point of view, Wendy, that is out of the ordinary.

I think as we discussed from the last call, we are seeing very robust market growth dynamics, and we are investing to grow this business, so the advertising is up.

And part of that is related to the timing of activity behind which we are putting that advertising.

And I think from an operating margin point of view, we're going to see the operating margin back up again next year, at least that's our estimate.

Terrific.

Thank you.

We will take our next question from Justin Hott, Bear Stearns.

Please go ahead.

Can you hear me?

Yes.

Ian, as you think about the categories here, and you've done an amazing job the last couple of years in oral care delivering great results an the organization and really sounds like it is hitting on all cylinders.

When you think about where you want to go, do you feel the organization is better equipped now to expand into other categories?

Whether or not you need that growth that you've built a better organization now with all of these initiatives?

And if you want to go, you would be a stronger company for doing it and be better equipped to do it?

I don't know what you mean by other categories, if you mean new categories to Colgate.

New categories.

The answer is that, we don't see a need for that.

We believe that if you look at the oral care, personal care, pet nutrition and home care categories that we have bounded a boundaries for ourselves, there are very good growth and profit expansion opportunities remaining, and we continue on a global basis to take advantage of that going forward.

I continued to feel that the focus we have on being expert at understanding the consumers and the professionals that recommend products and the customers that sell them in those categories, being more expert by focusing there, gives us an executional focus and advantage which we can benefit from, for many years to come.

Okay.

Thanks.

We will take our next question from alex Patterson, RCM.

Please go ahead.

Yes, good morning.

Good morning Alex.

Good morning.

You know, I wanted to get a sense, the reinvestment spending you've been doing into kind of operations, to structural stuff, you talked about this CIC developments and then part of the original restructuring was the development of sales and sort of feet on the street in leading markets.

Are we seeing a lot of that plan into how do you as you may, is coming out next year and if so, how does that look going out into '08 and '09?

Well if you look at the SG&A, and break down the component elements, obviously you know, advertising is up.

Overhead with logistics in is flat.

Fixed costs with logistics out is actually down slightly on a ratio basis.

But that still does include, exactly as you say, more resources on the ground, particularly in the developing markets.

So going forward, I think we would expect to see our percentage overhead excluding logistics down next year, as we get the full benefit of the restructuring.

And that still includes the investment in the incremental resources that we did indeed say we were going to do.

Okay.

Thanks.

We will take our next question from John Faucher, J.P.

Morgan.

Please go ahead.

Yes, good morning, everyone.

A quick question, you know, looking at your guidance for next year, on a regional basis, with what looks like emerging markets, you expect another strong year going out there.

You know, is there any way you would say okay the last couple of quarters you would see a change, either a market accelerating or decelerating in terms of market we should keep an eye out for the next 12 months?

Thanks.

I would say nothing of any significance, John.

Perhaps most of the press and media coverage these days is about the, you know, U.S.

and whether or not there will be a slowdown and you know, will that slowdown be a recession.

Pleasingly, at least in the businesses that are important to us, we do not see from a consumer point of view a slowdown in the purchasing of our products, particularly in the personal and oral care categories, maybe a tad of a slowdown in some of the household product categories, and as I said earlier, perhaps most encouragingly, year on year, we're seeing no increase in private label.

So no other countries around the world to call out neither particularly troubling nor positive and the U.S.

quite pleased with how our categories are performing.

We will take our next question from Amy Chasen, Goldman Sachs.

Please go ahead.

I'm sory to ask if some of you -- if you answered the question and I apologized, but I'm still not clear on why North American volume came in as low as it did relative to your going in expectations?

Was that a particular category?

Was it a particular channel?

Can you just kind of flush that out for us a little bit more?

I think as we said, Amy, and I did answer this earlier, we have been pleased with our U.S.

business over this year.

You know, 5.5% for the nine months.

And we expect that to continue next year.

We are beginning to see the benefits of the new products we have launched.

And the increased consumer promotion that we said we would put behind that business.

And our oral care business is up, you know, double digit.

In the U.S.

And importantly, the month of October is off to a very nice start in our United States business.

So we feel good about that.

And if you focus on the number of the quarter, perhaps some channel effect was we began to put out promotional activity in place.

But confident about going forward.

Okay.

Good.

But, I'm sorry, to follow-ups.

What do you mean by channel effect?

Just mean the timing of getting promotional executed in all of the different trade channels leading some to grow more aggressively than others.

Okay.

And when you say that your oral care business was up double digits, can you tell us what was down?

What was the weaker categories?

Because something was obviously much weaker.

The weaker category was home care which is exactly in line with our strategic priorities as you know.

It is oral care, pet nutrition, personal care and home care.

Okay.

And which channels were weaker?

I thought this was -- I'm not going to go into the specifics of each of the channels, Amy.

Okay.

Thank you.

And once again, that is star one if you would like to ask a question.

Or if you have a follow-up question.

We will take the next question from Christopher Ferrara, Merrill Lynch.

Please go ahead.

Hi, guys.

A repeat question from every quarter, I guess.

The fact that the U.S., or I'm sorry, the overall advertising did not go up as a percentage of sales this quarter, I understand it was in line with what your expectations were, but does it give any more insight into how do you view at overall 12% target going forward?

The 12% continues to be our target, Chris.

As I said a little bit earlier on the call, we expect for this year, our advertising to be up double digit, and the North of 11%, as a ratio to sales, and our preliminary look at our 2008 budgeting stance, although not final, shows continued double digit increase in our advertising, and continued progress towards the 12% goal we have established for ourselves.

So that continues to be very much our game plan.

Thank you.

Welcome.

We will take our next question from Alice Longly, Buckingham Research.

Please go ahead.

Hi.

Good morning.

Is it reasonable to expect with the oil prices doing what they're doing that Hill's will be taking further pricing for next year?

Yes, I mean the Hill's cost pressures of course stem from, you know, agricultural commodity cost increases which can indeed be a bio-fuel, and therefore at least indirectly oil-related, and you're exactly right, Alice, as you know, this year, we took pricing in the first quarter of the year around 4%, on our Hill's business, and have announced for the fourth quarter of this year further pricing to the tune of between 6 and 8%, depending on the line of products that's here in the U.S., and of course, we are doing that internationally as well.

The intention of course being to rebuild the Hill's gross profit through the fourth quarter and into next year.

And you have heavy shipping costs for Hill's as well, right?

Yes.

Are there any other categories where you think you should take pricing?

We're reviewing that on a category by category basis.

We have pricing factors into our preliminary budget position, between a percentage point and a percentage and a half.

And obviously, where we see the need, as you work through each of the commodities, and the raw material impact, which oftentimes are lagged, as you know Alice, where we need to, we will take the pricing.

Excellent.

Thank you.

Sure.

We will take our next question from Ken Gal, Waddell Reed.

Please go ahead.

Hi.

I don't have a question.

All right.

Thank you.

We will go next to Linda Bolton- Weiser, Oppenheimer.

Please go ahead.

Thanks.

Could you talk a little bit about what you've done with the times of name brand since you acquired it and I believe a natural dentist might be a new entrant of natural toothpastes after being in the national mouth rinses and do you think that is a threat to times of name business?

Can you talk about that?

Yes.

We're really pleased with the Toms business, having acquired it.

A couple of comments to make.

The business was up in the third quarter strong double digits.

I think reflecting the increased marketing support we put behind the business, and the distribution that we are building with the business, number one.

Number two, the market share actually is continuing to trend upwards historically from a Nielson point of view running at around 1.4, 1.5, now up to 1.7%, and growing.

And as I mentioned on the call the last time, we have very clear expansion plans for this business in the developed world, starting with the U.K., moving through Western Europe, and obviously down to Australia/Asia.

So a good expansion plan is in place.

And I think given the scale of opportunity and natural, I don't see a particular new entry as a threat.

I think there is room for Toms to continue to grow quite healthfully.

Thank you.

And we will take a follow-up question from Alex Patterson, RCM.

Please go ahead.

Ian, you started to talk about a little bit, any way you can put more elimination on some of the new product pipeline you suggested be more robust than normal as we get into the beginning of '08.

I would offer no illumination, Alex.

You know, other than to say we have, you know, organized ourselves to continue what we've always believed is a healthy flow of relevant innovation.

We have that this year.

And I think you will see as next year unfolds some interesting innovation come into the business that will be, you know, consumer relevant and continue to build our top line and our market shares.

But in aggregate, are you suggesting it is more than we've seen previously or about in line with what '07 showed?

I would say, you know, it will be what it will be.

I'm not calling a sharp uptick.

It will be what it will be.

That's true.

Thanks.

And we will take a follow-up question from Lauren Lieberman, Lehman Brothers.

Please go ahead.

Thanks.

I was hoping you could offer to touch on the operating margin expansion in the greater Asia/Africa business, because that was the other real standout in addition to North America, and I would think that the investment spending there would have been also going up pretty significantly.

So just, you know, major drivers of margin expansion in that business.

Again, the expansion trace is largely to the gross profit again, Lauren.

Let me just get that.

Hold on a second.

Sure.

Yes, while we don't quote the specifics of the gross profit expansion, we have in Asia seen a fairly meaningful increase in our gross profit, which again like the U.S., as you perhaps would expect, given the operating profit, operating margin expansion, is ahead of the world, ahead of the world average, and that is at the same time, as we have continued to increase our advertising support behind growing those businesses is that a double-digit level.

Do you have a sense for what the big driver -- is it a mix shift that is happening within the business that is the biggest driver of the gross margin there or is it restructuring savings that are disproportionately impacting that business?

It is a combination of all of the things I have talk about, Lauren.

It is the trading up strategy that Bina mentioned that works very successfully for us, the total example in Latin America, were equally applies to Asia.

So it is mix.

It is trading up.

It is funding the growth.

It is Colgate business planning.

And it is restructuring.

Okay.

Thank you.

Hello.

And we will go next to Amy Chasen.

Goldman Sachs.

Please go ahead.

I don't have any further questions.

Thanks.

Thanks, Amy.

And we will go next to Connie Maneaty, BMO Capital Market.

Please go ahead.

Hi.

I do have a follow-up question and it relates to what other people have been asking about the regional development of profit margins.

I mean given that they were up so strongly in North America and Asia/Africa this year Does it make sense that next year because of the projects in place we would see that sort of jump in the regions where there wasn't that kind of expansion this year?

You know, I guess Connie, we haven't tended to give forward guidance in operating margins.

I would say that we continue to feel very comfortable with the expansion in gross profit that I talked too, between the 75 and 125 basis points, and you know, that would translate through the divisions in terms of the commercial priorities and flow its way to the bottom line.

Okay.

Thanks.

And at this time, we have no further questions.

I would like to turn the conference back to Ms.

Thompson for any additional or closing remarks.

And I will turn it to Ian for the closing remarks.

And this is Ian.

Thank you very much for joining the call and your questions and support, and we look forward to coming back and continuing the dialogue as we close the year.

Thank you.

And ladies and gentlemen, that does conclude today's presentation.

Thank you for your participation.

You may now disconnect.