高露潔 (CL) 2007 Q4 法說會逐字稿

Good day, and welcome to today's Colgate-Palmolive company fourth quarter 2007 earnings conference call. Today's conference is being recorded and is being simulcast live at www.colgate.com. Just 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, Steve. Good morning, and welcome to our fourth quarter and year-end earnings 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 of the fourth quarter this morning, excluding charges relating to the 2004 restructuring program, and the fourth quarter 2006 gain on the sale of the company's household bleach business in Canada. The reported GAAP results with reconciliations to the results excluding the restructuring charges and the prior-year gain on the sale of the Canadian bleach business are included in the press release and accompanying financial statements and are posted on the investor relations page of our website 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 are very pleased with our earnings results, which yet again demonstrate the effectiveness of our global strategy with which you are all familiar. Getting closer to the customer, consumer, and [concession], being effective and efficient in everything we do, leading with innovation, and developing our leadership team around the world. We yet again achieved our goals of strong volume growth, solid gross margin improvement and meaningful increases in advertising while still delivering double digit earnings growth. As you read in the press release, worldwide sales and unit volume growth for the quarter were excellent, and encouragingly, the sales pace this year has started off well. Of particular note is our 90 basis point increase in gross margins, well within our targeted increase of 75 to 125 basis points and in the face of a very challenging commodity cost environment. Our ongoing funding the growth program continues to deliver substantial savings, and that has been supplemented with savings from our reception program as well as improved pricing.

Colgate business planning, now implemented in subsidiaries which represent over half of our sales is on track as well, and by the end of this year, should be implemented in roughly 70% of our business. Our double digit advertising increase has helped grow market shares around the world and we expect to achieve the 12% to sales advertising spending level we targeted for the end of 2008. Our tax rate for the year came in somewhat higher than anticipated, with the fourth quarter tax rate almost three points higher than the fourth quarter of 2006, due to the cost of increased remittances from subsidiaries and the negative impact of statutory tax rate changes in certain overseas subsidiaries. Our expectations for a 2008 tax rate are in the range of 32 to 33%. And we are delighted that our balance sheet remains solid and that our after-tax operating cash flow increased over 20%. Our return on capitol is strong at 34%, up from 29.7 in 2006.

So let's turn to the divisions. North America. We are very pleased with the strong volume growth in North America. In fact, in the U.S. alone, volume was up 7%. This was as a result of both market share gains and overall category growth. As has been the case for most of 2007, North America growth margin increased very significantly, a result of the restructuring activity here in the States as well as the implementation of Colgate Business Planning, which is now beginning to deliver savings. Consequently, operating profit increased to a record level as a percent to sales on a full-year basis. As always, new products have played an important role in delivering these strong results, and we expect that to continue in 2008 with several more exciting introductions. The first is Colgate Total Advanced Whitening, part of the Colgate Total Advance line. Like Colgate Total Advance Cleaning, Colgate Total Advance Whitening has a superior cleaning system and provides enhanced oral care benefits.

Multiple variants meet a variety of [needs]. Shipping in February, a new premium packaging will be Colgate Total Advance Clean Gel, and Advance Clean Paste, Advance Whitening Paste and Advance Fresh. And all these will be priced at the superpremium price point and will be supported by an extensive integrated marketing campaign. The Colgate total brand is the best selling toothpaste in America with over a 15% share of the market in 2007. In the toothbrush category, we will be launching Colgate 360-degree Sonic Power, a powered version of our very successful manual 360-degree toothbrush, and this has been selling in many overseas markets and has met with great success.

In body wash, we are introducing Softsoap Spa Radiance, for the consumer who wants to step out of each shower with that after spa glow. Priced at a premium, this line of shower gels, including exfoliating with mineral salts, moisture wrap with essential oils, and purifying with aromatic botanicals should continue to build the share momentum in this category. Our body wash market share for the full-year 2007 was at 9.3%, up 2 full points from 2006. Looking ahead, volume in North America is expected to increase in the solid mid-single digit range for both the first quarter and full year. Operating profit is expected to be up mid to high single digits for both the quarter and full year.

Turning to Europe, volume growth and market share results in Europe were very encouraging. For the year, market share increase in toothpaste, manual and battery toothbrushes, mouth rinse, shower gels and bar soaps, consistent with our focus on the higher margin oral and personal care categories. Overall in western Europe, our categories are showing good growth, a positive sign in what is a relatively mature market. New products are important to the growth of this region, as they are elsewhere. An exciting new toothpaste, Colgate Max White, that contains white microcrystals will be launching across Europe and the sOuth Pacific this year. Max White capitalizes on the innovative cooling strip technology used in Max Fresh by providing whitening strips for a superior whitening tooth paste. As is Max Fresh, this will be priced at a premium to the base business.

In shower gels, we will be launching a line extension in the Palmolive Pure Cashmere range, Intense Nourishment. This is also premium priced, as it delivers superior benefits, and should help to continue the positive trend in our market share in shower gels across the division, up year over year to 12.6% on a full year basis. Mouth rinse is another category where we have been placing renewed focus. We are growing our share in 13 subsidiaries, with particular success in the U.K. and Australia. In the U.K., our market share increased year over year by over a point to 14.3% with the latest read at 17.7%. And in Australia, our market share is up two points for the year to 15.5. Both Plax Whitening and Plax Overnight mouthwash have done well. Our GABA business is also doing well, and both the sales and profit basis have exceeded every year the commitments we made to the board when we acquired GABA in 2004. Looking ahead, volume in Europe is expected to increase mid single digit for the first quarter and full year, and operating profit is expected to increase double digits for the first quarter and full year.

Turning then to Latin America. Our business in Latin American continues to be very solid. The strong volume growth of 6.5% was driven by most countries in the region. In particular, Brazil and Venezuela saw strong gains while Mexico showed modest growth. Excluding Mexico, volume increased double digits. The seller volume in Mexico, where volume grew 9.5% in the year ago period, was primarily due to two factors: A fourth quarter change in the Mexican tax law resulted in a one time reduction in retailer inventory levels and in addition, two of our top five customers merged in the quarter, resulting in a one-time inventory consolidation. Market shares in Mexico are very healthy with increases in every single category except liquid cleaners. As referenced in the press release, toothpaste and toothbrush shares across the region increased to record levels.

Other categories are doing well as well. Our mouthwash sales increased triple-digit in almost every country in Latin America. We achieved market leadership in Argentina and became a volume leader in Brazil, with a record dollar share of almost 30% in the latest read. In bar soaps, Palmolive has now become the number one brand in Mexico with a 28% share year to date and a 29.2% share in the latest period. For the region, we have attained market leadership for the last two periods, and almost every subsidiary reached record share levels on a year-to-date basis. Colgate reached a 50% share, solidifying its already strong number-one position. Axion Tri-Cloro, launched across the region in 2007. has contributed to the positive results by bringing incremental share in every country in which it was launched. Terrific momentum in this business continues. Looking ahead, volume in Latin America is expected to increase high single digits in the first quarter and the full year. Operating profit is expected to increase several digits for the first quarter and full year.

Greater Asia Africa. Volume in Greater Asia Africa increased 6.5% with particularly strong growth in Asian markets. Market shares are healthy across the region. In India, our Leadership shares increased in both toothpaste and toothbrushes to 48.4% and 34.8% respectively. In Russia, we continued to gain toothpaste market share. Our share is up to 33.1%, up three points from a year ago. Other categories gaining share in Russia are toothbrushes, bar soaps, and shower gels. Our business in greater China continues to grow double digits, helped by three successive new product launches. Our market share in toothpaste is up to over 31%, and our toothbrush share is up over 1.5 points to just over 35%.

Our focus in this vast region has been on continuous invasion, distribution effectiveness, particularly in the indirect trade, and expansion into smaller cities accompanied by competitive media and in-store activity. This is clearly working and we are achieving growth in profits as well as sales. The initial phases of Colgate Business Planning having been implemented across Asia, and the return on investment toolkit is being used widely there. This has resulted in more effective trade spending and has also contributed to a strong growth margin increase and excellent operating profit growth. So looking ahead, volume in greater Asia Africa is expected to increase high single digit for the quarter and full year, while operating profit is expected to increase double digits for the first quarter and high single digits for the full year.

Lastly, Hills, as you know we and all major competitors are taking price increases to offset increased agricultural commodity costs affecting the pet food industry. These industry-wide pricing actions resulted in an initial slow down in the marketplace, which is reflected in Hills modest volume decline in the fourth quarter, but it now appears the market is beginning to strengthen. New products continue to play an important role at Hills. In the area of weight management, we reformulated our prescription diet RD and WD, Canine, and launched these products in the fourth quarter. Prescription RD, which is for weight loss, has been clinically proven to reduce body fat by up to 22% in just two months. I would like some of that. Our therapeutic food for dogs with arthritis, prescription diet JD Canine is also doing well as the result of the continuation and enhancement of programs designed to gain recommendations. from veterinary health care teams as well as to reach the pet owners themselves, who have dogs with mobility problems. So looking ahead, volume at Hills is expected to increase modestly in the first quarter and for the full year, and operating profit is expected to grow double digit.

In summary, then, we are extremely pleased with the way that we finished the year 2007. Colgate people around the world are all focused on our strategies and priorities, thereby delivering consistent results. We expect this momentum to continue in 2008, and look forward to sharing our progress with you as we go throughout the year. That is the end of my prepared remarks, Steve, so now we can open it up to Q&A. And a reminder to everybody, as you did last quarter, we would like to limit initially to one question with a follow up, and you can get back in the queue if you have a follow up. Okay? Thanks.

(OPERATOR INSTRUCTIONS). We will go first to Bill Pecoriello with Morgan Stanley.

Good morning. Ian, you've talked -- you stepped up investment in innovation capability and modified the processes and it sounds like you have a good stream of new news coming. Are you more confident in the innovation pipeline and the return you're getting on that stepped up investment as these products are coming to market and how are you measuring it in terms of how incremental they are? What percentage of your growth is coming from the new products? Thanks.

Yes, Bill, it is Ian. Good morning. I think as Bina said, we are pleased with all aspects of the strategic initiatives we are deploying from our focus on the consumers, the continued emphasis behind efficiency and productivity, growing our next generation of leaders and of course, as you say, innovation, where we have increased our capability around the world. As I said before, we have never made apology for our innovation stream in the past. But clearly, it is in our interest to try and increase the probability that we bring larger, more incremental products to the marketplace.

And indeed, our three-year pipeline of innovation, which is what we have, and nine innovation centers around the world and now three long-term innovation centers. We have added one more on top of the oral care and pet nutrition centers that we have, to have one now on skin cleansing, looking for that in time. You have heard from what Bina said, that we've had a good flow of new products this year, this year being 2007, and we have started 2008 with some good initiatives announced and already going to the marketplace. And we measure, as you would expect, Bill, any number of things, incrementality, the trial rates, repeat rates for the products, and we follow those very closely as we try and continue, as we have been, to build our market shares with marketing investments and the new products. So yes, we are pleased.

We will go next to Chris Ferrara with Merrill Lynch.

Thank you guys. Just wanted to ask about the U.S. margin. I know you have been pacing up pretty strongly, a couple hundred basis points in Q2 and 300 in Q3, but the 600 basis point improvement, I guess you said it's lot for a smaller company, can you give some color on that? And what ad spend might have been in the quarter in North America. Just so I can get a sense for how sustainable that might be.

Let's turn to that question, Chris. Yes, the real driver in North America has been the sequentially strong gross profit improvement we have seen in the third and now the fourth quarters of this year, between three and 400 basis point improvement. And that all traces to the changes we have made in our global supply chain, other restructuring and funding of those activities, which has delivered that boost to the gross profit.

We had talked about sharpening our promotional focus in the fourth quarter of this year behind our toothpaste business with the benefits of Colgate Business Planning and that has been very effective. We have seen our market share grow. We have been very encouraged by the top line growth of the U.S. business, and if I look forward, the advertising increase in our U.S. business, which was up double digits for the year this year will continue at that pace next year and continue to take HOS ratio to sales up yet again. And the gross profit expansion will continue to be strong, not in that 300 to 400 basis point range but in the 150 to 250 range for 2008.

We will go next to Amy Chasen with Goldman Sachs.

Hi. I just want to [philosophically] on pricing. It looks like -- and I understood the comments you said on Latin American with volume being tempered by things that happened in Mexico. But if you look at both Latin America and Hills, both of those regions had weaker than expected volume, at least relative to my expectations, and the pricing was much higher than I had expected in both of those regions, so it looks like you are philosophically willing to take the volume hit to get the pricing when necessary. Can you comment on that and whether you see more of that to come in 2008?

I think I would delineate between Mexico and Hills. Mexico, which was the effect in Latin America, as Bina said, truly was a couple of one-time events. There was a change in tax law, which resulted in reduced inventory purchases by major customers because they were no longer tax deductible. And secondly, two of the top five customers in Mexico consolidated. That was Gigante and Soriana, and of course, as is usual, when you have those consolidations there was, likewise, an inventory reduction. so the modest growth we saw in Mexico traced precisely to those two things and that was the depressing factor on Latin America. If fact, if I were to turn to this month in 2008, we have seen and continue to see strong double digit growth in both Latin America as a division and Mexico as a subsidiary. So Mexico very, very much goes to events.

Hills is a slightly different story and strategy. Hills, as you know, has been faced with high agro-based commodity cost increases, which have put pressure on the gross profit line. And we took the decision, along with others in the pet nutrition industry, to take pricing to offset that at an elevated 7% level. And as is customary, the market slowed down after that happened. But as we tracked both the channels and our business, we saw channel growth coming back before the end of the year and rather like that in America and Mexico, our Hills business is off to a strong double digit start in sales growth this year.

So, we approach pricing not in a cavalier fashion, not as a blunt instrument. We monitor very closely competitive activity. We monitor very closely consumer activity in the marketplace. I think what you will see going forward is intelligent application of pricing at the right time while maintaining the top line growth that we have talked about before in that 5 to 8% volume range. So it is pricing to offset costs but not to slow volume.

We will go next to Filippe Goossens with Credit Suisse.

Bina, I hope you will permit me to ask a two-part question. They are related, I promise. Ian, good morning. Within the context of companies focusing more on sustainability trend, can you comment on whether you see any significant opportunities within the Amazon sub-brands that you have in Brazil as a way to reposition the Palmolive brand towards a younger customer and perhaps some higher price points? And then my related question is as you are test marketing a number of SKUs on the skin care side in Mexico. If skin care were indeed to become the fifth leg to the Colgate share, would your preference still be to do that organically versus looking outside? Thank you.

I will take that as a two-part question but not promise to answer both parts. The -- relative to Amazonia, we are very excited about that as an opportunity to expand our Palmolive franchise. As you say, originated in Brazil, traces to the concept of naturalness. And we have indeed tested it beyond Brazil. We are taking it already to central Europe where the consumer responded very positively and where we see the opportunity to expand further, we will clearly take advantage of that opportunity. So absolutely, yes.

Relative to other skin care offerings, we have in test markets around the world, I assume primarily you would be referring to the skin lotions and creams we have been testing in Mexico, which today sit at about a six to seven percent market share. We have ambition to take that to a 10% market share as we exit 2008. A benchmark to consider further expansion, and if we realize that benchmark, I think you will see us expand that business elsewhere.

Relative to acquisition in general, I can only reiterate our general strategy. We are always interested in opportunities to strengthen our strategic position in categories and would actively pursue opportunities that presented themselves to do that along with the valuation we thought we could deliver. But we do not see a need to have to reach for acquisition, either to expand the segments in which we do business, or maintain the rate of growth that we have. So, an opportunity, but not an necessity.

We will go next to Nik Modi with UBS.

There has been a lot of debate about the health of the global consumer, particularly in the emerging markets, given what is happening here in the U.S. Most companies have come out and said things are pretty fine. And the question I would have for you is in Latin America specifically, are we seeing any early evidence of any type of softening? If you could just give your perspective on that at a very high level.

It is difficult for me to give anything at a high level. The answer is no. We are not seeing anything that would indicate a slowdown. Obviously we stay very, very close to that. Interestingly, if you take a big step back and look at the last three or four recessions around the world, starting with the mid 80s, we have delivered strong double digit EPS growth through those times while maintaining good top line growth of our business, but if you come more sharply in to 2007 and 2008, again, as I said to Amy, the Latin American volume in the fourth quarter relates directly to that one-time combination of events in Mexico with no underlying indication of any consumer trade down or slow down.

In fact, we have stayed very close to that, of course, in the developed markets as well. And here in the United States continue to see consistently through each of the courses of 2007 an underlying growth rate in aggregate in the categories we do business, between 3 and 4% and in Europe between 2.5 and 3.5% and we see private label in our personal care businesses flat to down. And so, so far, we are seeing no indication of a slowdown. It is fairly normal in our kinds of personal care businesses in the emerging markets that once consumers enter our categories and bring them into their home and get used to using them, that we don't see them trading out when economies slow down. In those emerging markets, we offer a different packaging forms with different pricing points to make sure the consumer always has access to our business. But the headline answer to come back to your original Latin American question is no, no early indication.

And we will take our next question from Ali Dibadj with Sanford Bernstein.

I have another question particularly on margins. This is the only quarter this year that has been up year on year. For the year it is looking like it is on par. That is a surprise to me given CBP being put in place, given pricing trading up obviously, the bleach divestiture. Are you seeing that -- I know on the last call you said you have to spend more back, or you're planning to spend a little bit more back. Are you saying you have to spend that much more back to get to the growth levels you want in Latin America?

I think as I have answered before, Ai, we have chosen to spend back. We have chosen to spend back to increase penetration and grow our market share and put premium value product opportunities in front of the consumer. So it is not a need, it is a choice.

We will go next to Wendy Nicholson with Citi Investment Research.

Hi. I had a question about the buy back that you announced this morning. It struck me as being a very big number and maybe aggressive in language and in timing than I have seen from you in a long time. And particularly since I don't think you bought back stock in the fourth quarter, maybe reflecting the move the stock had had, I am trying to interpret, is this a commitment to buy 30 million shares over the next two years? Because that is a big number and I am wondering what that reflects? More of a emphasis on buybacks as opposed to acquisitions or dividend increases, or what was the thought process there?

Let me say, first of all, Wendy, no change in strategy, approach, or thinking. And no drama. Certainly no drama in the way you pose the question to the two-year plan, 30 million share buy back. You may recall that we had share authorization in March of 2006 to buy 30 million shares over a two-year period. And that -- that is going be used up by the end of February this year, number one. Number two, we did not stop buying shares in the fourth quarter of last year. Indeed our gross acquisition of shares was approaching 4.5 million shares, $344 million in the fourth quarter. So, what this authorization allows us to do over the coming two years is to buy back the same number of shares that we bought over the last two years, and that is all that it is.

We will go next to Alice Longley with Buckingham Research.

I have a question on Hills. PetSmart guided sharply down for the fourth quarter, citing poor consumer for pets. Could you give us the growth rate of dog food, I guess, in specialty channels in that period? Obviously you are gaining share and doing fine.

One second, Alice. Let me reach here for the folder. Yes, as I had said, if you take the total specialty channel, of which PetSmart is part, what we are looking at here in terms of year-end value growth in that -- in that category of between 5 and 8% in aggregate. That is all specialty channel. Pet, vet. And that is what we are seeing. And you are right in saying that our market shares have likewise been growing, and again, as I said earlier, our Hills business is up double digits so far this year and that is reflected in the United States as well.

We will go next to Bill Chappell with SunTrust Robinson.

Good morning. This is actually Mark in for Bill. If you could just give us an update on your commodity assumptions for 2008, with oil hovering around $90. And pricing to offset, whether the majority of that is list or that's just innovations.

Sure, Mark. Let me just get the file here. Okay. Let's turn to input costs and our response -- our response to that. We -- as we had said on the last call, went through our budgeting process with oil running at an average for 2008 at about $75. And that is all across all of our businesses, an increase in input costs of around 5 or 6%. Obviously, seeing what everybody else has seen as we came out of our budget process, we have been back around the world and had our divisions redeploying activity behind the $90 assumption which would see the input costs increase by about 8%.

Now a few things to say in terms of how one responds to that oil and across that impact of that oil. First and foremost, these impacts are not directly linear. So as we see oil increase, short term increases, do not on our business, result in immediate costs. About a third of our materials are directly oil related. A third are partly oil related and a third have little correlation to oil. But how we have approached it, and how we continue to approach it, I guess can be best exampled by breaking down for you the fourth quarter of this year's gross profit. So if I were to go back to the gross profit in the fourth quarter of 2006, at 56.6%, the material price negative on that gross profit is 230 basis points. Pricing for us offset that by about 40%. So 0.9 positive for pricing. And then the rest was our long standing funding the growth savings, which added 150 basis points positively.

So those are all the efficiency and productivity programs that we have been focusing on in the company for a long time. And then there was a 60 basis points benefit from restructuring and about another 20 from mix, et cetera, which gets you from the 56.6 to the 57.5 and the 90 basis point increase. So our approach to it is on many levels. Number one, yes, pricing in terms of list price increase. Two, efficiency that we get from our Colgate Business Planning tools in terms of our trade spending.

The traditional funding the growth savings programs that we have year in, year out. The benefit from restructuring and the mix of our business, moving to higher margin categories and within those categories, higher margin offerings to the consumer. And it is all of those that we will be deploying to offset the assumed $90 barrel of oil.

We will go next to Justin Hott with Bear Stearns.

Thanks. Could you give us a little more detail on Colgate Business Planning and some of the results you expect to see in 2008? And I think you mentioned Asia as almost fully rolled out? Can you talk about where it is around the world?

If I can find the file, I will be glad to do that. Thankfully I found it. Yes, as you say, Justin, Colgate Business Planning continues to be a very important part of, I think, our growth strategy and productivity strategy going forward. And we are expanding it around the world. At the end of 2006, we had it in about 12 to 15% of our global sales. By the end of this year, we are approaching 60% of our global sales and we expect to have Colgate Business Planning deployed in subsidiaries that account for 70% of our global sales by the end of 2008.

From a savings point of view, we got about $7 to $10 million of savings in 2006. This past year of pretax we have savings in the order of magnitude, $70 million. And as I have said before, we have an expectation to deliver $100 million in saving from Colgate Business Planning in 2008. So, the answer to your geographic expansion, increased savings, and as I said before, what we like about Colgate Business Planning, it is something that you get better at over time. So, we think the benefits here will accrue well beyond 2008.

We will go next to Bill Schmitz with Deutsche Bank.

Hey, Bill.

Bill, your line is open. Please check your mute button. We will go next to Connie Maneaty, BMO Capital.

Good morning. I still had some questions on Latin America and especially Mexico. Oftentimes, when retailers combine the inventory adjustment is not limited to one quarter as you suggested it was in Mexico's fourth quarter. What is different about the combination of these two retailers that gives you confidence that it is, especially since in the first quarter right now you are going up against a very tough comp to last year's 14% unit growth in Latin America?

Thanks, Connie, as I said, the impacts from the first quarter were two. One is that income tax law change. Clearly that was a one-time in the quarter event. The confidence on the Gigante Soriana traces to our local management of that down there and how they have worked with those customers through their adjustments in inventory. But putting that to one side, to your point about comparisons, our first quarter volume in Mexico and Latin America, but specifically Mexico, is up so far strong double digit. So, we are seeing it play out as we had expected it would.

We will go next to Lauren Lieberman with Lehman Brothers.

Thanks, good morning.

Hi.

I sensed at least in the prepared remarks that there were many more mentions of premium priced launches of products. Generally I understand that is a goal. Is that something that's a little bit different and maybe as part of a result of what you have seen from Colgate Business Planning in terms of what appetite there is in the market for premium price innovations from Colgate, that's kind of the first part, and secondly, pricing overall for the quarter was about double what I had expected. Would you say that the balance was there more list price increases outside of North America that maybe we don't know about or is most of it Colgate Business Planning related? Thanks.

Thanks Lauren. Let me get the file here. To your first question, which is this notion of premium product, I guess my response to that would be that does not really come from Colgate business planning. That is more to do with providing value to consumers that consumers have the appetite to pay for because they are getting a benefit, a quality that they seek. And so it is really more to do with consumer insight than it has to do with Colgate business planning. And of course, whilst we are trying to develop those value-added new products for consumers, that does not mean in anyway we are taking away the entry price point offerings we have in countries around the world. It is consumer insight driven rather than an efficiency or Colgate Business Planning driven.

When you look at our pricing, generally around the world, you see list price increases in all geographies to different levels. I had mentioned the Hills level, obviously given the commodity impacts. And in those geographies where we are most advanced with Colgate Business Planning, you see Colgate Business Planning contributions to the overall average selling price change running at about 50% of the SPIs being taken. It's a joint contribution.

We will go next to John Faucher with JPMorgan.

My question has already been answered.

We will go next to Alec Patterson, RCM.

Ian, I was curious, the non-advertising SG&A spending trend, even backing out the foreign exchange lift, is still running up a pretty healthy level. I know you would probably say overhead as a percent of sales has been heading down and all that. As we try to separate out what you have been doing, on building up innovation, building up the feet on the street and the developing markets, all part of the spinback of the restructuring program, is that what we are seeing in this non-advertising SG&A and how much further does it have to go?

Alec, you have in part answered your own question. That is exactly what you are seeing. I was going stop and tell you that the world wide overhead on [race trio basis] is indeed down year-over-year if you take out the logistics piece of it. I think we said this when we announced the business building and restructuring program at the end of 2004, that we were focused on increasing our advertising spending behind our businesses, but also, our capabilities to more effectively compete on the ground. That traces to new product groups, that traces to R&D, detailers, merchandisers, sales organizations in general, and I would say that by the end of 2008, our plan is to pretty much have that in place.

We will go next to Jason Gere with Wachovia Capital.

Good morning, just one clarification question first. When you talked about CBP, the incremental in '08 is $100 million, correct?

Correct.

In terms of some of the other pricing outside of Hills that has been announced for 2008 in the U.S. market, whether or not you led that or did everyone else follow along?

We -- again, if you dissect the businesses most impacted by all related commodity costs in our U.S. portfolio of products, It tends to go the household product categories and of course, you have the tallow impact on bar soaps. So we have taken pricing that ranges from 5 to 12% announced, accepted, private label matching in our dish liquid businesses, on our fabric softeners and our bar soap. And we see in the marketplace that competitors have similarly moved and those prices will start to impact in the second quarter of this year.

We will go next to Joe Altobello with Oppenheimer.

Thanks, good morning. Just one quick question on the restructuring. This, I believe, is the last year of the original restructuring program you announced in December '04. You've already upsized it once. I was wondering if you could talk about any opportunities for incremental cost savings beyond '08 that could bleed into '09 and beyond.

You are right, Joe, the restructuring that we announced at the end of 2004 is scheduled to end at the end of this year in terms of charges. We did a pretty thorough job in the first couple of years of that restructuring program to try and identify all of those opportunities that we thought could create value and be executed within the four-year time frame we announced. So the restructuring program as we have it today, which is to say charges of 675 to $775 and savings of 300 to $350 after tax remain as we had put them forward before, and there will be no continuation of the restructuring beyond the end of 2008 or establishment of a new restructuring. The restructuring charges end at the end of 2008. That is the answer.

We will go next to Ali Dibadj with Stanford Bernstein.

If you could indulge me for a moment on my Latin American thing, this has been such a big driver of your growth. If it is, in fact, a choice, not a requirement to spend back more in advertising in that region, why is this year's organic sales growth lower than last year's and related to that, just as a point of interest, how much of your Latin American growth is actually coming from inflation in those countries, given that it costs 5 or 6%?

I think, Ali, we answered the Latin American question relative to Mexico. In other words, we saw a growth of 6.5% in Latin America. Without Mexico, just stripping Mexico out, that growth would have been 10% and the issue in Mexico traced entirely to the two one-events that I mentioned with all of Latin America and the Mexican business growing double digit this year. You know the volume growth we have had in Latin America over time, which has been consistent, and we are calling high single digit for 2008. There is no trade down that we see in consumers in our businesses, and we continue to build penetration and market share. So, we think we are building on strong business fundamentals with the right strategies and the right end market programs.

We will go next to [Neil Gleason] with the Boston Company.

I have a question about your ad spending. You talked about increasing that to about 12% of revenue. Once we reach that level, what can we expect beyond that?

Neil, when we started our business building and restructuring program, we set this aspirational and to a certain extent calculated target to get our advertising to a 12% level. We hedged north of 11% in 2007, and I think we are quite well poised to realize the 12% ambition we established by the end of 2008. And to be quite candid, as we always do, when we get to 2009, we will revisit what our business requirements are. We think 12% is a very healthy level, and we maintain it or depending on what our business needs and requirements are, you could see it shade up a little bit or even shade down a little bit. But right now we feel good about the 12% and we will be there we think, by the end of 2008.

We will go next to Filippe Goossens, Credit Suisse.

Thank you very much for taking my follow-up here. Going back to an earlier question from Lauren as it relates to a focus on premium products. One segment that we have not addressed this morning so far is the home care business. Could you frame how you think about the home care business strategically and particularly given that it is your slowest growing business as well as the one that is most exposed obviously to commodity prices aside from the Hills segment. Thank you.

Yes. We like our home care business. And we have some very, very strong leading market positions, particularly in Europe and Latin America, and we intend to continue to grow them. I think it is not a secret. We have been saying for many, many years that the growth potential, the gross profit potential in the oral and personal care businesses is , on a priority basis, more attractive than the underlying industry potential in home care. If we look at 2007 for the full year, while it was behind our oral care growth of 17% and behind our personal care growth of 12%, and behind pet nutrition growth of 12%.

Our home care came in at a very respectable 7% growth rate and it was double-digit in those two geographies, where I mentioned we had leadership positions, and the ability to deliver value that consumers are prepared to pay for exists. We have the technology to deliver it. And we have strong franchises in home care. So we continue to like the business, its role in the company and we are quite pleased with the growth rates we're getting.

We will go next to Chris Ferrara with Merrill Lynch.

I just wanted to ask about CapEx. So, obviously, the last couple of years through the restructuring, your CapEx has run significantly ahead of your depreciation levels. I want to get a sense for when you think that comes back down and what your outlook longer term would be for CapEx and D&A and the relationship between two? Thanks.

You are right, Chris. You have seen our CapEx consciously increase as we have established some of these state of the art facilities in Poland and the United States and in Asia. I think what you will see, starting in 2009 and certainly by 2010 and s that our capital expenditure will move back from the four plus to sales levels that we have today into our more normal 3 to 3.5% range. That is the plan.

And we will take our final question from Connie Maneaty with BMO Capital.

Hi. Could you give us a progress report on the once a week toothpaste and its test markets and what the likelihood of expansion is to other markets in 2008?

It is still doing, we believe, quite well in the U.K. and Australia. I think I have said before that we are anxious to temper expectation here because although we like the characteristics of this, in other words, it's not a new learned behavior, it's simply a new usification, we really want to wait and get a substantive repeat level on the business and we are not -- we are not going have that until towards the middle of this year. So I would imagine on the next call or maybe the one after that Connie, we would have something more substantive to report.

And having no further questions, this will conclude today's conference. We do thank you for your participation, and you may disconnect.