高露潔 (CL) 2010 Q1 法說會逐字稿

Good day everyone and welcome to today's Colgate-Palmolive company first quarter 2010 earnings conference call. Today's call is being recorded and is being simulcast live at www.colgate.com. Just as a reminder, there might be a slight delay before the question and answer session 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.

Thank you, Bina and good morning everybody and welcome to our first quarter 2010 earnings release conference call. With me this morning are Ian Cook, Chairman, President and CEO, Steve Patrick, CFO, Dennis Hickey, Corporate Controller and Elaine Pace, Treasurer.

This conference call will include forward-looking statements. These statements are made on the basis of our views and assumptions as of this time reason not guarantees of future performance. Actual events or results may differ materially from these statements. For information about certain factors that could cause such differences, investor shows consult our most recent annual report on Form 10(K) filed with the Securities and Exchange Commission and available on our website including the information set forth under the caption, risk factors and cautionary statements on forward-looking statements. We'll discuss our results and outlook excluding the one time charge of $271 million related to the transition to hyper inflationary accounting in Venezuela as of the 1, January, 2010.

We will also discuss organic sales growth, excluding foreign exchange acquisitions and divestitures. A full reconciliation with the corresponding GAAP measures is included in the press release. And is posted on the Investor Relations page of our website at www.colgate.com. And we will be glad to answer any questions you may have including or excluding these items as you wish. We are really delighted with our results. We started off the year with good momentum and strong financials.

Our financial strategy which we have been deploying for well over a decade, continues to deliver a health see P&L, solid balance sheet and good cash flow. We increased volume and gross margin while retaining our fixed expenses which has allowed to us invest generously in advertising while at the same time, growing the bottomline.

We had told you last year that 2009 would be a transition of balancing price and volume and in each successive quarter volume growth increased while pricing played less in the role. We've seen that shift again in the first quarter with volume increasing solidly in nearly every operating division. Of particular note as we had said in the press release, is our 170 basis points increase in gross margin, And as you can see this is as a result of our cost savings efforts including many funding the growth programs around the world rather than from pricing.

This is consistent with how we have achieved gross margin increases over many years. You'll hear as we go through the divisions how market shares have increased in many categories. And as always, new products play an important role. Our very healthy increase in advertising of over 30% has allowed us to support both new product launches as well as our ongoing businesses.

Cash flow was good and our working capital remains at very low levels. And as you may recall, we recently announced a dividend increase of 20% effective this quarter along with a renewal of our share repurchase program. We expect our strong cash generation will allow to us to fund these activities while maintaining a low level of debt. And as we indicated in our previous guidance, the tax rate in the first quarter was below the first quarter of 2009 due to the devaluation in Venezuela. Also included in the quarter was the $9 million one time charge related to the elimination of the tax deducibility of the Medicare Part D retiree drug subsidy.

Our expectation going forward is that the tax rate will be between 32% and 33% for the remainder of the year. And as previously disclosed, first quarter results were also impacted by the current devaluation in Venezuela. Again a gain of $59 million or $0.11 per diluted share is included in net income for the quarter related to the remeasurement of the Venezuela balance sheet and lower taxes on accrued but unpaid remittances.

This gain was partially offset by the impact of translating our Venezuela financial statements at a lower exchange rate resulting in a reduction to net income of approximately $30 million, or $0.06 per diluted share. As mentioned in the press release, the company continues to estimate that the full year impact of the devaluation will be a net reduction of $0.06 to $0.10 per diluted share. The impact for the quarter and full year is in line with guidance we provided in January of this.

So let's return to the division. Starting with North America. Results in North America were solid with healthy volume growth and excellent operating profit growth. We told you about a number of new products last quarter and the new product growth continues. Most recently in the oral care area, we introduced Colgate Proclinical toothpaste a product which brings cosmaceutical toy care. Colgate Proclinical is a new line of professionally inspired daily toothpaste formulated with clinically proven technologies that provide health and beauty benefits. It started shipping at the end of the first quarter when media and online activity also began. Colgate Wisk continues to perform well.

A second variant with Plus Whitening was launched in March. Trial for the product continues to grow monthly exceeding our initial goals and importantly the repeat rate continues to grow as well. It's considerably ahead of where Colgate 360, the best selling tooth brush in the US, was at is similar time frame following its launch. This has resulted in excellent market shares referenced in the press release.

Distribution into new channels is increasing as well including convenience stores, gas stations, air ports and college campus book stores. And we told you last quarter about a new deodorant product, Speed Stick Stain Guard. Initial shipments were strong and a very comprehensive integrated marketing campaign is in sight to support this launch.

We're combining TV media with a targeted sampling program as well as instore activities. And we also have a partnership with Haynes T-shirts, a sampling program which highlights that Speed Stick Stain Guard is designed to help fight yellow stains on white t-shirts. So looking ahead, volume in North America is expected to grow mid single-digit through the second quarter and full year. Organic sales are expected to grow low to mid single digits for the second quarter and full year. And operating profit is expected to grow double-digit through the second quarter, up absolutely and as a percent of sales and should grow at least mid single digits for the full year; up absolutely and as a percent of sales.

Europe, South Pacific, we are very pleased with the continued momentum in our European business. Although macroeconomic conditions remain somewhat fragile, successful new products backed by healthy advertising have resulted in good volume and organic sales growth.

Across the region our market shares increased in two face, manual and power toothbrushes, mouthwash, body wash, liquid hand soap, bar soap and fabric softeners. We are continuing our introduction of Colgate Sensitive Prorelief throughout the region. Results are very encouraging. In the UK, one of our initial markets, our initial markets our toothpaste market share is now over 50% and Colgate Sensitive Prorelief has added incremental shares. In the sensitive segment, the gap between Colgate and the leading sensitive toothpaste has been cut almost in half.

In Greece, after four months in the markets, we've now taken leadership in the sensitive segment at 8.5% over two and a half points ahead of our nearest competitor. In Italy, where Total Advanced Clean was named new product of the year for 2010 our toothpaste share is up almost two points year over year. We are excite about new products in other categories as well. We told you about our new body wash, Palmolive Nutrifruit, which began shipping late in the first quarter. Even before advertising the product, consumers response has been excellence which bodes well to the second quarter when media support will begin.

Another new product is in the home care category, we will be building our existing equities in Ajax cleaners, Palmolive dish liquids and Soupline fabric conditioners under the brand Netunaverde (phonetic). Targeted to consumers who are echo aware of a desire uncompromised ethicacy. These products contain ingredients of natural origin and they are formulas are bio degradable while still offering strong performance. The kind of performance which these leading brands are already known. Early trade reaction has been extremely encouraging and the products are shipping now. So looking ahead, we expect volume in organic sales to be up mid single-digit for the second quarter and full year.

Operating profit is expected to be up double-digit for the second quarter and full year, up both absolutely and as a percent of sales in each period. Latin America. We are especially pleased with the continued strong performance in our Latin America business particularly given the challenges we and other companies are facing in Venezuela. And as noted in the press release, we saw strong volume gains in most of our markets and continued good performance in our market shares.

Toothpaste, our latest exciting innovation, Colgate Sensitive Prorelief, is being rolled out across the region. It is now selling in Brazil, Mexico and the Southern Cones and is contributed to year over year market share increases in all of those geographies.

In Brazil, where our overall toothpaste share was up year over year, Colgate Total reached a record level of over 18%. In Mexico, despite heightened competitive activity, our toothpaste market share is up 20 basis points year over year to over 85%. And in Venezuela, our toothpaste share increased 3.6 share points to a record 93.7%.

As you know, mouthwash is another critical area of focus for us in many parts of the world. Across Latin America, our share is up over two points year over year to almost 30%. Nearly having the gap from a leading manufacturer that existed in 2007. We gained two more share points in Argentina, consolidating our leadership position to over 50%. The gain was achieved through gross in our base plaque business as well as the recent launch of Plaques Whitening.

In bar soap, we maintain the leadership position across the region. We established in 2008 and our 2010 years date share is up 20 basis points. In fabric conditioners or share was up 50 basis points to over 50%.

Our most recent innovative new product, Suavitel Good Bye Ironing, helped increase share. New TV testimonial advertising reinforced the key benefits such as wrinkle reduction on clothes and time saving. So looking ahead, volume in Latin America is expected to grow mid single digits for the second quarter and full year, with organic sales growing double-digit for both periods. Operating profit in the second quarter is expected to decline modestly from the very high levels for the second quarter of 2009.

Full year 2010 operating profit is expected to be basically flat due to the negative currency translation effects in the Venezuelan business. Greater Asia Africa. Sales in this region were very strong continuing the momentum with which we existed 2009. Toothpaste shares across the region were strong. In China, our share was up 120 basis points to almost 33% and was over 33% in the most recent period. Part of this was driven by the launch of Colgate Sensitive Prorelief in key cities.

In Russia, our year to date share is up almost a full point. And you may recall we launched Lmix, a java product in this market last year and this has contribute to the growth along with our Colgate business. Colgate Sensitive Prorelief has now been launched across the region and in the second quarter we will be shipping a whitening version in additional to the original variance there by increasing presence on the shelf. We maintained our leadership share in tooth bushes across the region.

In India, our share is up 400 basis points year over year to over 40% and in Russia our share is now over 51%, up 220 basis points on a year to date basis. Another category which has been very strong is mouthwash. As we continue our focus on this category in markets outside the US, Our shares increased in every market we are present in more than doubling in a number of markets.

Our shower gel shares are up almost two points across the region. New products supported by increased advertising drove our Palmolive franchise in Russia and Turkey. And in Thailand, a new schematic campaign for Protex, accompanied by impactful instore activity drove our share up two points year over year.

So looking ahead, we expect volume and organic sales to continues to grow at high single-digit levels for the second quarter and full year. Operating profit is expected to increase several digits for the second quarter and full year, up both absolutely and as a percent of sales.

Turning then to Hill's. We are encouraged by the improvement in our Hill's business from the fourth quarter of 2009. As we told you, we've been working around the world to ensure that our pricing is competitive in the marketplace through a combination of price reductions as well as rightsizing. And that process which began in September of 2009, should be substantially complete by the end of this quarter in the US and by the third quarter in Europe.

In conjunction with this, we've been building brand awareness via an integrated marketing communications plan. The print and online campaign leverages powerful testimonials to communicate nutritional efficacy, strong visuals to showcase new lower prices and includes the tag line, "vets number one choice to feed their own pets." We are already seeing the benefits in the marketplace. Monthly scanner data through March indicates that consumption of those right-sized, right priced products in US large format retailers has increased as compared with the prior six months average. And in addition, we are seeing veterinarian endorsements returning to their historically high levels.

A number of new product initiatives are helping to restore growth in market share. We told you last quarter about our launch here in the US of Science Diet for small and toy breed dogs. We began shipping in February and have achieved excellent distribution in overall consumer response. So this quarter we will be launching small and toy breed in Japan. We customized a product for the region with even smaller kibble sizes and smaller package sizes.

This is a great opportunity in a country where 65% of registered dogs are five kilos or smaller in size. And in Japan these dogs are considered precious and treasured family members, that require food specifically tailored to them. Another new product launch recently cross Europe was Science Pan for healthy mobility canine. Following the success we are now launching the product under the Science Diet brand in the US in June with a very comprehensive support plan including the healthy mobility challenge to improve pets mobility in just 30 days, And just this month in Europe we are launch ago wellness products which will be sold exclusively through the veterinary channel. Initial reaction has been very positive. This should help drive brands recommendation as well as market share.

So looking ahead, volume at Hill's is expected to be essentially flat year over year in the second quarter and should be up low to mid single digits for the full year. Organic sales are expected to decline modestly for the second quarter with growth for the full year in the low single digits. Operating profit is expected to be up mid single digits for the second quarter and full year, up absolutely and as a percent of sales.

So in summary, we are very pleased with the way 2010 has started. Clearly the momentum in our business which we enjoyed as we exited 2009 is continuing this year. Our strategies are working. Our ongoing funding the growth programs are helping to increase gross margin significantly. Our worldwide focus on increased advertising is resulting in excellent sales and volume growth. And our market shares are healthy and increasing around the world. So we look forward to sharing our progress as we go through the remainder of the year. Now, Dana, I would like to turnover to questions, please.

Thank you. (Operator Instructions) And we'll go first to Alice Longley with Buckingham Research.

Hi, good morning.

Hi, Alice.

Hi, could you tells given what's in the news what percentage of sales in the Europe South Pacific region are generated roughly in Spain, Portugal, Italy, Ireland and Greece all together?

I don't have that number off the top of my head, Alice, I must say, but it is relatively modest on a global basis. You'll have to connect with Bina separately.

But probably below 5% of sales?

It is modest. It is modest. I'd prefer not to guess a number.

And then could you give us an update on your advertising or media ratio to sales plan for this year for this year and also for your promotional activity coming off of sales, is that going to be a bigger chunk of sales or less than last year?

As well, just sort of taking a little bit of a step back, I think as we worked our way through last year and talked about this year, we said that we were very comfortable with the strategic initiatives that we had starting with the consumer and obviously driving growth with that consumer with new products and with advertising. And we said that we would be increasing our advertising both absolutely and as a percentage to sales in 2010. And, of course, we have started quite strongly in the first quarter and been pleased not just by the financial results.

But if we look at our market shares around the world as you may have seen in the release and heard from Bina's comments we are seeing good share progress in all of our major markets, particularly in the emerging markets around the world. So as we look forward for 2010, we continue to estimate that our advertising will be up both absolutely and as a percent of sales in subsequent quarters and, of course, for the full year.

As I said before, that really is media advertising digital advertising, sampling and professional programs we've had for quite a time and we've spoken about it for quite a time, moved our advertising emphasis into activity at the store level. That continues to be very effective in terms of engaging and connecting with consumers and we continue to increase out focus there and, as you say, that comes between the gross and the net line and is on top of the advertising I have just spoken about.

But that deduction from sales is going to expand a little bit this year.

Modestly.

Modestly. Okay. My final question is, you do tend to give some guidance for EPS growth and you confirmed that you think EPS will be up double digits this year overall. Of course, you have this big increase in the first quarter. Are you willing to say that your EPS will be up double digits in through the remainder of the year, the latter nine months of the year?

Alice, I think we've been very clear on this since the Venezuela matter started in January of this year and we put out I think quite frankly releases both with the devaluation and when the accounting change happened. Focusing on the devaluation, this is a subject that we have encountered many times over many years in several of the Latin America countries. We planned for it from an operating point of view and then we executed. That's what we did in the first quarter. It has always been and it will continue to be a combination of theory measurement of the balance sheet and the ongoing translation impact that will affect the subsidiary. That's how we've always done it, positive or negative, and that's how we have done it in 2010. So as we said then, I would repeat now, that the double-digit progress assumes the way we have operated Venezuela this year which is with all of the impacts of the devaluation in.

I understand that but your results, aside from that were better at least than I thought in this quarter. So I'm, I think the general idea is your earnings will not be up double-digit through the latter part of the year because of Venezuela and, should we be more optimistic than that?

Again, I repeat Alice, what I said, double-digit with Venezuela treated the way we have treated it and circling back to your very first question, the countries that you mentioned are less than 4% of our global sales.

All right. Thank you very much.

And we'll go next to Joe Altobello with Oppenheimer & Company.

Thanks, good morning, guys.

Good morning.

First question is on pricing. It seems like that was most acute, at least downward pressure was in your developed markets, North America and somewhat in Europe. Which categories are you seeing the most pricing pressure on?

First let me back up a little bit on price there, Joe. Yes, pricing was essentially flat on the quarter. You will know by looking back at history that that compares to price up 8% in the first quarter of last year. So over that time frame our pricing is indeed up and the comparisons as you work through the second half of this year become easier given relative pricing in prior years. So putting it in an overall context we are expecting pricing to be more favorable as the year unfolds with the full year in our historical half a percent to a point and a half increase worldwide.

Secondly, the gross margin as you know was up in the first quarter, 170 basis points notwithstanding flat pricing and we expect that gross margin to continue to increase as the year unfolds. Now when we think about pricing, there are really three contributory aspects. One is those things that you do to create trial for new products, the coupons that are used in the United States which go to price.

Second, are the promotional activities that one adopts to manage your ongoing business and, third, any action that needs to be taken to manage competitors. Our portfolio is very much focused on the Hill's, the oral care, the personal care and then our home care businesses. And if you take a snapshot around the world you would see that the pricing of competitors in the more volume oriented home care categories has been somewhat sharper. So if you focused on categories, it would from a competitive point of view be more in the home care area, although we have responded in a targeted way to like activity in other categories as well. But the strong buyers would be to the more volume home care businesses.

Okay. So it sounds like you expect a sequential improvement in pricing throughout the year.

We do.

You also mentioned gross margin and actually that was my second question. It looks like gross margin, at least sequentially, was down a little bit, you talked about a 60% gross margin this year. It sounds like some of that's going to come from pricing but are you still comfortable given that we've got some headwinds, you know, in the back half of this year on the commodity side that that 60% number is still billable?

We think by the end of the year getting to go 60% is still doable in 2010, Joe, and, you know, we continue to put great focus and get a great return from our traditional funding the growth program and that is the corner stone of our progress for 2010, and that is having built into our forward look projections with the rising commodity pricing and also the increases in oil. So pricing a bit, but more the traditional funding the growth initiatives.

Got it. Thank you.

And we'll go next to Bill Chappel with SunTrust.

Good morning.

Hey, Bill.

A little more color on the prosensitive launch. I guess it sounds like you were in Latin America, Europe and Asia or at least part. Can you kind of help us, were you there at the start of the quarter or was this more of a roll-out period so we would still see the full benefit in two cue or any updates on where it would expands in the seconds half of the year?

Well, you know, it's, would you almost have to go country by country. It is a, there are a lot of different timing so there's not an obvious, it all started in January or February. Secondly, I think we have made the point before that this is a long-term journey for us. We are very encouraged by the initial share reactions with the superior technology that is Colgate Sensitive Prorelief.

We are particularly encouraged by the early trial and repeat today that we are seeing in some of the lead markets like the UK and Taiwan. But there is a very strong competitor in that segment and we have said that this is going to be a multiyear adjourn me to achieving our over arching goal which is leadership in that $1 billion segment. In terms of our global expansion, we expect to be in about three quarters of shall we say the sensitivity world by the third quarter of next year. That's our plan and we continue to be on that plan.

Just to follow up, it doesn't sounds like Prorelief was a meaningful driver of the topline this quarter.

No, Bill.

Thanks so much.

And we'll go next to Ali Debash with Bernstein.

You talked about competition you are seeing in home and personal care. We just heard from another one of your competitors in oral care talking about 40% growth in Mexico and clearly that's in a smaller base, but large growth, being the overall leader in oral care in western Europe. Brazil being very successful and more pushes, they didn't say this but we believed potentially in India going forward. Can you comment a little bit on that? What are you seeing? How are you reacting? How are you planning to react about what's out there?

Let me talk about the markets and give you our perspective and observations on what we see. India as you saw in the release, market share up over 51% now and continuing to grow. And there is only one established competitor in India. China, our market share is up quiet meaningfully, over a point. Business was up double digits. And our leading competitor in the number two position, their market share is down in China. In Russia, our market share is up over 33%. The number two competitor in Russia is less than half of that share and the market share is down.

Turn to Mexico, our market share is up, competitor is flat to modestly up. In Brazil, we have the highest market share we have had in over ten years, continuing into the first quarter of this year. I think as may have been said, the volume growth that is being talked about there is largely to do with geographic expansion in the country when we look at the market shares in, whether it's the pharmacy whether it's in Port Alica (phonetic), they continue to be around that 5% level but I have quoted before.

In western Europe, we continue to lead in every segment with the exception of powered tooth brushes which is the smallest oral care segment in Europe. Our toothpaste share is 3.5 times. The competitor that you had mentioned, we lead in manual tooth bushes and we lead in mouth rinse. As you know, toothpaste and manual tooth brushes are by far the largest segments of oral care in any market in the world, certainly true in Europe. So we continue to comfortably lead that market in market share inside all cases, I'm talking here, Nielsen market shares, and even here in the United States we continue at least in terms of Nielsen all outlet share to lead here in the United States as well. So our response to activities in any market are what you would expect from a traditional marketing point of view starting with volume little and market shares that we have the overwhelming professional recommendation advantage that we have, and the strong linkage with the next-generation consumers through the schools programs. And then, of course, there is the offense in those markets of the Sensitive Prorelief which in Brazil is off to a terrific start and indeed Sensitive Prorelief on its own with the scanned Nielsen data in three months is ahead of the share, the prohealth product brought in over a year. That's what we see around the world, Ali, in terms of market shares provided by Nielsen, whether scan or oral outlet. And our responses will continue to be respectful but leverage the strengths we believe we have built with consumers and customers over many years and not take any of this in any way lightly.

It's very helpful trotting around the globe. Thanks for that. In terms of what you anticipate going forward, I'm sure you guys have market intelligence. Are you prepared for anything more aggressive? Are you expecting anything more aggressive? Even though some of the data obviously conflicts and everyone says they are gaining share, the goal at least is for everyone to gain share. How do you anticipate what's going to happen around the corner or do you think, not going to be very impact full to us?

We will react to what we actually see in the marketplace, we have had a lot of experience of dealing with competitors in the oral care aircraft head they are local, regional or multinational. We think we know what we are doing in this category in order to both grow it and if need be, defend it, and we will react accordingly. So that would be my answer.

Okay. I guess I asked that in the context of what we saw in pricing this quarter and expectations of improved pricing going forward. I ask it in that context, I guess.

That's why I said early on the call we have clearly worked all of this through in our estimating and we feel comfortable with the stance we are taking on pricing in our categories.

Okay. Just one very quick follow up and I apologize, sensitivity, Prorelief in the US, if you mention it, I apologize, any update there?

No. None, Ali. We are in the normal process of reviewing this with the Food and Drug Administration. And that is proceeding as it does customarily and when we any news you will probably be the second to know behind our customers.

Okay. Long enough. I'm not the third. Thanks very much. Bye.

And we'll go next to Doug Lane with Jefferies & Company.

Hi, good morning everybody. Is there any way you could quantify, we've seen a lot of raw material costs movement and shipping rates looking to go up. Is there any way you can sort of give us an order of magnitude on the cost side between shipping energy and raw materials, what kind of headwind you're looking at now versus maybe back in January when we talked?

Well, what I can say, Doug, is that we have reflected in our go forward estimating the prevailing oil prices at around the $85 level and we have taken account of the headwind now being faced with some of the key commodities that we by. And that is built into our plan for the balance of the year and that plan continues to see our gross margin continue to expand sequentially and for the full year.

Now, do you up your assumptions on the pricing front since January to try to recover some of these cost pressures?

As I said earlier, Doug, our pricing expectation for the year is between that half to a point and a half that we have historically seen from pricing. And the bulk of our gross margin expansion for the year is forecast to come from our funding the growth program which has been the driving of gross margin expansion for us for many, many years.

Right. Okay. And then just lastly looking at the US specifically where, we are looking at numbers where toothpaste market share is down a point or two. Is there a specific strategy in the US to recapture lost toothpaste market share this year?

Well, modestly down from an all outlet point of view the strategy is innovation and reaching consumers where we have great loyalty which in the US is particularly the Hispanic consumers where we do very well.

Do you expect to have the sensitive product out this year or is that more of a 2011 event in the US?

I can't really say, Doug, as I mentioned earlier to Ali, we are in active discussion with the Food and Drug Administration following normal models there and I don't have any incite or projection to give you.

Okay. Thank you.

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

Hi, guys, good morning. Can you talk about what your category of growth assumptions are as the year progresses, your expected categories, I know they never slowed markedly but are we going to get back to those sort of 4% to 5% growth rates that we saw maybe 2007, 2008 time frame?

I think we are certainly going to see low to mid single digits on a constant dollar basis and that is going to be led, Bill, by the emerging markets which we are seeing running at a double-digit clip and the development world is lagging and they are running and we are estimating low single digits for both western Europe and the United States. And pleasingly when we look at our categories we've seen our oral care business up organically double digits for the first quarter and our personal and home care businesses up low to mid single digits which we are quite pleased with in that context.

Okay. Great. Then just in terms of some of the price wars on especially in India? Obviously not P&G yet but that's speculation, are there signs that it's start to go abate a little bit because that's what we've sort of picked up in the past couple of weeks?

In India?

Yeah.

Well, no. The, our Indian financial performance has been very healthy and our market shares continue to grow in both , in both categories. So pricing wars is a classification we are certainly not looking at in our categories in India, no.

Okay. Great. Thank you so much.

And we'll go next to Andrew Sawyer with Goldman Sachs.

Sure, guys. Following up on your guidance for flattish profit in Latin America for the full year. I was wondering if you could parse out what portion of that was Venezuela and how it would look without Venezuela and if there were things going on from the margin perspective outside of Venezuela that we should be aware of as well?

Andrew, it hasn't been our custom to get to that level of detail on a division basis. If I take Latin America in total, we continue to expect good growth as we have said. And a gross profit modestly impacted by Venezuela in to the taillight to the at that time maybe down 80 basis points or so.

And then just a quick follow up on the second line, could you do the gross margin bridge that you typically do>

Yeah, happy to do so. So this is first quarter gross profit, Andrew, and you saw first quarter 2009 with 57.5%. And then as you work your way through pricing .1%. Funding the growth, a healthy 1.1%. Material prices a favorable .4% and all other mixed divestment, et cetera .1% and that takes you to the 59.2%.

Thanks a lot, Ian.

Okay.

And we'll go next to Connie Maneaty with BMO Capital Markets.

I just have one question. Most of might be have already been asked. In Venezuela, have you been able to price to recover the inflation impact?

We are moving forward with pricing, Connie, that does partially that and that is in place and moving forward.

Okay. Great.

And I would also comment that we are continuing to get access to dollars at the 2.6% rate for raw materials on our products with the majority of our products in Venezuela made in Venezuela.

And we'll go next to Lauren Lieberman with Barclays Capital.

Thanks, good morning. You touched a little bit on pricing and homecare but if you could talk a little bit more broadly about the competitive environment there and then specifically I think I missed it when Bina was walking through a description of the eco-friendly home care products, if it's a totally new brand or if it's a sub brand underneath the home care portfolio, how will it be priced? Kind of what's already in the western European market in that category?

It's, let's start with the second one because it's pretty straight forward. It is a sub brand but it basically ties together strong equities that we already have in Europe. So our fabric softener, our Ajax all purpose cleanser and our dish liquid all together. It is ties together and it is a modest premium and it is moving around Europe but too early to the comment on market share results. Reaction from the trade has been really quite positive.

So coming back to coming back to the subject of home care and activity in home care, again, you will remember that, gosh, I guess in 1988 we took the strategic view that HDD was a category that was not going to be a priority for the company globally and now have less than 3% of our business remaining in that category. And what we observation around the world, that there is a lot of pricing activity in home care, specifically in the laundry care segment which we don't compete in. But we have also seen activity in fabric softeners and in dish liquid, in some selected markets. And we have, where necessary, responded to that, and as I mentioned earlier, quite happy with the mid single-digit growth rate that we have accomplished and category margins that are quite pleasing with category margins on our homecare margins are health healthily up versus prior year.

Okay. Great. Thanks so much.

And we'll go next to Wendy Nicholson with Citi Investment Research.

Hi. I just wanted to go back and follow up to Andrews question about the profit growth in Latin America first. I know that you don't like to comment on specific markets, but it's fair to say that the bulk of the pressure on the Venezuela profits this year -- excuse me, Latin America, is in fact Venezuela? I mean, profits are still going to be up in Brazil year over year? Right?

It is strictly Venezuela.

Got it! I don't need anything more than that. my second question has to do with the US business and the fact that there seems to be an increasing divergence if will you from the results that you post and what we see from Nielsen. And I know there's always been a gap because of what's not tracked but is there anything that's changed just from within the US marketplace where the Nielsen measure channels grocery stores in particular are particularly weak from a pricing perspective, that's where a lot of the investment has to go and that the nontrack channels are actually much more, whether it's rational or robust, however you want to put it, because it just seems you are doing a lot better on a netting out volume and price in the US than what we see for Nielsen.

Yeah, I don't have a mathematical tie in on that, Wendy. It is simply that there is a large part of the business in the United States that is nontracked channels which we do pick up in that so-called all outlet share which is as you know a Nielsen sort of pantry type measure. I guess the only thing you could see in terms of the various channels is that the super, the grocery store and super markets tends to have more of a high/low strategy from a promotional point of view than some of the other nontracked channels so you may see some more period to period choppiness there than you would in the other channels. But beyond that I can't offer any other deeper insite.

And you don't see a marked difference if you will in terms of your performance given your relative category pricing in one channel versus another?

Not related to pricing, no.

Got it. My very last question, did you give guidance or have you given it for targeted share buy-back level for the full year?

We have, we have not. But now you ask, yes, you saw perhaps what we bought in the first quarter which was around half a billion, between 450,000 and half a billion and I think you could expect to see us buying forward at or around that level.

Per quarter.

Yes.

Okay. Terrific. Thank you very much.

And we'll go next to Jason Gere with RBC Capital Markets.

Good morning, guys.

Hi, Jason.

Just a question, with the pricing I think back in January you were saying pricing was going to be two and a half to three and a half percent of sales and obviously it's a little bit lighter now. I'm not sure if you said this but you're still comfortable with the 6% to 8% organic sales for the year?

Yes.

Okay.

Yes, Jason.

Okay. Great. Then just another question, more clarification, I think, you are talking about the gross margin. It sounded like you were saying 60% by the ends of the year. I think the commentary areas was around 60%. Is there anything in there, you are saying the growth to be a little bit better, is that going to be the upset offset by incremental commodities so we shouldn't expect anything better or worse on the gross margin?

I'm glad you added the around, Jason.

Okay. And with that being said I guess leads to the next question. Just on advertising, I think in the past you could looking for advertising up 50 basis points for the year. Obviously the first quarter had a nice, big, upswing. You know, how should we think about that going forward with the gross margin still expected to be a nice increase the rest of the year? Obviously not as great as the first quarter but should we look at like half of a rate, half the rate of gross margin, reinvested back into advertising?

I think what I would say, Jason, is that the advertising quarter on quarter versus prior year is going to continue to be up both on an absolute basis and a percentage to sales basis and, therefore, the same for the year. But I think we stepped up in the first quarter to quite a healthy ratio in terms of our advertising spend.

Okay. Great. Thank you very much.

And we'll go next to Chris Ferrara with work Banc of America Securities.

Thanks. Ian, I was wondering if you could comment a little bit about what you are seeing in the retail environment? Obviously you are not going to comment specifically on retailers. We are certainly seeing commentary around roll backs at Wal-Mart. What kind of pressure or suggestion or anything are you seeing from retailers with respect to increased promotional spending? Do you feel like the retail trade is trying to drive volume with increased promotion or do you feel like a lot of this, sharper price points are coming from competitors and if there's a way to parse that out?

Difficult, Chris. It becomes a little bit chicken and egg, such a discussion. I think everybody is seeking two things. One, a better understanding of how to connect with the consumers in order to grow. And I think things that could influence that are new products, advertising, sampling, professional recommendations, and applied properly, selective promotional activity and I think we are seeing all of those in play in the marketplace. And I wouldn't like to try and parse out whether it's coming from a competitor to a retailer or from a retailer.

I guess putting it another way, are retailers approaching you guys now with the hope to generate more promotional spending more today than they have been over the last couple of quarters?

I think people are coming at us and others looking to grow and the question is, what is the best strategic and tactical answer to that question. Pricing is an answer but pricing is often a nonsustainable answer and I think it's the responsibility of manufacturers who understand brands and consumers to create growth where price are is a component but not the only driver.

That helps. Then just on another note and I think you said raw materials swung to being a positive impact on gross margin over the last couple of quarters. I think you've also said in the past that FX in the transaction drag will help associated with commodity purchases and some of your international markets is kind of lumped into that same line. Can you give a sense for how we should think about the break down between commodity diluted shares, strictly raw materials, inflation, deflation to that line, versus the FX piece of it and was FX transaction a positive this quarter, is that a big part of why the swing went positive?

Again, Chris, I'm not sure I want to get into that level of detail. I think you could say from a macro point of view that material costs in and of themselves were a favorability in the first quarter and as we look to the balance of the year, the material prices themselves, we expected some key raw material commodity categories are going to go up. That is built into our forecasting and also we have the obvious transaction drag from Venezuela which is a component as well. So pure costs are going to start, raw material costs are going to start going up towards the balance of the year.

And where does the Venezuela hit come into play in the margin drag? I guess, is there a hit on the raw materials side from change in parallel rate and how things are trending in Venezuela right now? Is that incorporated into that raw materials break out?

It's in raw materials, it's in cost, it's in margin.

Thanks.

And we'll go next to Caroline Levy with CLSA.

Good morning. A couple of quick questions. One is I'm not sure if you mentioned mix either geographic or product mix and the impact on the topline, and the other is around your dividend pay out strategy going forward, taxes and dividends are going to be going up very dramatically next year. Is this something your discussing in looking at the balance between share repurchase and dividends?

Well, we, Carolyn, other latter point we discuss that all the time. We, having just announced the 20% healthy dividend increase this year, we haven't yet turned our planning to what we will decide to do should we continue healthy cash generation for next year but obviously we would take that into consideration and further discussions have already started on it. In terms of mix, I think I said earlier that our oral care business was up out pacing our personal and healthcare businesses, double-digit organic growth there compared to mid single digits on the other two businesses. We don't tend to go beyond that.

So I'm just thinking about, so geography, you wouldn't comment on what the impact of mix was geography.

Pricing is in volume. So we have dollar weighted. And mix is in pricing in our case.

And we'll take our final question from Linda Bolton Weiser with Caris.

Hi, just another question on Latin America. On the pricing, I guess last quarter, the first quarter it was 12% positive and it was 6.5% this quarter. What is the reason for that, is it just a general competitive situation or what exactly?

It's less Venezuela in the mix. The pricing towards the ends of last year was very much driven by Venezuela.

Oh, I see. Okay. Thanks a lot.

Okay. Well, that's, thank you very much for being on. Thanks very much for your questions. Thanks to all the Colgate people around the world for their hard work and we look forward to reconnecting after the second quarter. Bye, bye.

Again, that does conclude today's presentation. We thank you for your participation.