Colgate Palmolive 3Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

China inventory destocking has corrected itself

“Now very specific to China, on the last call, we described and explained how the combination of the deceleration in consumer consumption led to a destocking of the extended distribution system in China through distributors and wholesalers and that we thought that would correct itself in response to a question, if I recall, within 60 to 90 days. And somebody said, well, does that mean the China business will come back from a Colgate volume point of view towards the end of the third quarter? Now many of us have just come back from an extended trip to Asia and I’m pleased to say that is precisely what has happened. In other words, while China for the quarter remains modestly negative, what we saw in terms of independent offtake data is consumption at about mid-single digits and the destocking working itself through the system. So as we finished the quarter, our volume was now servicing again that mid-single-digit rate of consumption. ”

Brazil is a little behind China but on the same path

“Brazil is China redux except a little bit later. I think, frankly, we were planning for a recovery following the World Cup and that didn’t occur. The category growth rates repeated what we saw in China. And the inventory destocking also compounded against that reduced consumer consumption level. And again, as Bina has said, we have begun to see that come back in Brazil, with the category growth rates now in the mid-single digits. ”

India and the rest of Asia did well and China is back to mid single digit growth

“when Bina said India was strong, India was strong. And the Southeast Asian countries generally performed very, very well during the quarter. So it really is China and the correction of that Chinese business back to, I stress, this underlying mid-single-digit consumption rate for consumers.”

Signs US may be accelerating, destocking is done

Yes, let’s not get too excited. I think, the U.S. is showing modest acceleration. But these things have tended to be lumpy. But I tried to imply that in my remark on category growth that we are indeed seeing the U.S. upshift towards the higher end of that 2% range. On the destocking, given the vastness of the 2 geographies and the indirect nature of the distribution, China, which we talked about in the second quarter, we believe on the data we see is done, was done by the end of the third quarter. Brazil is on the way to being done and that will be completed during the fourth quarter. There are no other spots of destocking.”