Colgate-Palmolive Co. (NYSE:CL) Q2 2020 Earnings Conference Call - Final Transcript

Jul 31, 2020 • 08:30 am ET

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Colgate-Palmolive Co. (NYSE:CL) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day and welcome to the Colgate-Palmolive Second Quarter 2020 Earnings Conference Call. This call is being recorded and is being broadcasted live at www.colgatepalmolive.com. Now, for opening remarks, I'd like to turn this call over to Chief Investor Relations Officer, John Faucher. Please go ahead.

Executive
John Faucher

Thanks, Savannah. Good morning and welcome to our second quarter earnings release conference call. This is John Faucher, Chief Investor Relations Officer. Today's conference call will include forward-looking statements. Actual results could differ materially from these statements. Please refer to the earnings press release and our most recent filings with the SEC, including our 2019 Annual Report on Form 10-K and subsequent SEC filings, all available on Colgate's website for a discussion of the factors that could cause actual results to differ materially from these statements.

This conference call will also include a discussion of non-GAAP financial measures, including those identified in tables eight and nine of the earnings press release. A full reconciliation to the corresponding GAAP financial measures is included in the earnings press release and is available on Colgate's website. Joining me on the call this morning are Noel Wallace, Chairman, President and Chief Executive Officer; and Henning Jakobsen, Chief Financial Officer. I will discuss our Q2 performance and provide some context around 2020 before turning it over to Noel for his thoughts on our results and the current operating environment. We will then open it up for Q&A. As usual, we request that you limit yourself to one question, so that as many people as possible get to ask a question. If you have further questions, you are welcome to re-enter the queue.

We are pleased with our second quarter performance as we delivered growth in net sales, organic sales, operating profit, earnings per share, and cash flow in Q2 2020 despite headwinds from foreign exchange, the worsening global economy, and impacts from the COVID-19 pandemic around the globe. We delivered growth in five of our six divisions with Europe down slightly as consumers worked down some of the extra pantry inventory they purchased in the first quarter.

Our gross profit margin was 60.8% on both a GAAP and a base business basis. On a GAAP basis, this was up 110 basis points year-over-year. On a base business basis, our gross profit margin for the quarter was up 120 basis points, our best year-over-year performance in several years. For the second quarter, pricing was 130 basis points favorable to gross margin while raw materials were a 230 basis points headwinds, primarily driven by the transactional impact from foreign exchange. Productivity added 220 basis points.

On a GAAP basis, our SG&A was up 40 basis points as a percent of sales. On a base business basis, our SG&A was up 60 basis points in the quarter on a percent of sales basis, driven by a 50 basis point increase in advertising to sales as our advertising spending was up 6% year-over-year on an absolute basis, and by an increase in logistics costs