Colgate-Palmolive Company — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This filing reports full-year results; it does not provide a clear standalone fourth-quarter income statement. Unless noted otherwise, amounts are U.S. dollars in millions.
Business context
Colgate-Palmolive sells consumer and pet nutrition products in more than 200 countries and territories. Its segments are Oral, Personal and Home Care, managed across five geographic regions, and Hill’s Pet Nutrition. Approximately 70% of sales came from outside the U.S. in 2021. Walmart and its affiliates represented about 12% of net sales.
Financial performance
| Metric | FY2021 | FY2020 | Change / context |
|---|---|---|---|
| Net sales | $17,421 | $16,471 | Up 6.0%; organic sales up 4.5% |
| Gross profit margin | 59.6% | 60.8% | Down 120 basis points |
| Operating profit | $3,332 | $3,885 | Down 14%; includes 2021 Filorga impairment |
| Operating profit margin | 19.1% | 23.6% | Down 450 basis points; adjusted margin was 22.3% vs. 23.5% |
| Net income attributable to Colgate-Palmolive | $2,166 | $2,695 | Down 20% |
| Diluted EPS | $2.55 | $3.14 | Adjusted diluted EPS was $3.21 vs. $3.06 |
| Cash from operations | $3,325 | $3,719 | Down $394, primarily due to working capital changes |
| Capital expenditures | $567 | $410 | Higher, including capacity expansion and sustainability projects |
| Cash and cash equivalents | $832 | $888 | At December 31 |
| Total debt | $7,245 | $7,601 | At December 31 |
Higher raw and packaging material costs reduced gross margin by 450 basis points; funding-the-growth savings added 210 basis points and pricing added 120 basis points. Reported operating profit includes a $571 pretax Filorga impairment and a $26 pretax Brazil VAT benefit. Adjusted figures are company-defined non-GAAP measures and should be considered alongside GAAP results.
Segments and material changes
- Oral, Personal and Home Care: Sales were $14,110, up 4.0%; organic sales rose 2.5%. Oral Care growth was partly offset by declines in Personal Care. Segment sales were flat by volume, with pricing and foreign exchange contributing to growth.
- Hill’s Pet Nutrition: Sales were $3,311, up 15.0%; organic sales rose 13.5%, driven by volume growth, pricing and growth in Science Diet and Prescription Diet.
- Company-wide sales growth included 1.0% volume growth, 3.5% net selling price increases and a 1.5% favorable foreign-exchange impact. Global toothpaste share was 39.4%, down 0.3 points; manual toothbrush share was 30.9%, up 0.1 point.
- GAAP earnings were materially affected by the $571 pretax ($518 aftertax) non-cash Filorga goodwill and indefinite-lived trademark impairment. The charge followed weaker forecasts amid COVID-related restrictions and reduced consumer mobility, particularly in duty-free, travel retail and pharmacy channels.
- 2021 also included a $75 pretax ($55 aftertax) loss on early debt extinguishment and a $26 pretax ($20 aftertax) Brazil VAT benefit. Adjusted operating profit was approximately flat year over year; adjusted net income rose 3%.
Liquidity, capital allocation and outlook
Management said operating cash flow and debt issuance should cover foreseeable operating and recurring cash needs. The company had $3,457 of unused domestic and foreign credit lines at year-end, including a new $3,000 five-year revolving facility expiring in 2026. It reported compliance with applicable debt covenants. Cash dividends paid were $1,679, and share repurchases totaled $1,320 in 2021.
Management expects challenging conditions to persist in 2022, including elevated raw-material, packaging and logistics costs, foreign-exchange volatility, competitive pressure and uncertainty from COVID-19 and supply-chain disruptions. The filing gives no specific 2022 sales or EPS guidance. Capital expenditures for 2022 were expected to be approximately 4.0% of net sales.
On January 27, 2022, the Board approved a global productivity initiative expected to be substantially completed by year-end 2022. Estimated cumulative pretax charges are $200–$240, about 90% expected to be cash expenditures; projected annualized pretax savings are $90–$110. These are estimates, not guaranteed outcomes.
Risks, contingencies and unusual items
- Key risks include inflation and commodity, labor and logistics costs; the ability to implement price increases; supply-chain disruption; foreign-currency movements; COVID-19; retailer concentration and changing channels; competition; and product innovation.
- Other cited risks include cyber incidents, regulatory and product claims, climate and sustainability obligations, talent retention, acquisitions and execution of the productivity initiative.
- For disclosed matters where losses could be reasonably estimated, the company put the aggregate range of reasonably possible losses in excess of accrued liabilities at $0–$425. Management did not expect the matters to materially affect consolidated financial position or ongoing results, but noted an adverse outcome could materially affect a particular period.
- Notable proceedings include Brazilian tax matters, a Greek competition-law appeal, 171 pending talcum-powder cases at year-end (versus 136 a year earlier), and an appealed ERISA class action. The company stated that it intends to contest these matters; outcomes remain uncertain.
Investor verification priorities
- Reconcile GAAP earnings and margins with management’s non-GAAP adjustments, especially the Filorga impairment and debt-extinguishment loss.
- Track whether pricing and productivity savings offset continued input, labor and logistics inflation without materially weakening volume or market share.
- Monitor Filorga performance and the assumptions underlying its impaired trademark and goodwill valuations.
- Assess cash conversion and working-capital trends, alongside debt maturities, commercial-paper reliance and capital returns.
- Review progress, cash costs and realized savings from the 2022 Global Productivity Initiative, and developments in material legal and tax contingencies.