Colgate-Palmolive Company (NYSE: CL) — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report; the figures below are full-year results, not standalone fourth-quarter results. Dollar amounts are in millions unless stated otherwise.
Business context
Colgate-Palmolive sells oral, personal and home care products and Hill’s pet nutrition products in more than 200 countries and territories. Approximately two-thirds of sales came from outside the U.S.; Walmart and affiliates represented about 11% of 2023 net sales.
Financial performance and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Net sales | $19,457; up 8.5% | $17,967 |
| Gross profit / margin | $11,326 / 58.2% | $10,248 / 57.0% |
| Operating profit / margin | $3,984 / 20.5% | $2,893 / 16.1% |
| Net income attributable to Colgate-Palmolive | $2,300 | $1,785 |
| Diluted earnings per share | $2.77 | $2.13 |
| Net cash provided by operations | $3,745 | $2,556 |
| Capital expenditures | $705 | $696 |
| Cash and cash equivalents at year-end | $966 | $775 |
| Total debt at year-end | $8,549 | $8,766 |
Sales growth was primarily price-driven: net selling prices increased 10.0%, while volume declined 0.5%; foreign exchange reduced growth by 1.0%. Organic sales, a non-GAAP measure, rose 8.5%. Gross margin improved 120 basis points, as pricing and productivity savings more than offset higher input costs and unfavorable mix. Interest expense, net, increased to $232 from $153, primarily due to higher average borrowing rates.
Year-end current assets were $5,279 and current liabilities were $4,741. Management expects operating cash flow and debt issuance capacity to cover foreseeable operating and recurring cash needs. Available unused domestic and foreign credit lines were $3,574. Operating cash flow increased year over year, mainly reflecting working-capital changes and higher net income.
Material changes and segment trends
- Oral, Personal and Home Care: Sales increased 6.5% to $15,167; organic sales rose 8.0%. Pricing supported growth, while volume declined 1.5% and foreign exchange was unfavorable by 1.5%.
- Hill’s Pet Nutrition: Sales rose 15.5% to $4,290; organic sales grew 10.5%. Operating profit fell 5% to $806 and margin declined 410 basis points to 18.8%, as higher materials costs and unfavorable mix outweighed pricing and savings.
- Global toothpaste share increased 1.1 percentage points to 41.1%; manual toothbrush share was flat at 31.5%.
- Reported operating profit and earnings benefited from the absence of the $721 million Filorga impairment recorded in 2022. Excluding disclosed unusual items, operating profit rose 10% to $4,036 and diluted EPS increased 9% to $3.23.
- Cash dividends paid totaled $1,749, and share repurchases totaled $1,128 in 2023.
Outlook, unusual items and risks
Management expects challenging macroeconomic, political and market conditions, including inflation, higher interest rates, volatile foreign exchange and elevated raw-material and packaging costs. The company has implemented pricing and cost-saving measures, but cautions these may not fully offset costs and could pressure consumer demand, sales volumes and product mix. The filing provides no specific numerical 2024 sales, profit or EPS guidance.
- Significant 2023 charges: A $267 million ERISA litigation charge increased pension obligations but is not expected to require an immediate company cash contribution. A $148 million tax charge was partially offset by reversal of $22 million in withholding-tax reserves; the resulting tax liability was paid in 2023. A voluntary Fabuloso cleaner recall reduced operating profit by $25 million.
- Productivity program: The 2022 Global Productivity Initiative is expected to be substantially complete by mid-2024. Estimated cumulative pretax charges are $200–$240 million, with annualized pretax savings of $90–$110 million once approved projects are implemented; approximately $100 million in pretax savings had been achieved to date.
- Contingencies: The company estimates reasonably possible legal losses above recorded accruals at $0–$300 million, while noting outcomes may differ. It reported 278 pending talcum-powder cases at year-end. Separately, a disputed IRS assessment for 2010–2018 is estimated at approximately $145 million including interest and is not included in uncertain tax positions. Brazilian tax and civil proceedings also remain unresolved.
- Other watch items: The Russia/Ukraine conflict, Middle East conflict, foreign-exchange exposure, retailer inventory and shelf-space policies, competition, commodity costs, cybersecurity and regulatory developments could affect results. Filorga goodwill fair value approximated carrying value at the annual test, leaving impairment sensitivity if assumptions weaken.
Important facts for investors to verify
- Reconcile GAAP results with management’s non-GAAP adjustments, particularly the tax, ERISA, recall and productivity-program items.
- Track whether price increases can be sustained without further volume declines, and whether cost inflation moderates.
- Assess Hill’s margin recovery, including input costs and acquisition-related product mix.
- Review cash generation, debt maturities and refinancing capacity; verify the company’s ability to fund dividends, buybacks and investment while managing debt.
- Monitor developments in the ERISA, talc, Brazilian tax and IRS matters, as well as potential impairment indicators for Filorga.