Q2 2025 Colgate Palmolive Co Earnings Call

Betsy: Good morning. Welcome to today's COLGATE-PALMOLIVE 2025 second quarter conference call. This call is being recorded and is being simulcast live at www.colgatepalmolive.com. Now, for opening remarks, I would like to turn this call over to Chief Investor Relations Officer and Executive Vice President, M&A, John Faucher.

Good morning. Welcome to today's Colgate Palmolive 2025. Second quarter conference call.

This call is being recorded and is being simal cast live at www.colgate.com.

This call over to Chief investor relations officer and Executive Vice President m&a, John foche.

John Faucher: Thanks, Betsy. Good morning and welcome to our second quarter 2025 earnings release conference call. This is John Faucher. 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 related prepared materials and our most recent filings with the SEC, including our 2024 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. As we noted in the prepared commentary, our guidance includes the impact of tariffs that have been announced and finalized as of July 31st, 2025. This does not include the tariffs announced by the United States last night. While these tariffs are not yet finalized, based on our preliminary analysis, we do not expect them to have a material impact.

Thanks Betsy. Good morning and Welcome to our second quarter 2025 earnings release conference call. This is John Oche.

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 related prepared materials. And our most recent filings with the SEC, including our 2024, annual report on form, 10 K and subsequent SEC filings all available on colgate's website. For a Dutch discussion of the factors that could cause actual results to differ materially from these statements,

as we noted in the prepared, commentary, our guidance includes the impact of tariffs that have been announced and finalized, as of July 31st 2025,

This does not include the tariffs announced by the United States last night. While these tariffs are not yet finalized, based on our preliminary analysis, we do not expect them to have a material impact.

John Faucher: Our remarks also include a discussion of non-GAAP financial measures, which exclude certain items from reported results, including those identified in tables 4, 6, 7, 8, and 9 of the earnings press release. A full reconciliation to the corresponding GAAP financial measures is included in the second quarter 2025 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 Stan Sutula, Chief Financial Officer. Noel will provide you with some thoughts on our Q2 results and our 2025 plan. We will then open it up for Q&A. Noel?

Our remarks also include a discussion of non-gaap financial measures.

which excludes certain items from reported results, including those identified in tables 4, 6, 7, 8, and 9 of the earnings press release.

A full reconciliation to the corresponding. Gaap Financial measures is included in the second quarter, 2025 earnings press release.

And is available on Colgate website.

Joining me on the call this morning are Noel Wallace, Chairman, President, and Chief Executive Officer, and John Faucher, the Chief Financial Officer.

Noel will provide you with some thoughts on our 22 results in our 2025 plan.

We will then open it up for Q&A.

Noel Wallace: Thanks, John. Good morning, everyone. Thanks to all of you for joining us today as we discuss our Q2 results. In Q2, we grew net sales, organic sales, and earnings per share despite significant raw material pressure and negative foreign exchange. Excluding the impact of lower private label, organic sales growth accelerated by 60 bps to 2.4% in the second quarter, with slightly positive volume driven by the improvement in North America and Africa Eurasia. We also generated additional pricing through strong revenue growth management execution in key markets. We launched significant innovation across categories, geographies, and price tiers, and we closed the acquisition of Prime 100, the number one vet-recommended fresh pet food brand in Australia. As I said to you on the Q1 conference call, throughout 2024, we had prepared for a more volatile and uncertain operating environment in 2025.

No.

Yes, thank you John. Good morning everyone. Thanks to all of you for joining us today as we discuss our Q2 results.

In Q2 we grew net sales or organic sales and earnings per share, despite significant raw material pressure and negative foreign exchange.

Excluding the impact of lower private label organic sales. Growth accelerated by 60 basis points to 2.4% in the second quarter which slightly positive volume during the Improvement in North America and Africa. Eurasia we also generated additional pricing through strong Revenue, growth management and execution in key markets.

We launched significant Innovation across categories geographies and price tiers and we closed the acquisition of prime 100. The number 1 vet recommended fresh pep food brand in Australia.

Noel Wallace: This preparation is paying off as the Colgate-Palmolive team continues to execute with resilience, even as the environment remains difficult with category volatility, geopolitical, macroeconomic, and consumer uncertainty, high raw material and packaging costs, including as a result of tariffs and lower levels of in-market inflation. Through all of this, we remain committed to our strategy. While we may shift tactics depending on the short-term fluctuations of the operating environment, our strategic focus keeps us on track for long-term performance. First, I'd like to discuss how we're making short-term adjustments in light of what we're seeing in the world. Because we have a portfolio with broad-based strength across geographies, categories, and price tiers, we think we're very well positioned for the current environment. We're sharpening our offerings to appeal to consumers who are looking for value.

As I said to you on the q1 conference call throughout 2024, we had prepared for more volatile and uncertain operating environment in 2025.

This preparation is paying off as the Colgate, from all of Team continues to execute with resilience, even as the environment remains difficult with category, volatility, geopolitical, macroeconomic. And consumer uncertainty, High raw material and packaging costs including as a result of tariffs and lower levels of in Market in place.

Do all of this; we remain committed to our strategy. And while we may shift tactics depending on the short-term fluctuations of the operating environment, our strategic focus keeps us on track for long-term performance.

So first, I'd like to discuss how we're making short-term adjustments in light of what we're seeing in the world.

Noel Wallace: The work we have put into core innovation over the last six years means that our big core brands provide consumer-recognizable value. We're actively leveraging price pack architecture to deliver consumer-perceived value. This can be through larger sizes, multi-packs, where consumers pay a lower price per usage, or through smaller sizes for consumers who are looking for a lower out-of-pocket expense. We can then leverage our global supply chain's breadth, resiliency, and agility to respond to these changes in consumer preference. The cost environment is difficult as we are dealing with tariff increases, higher raw and packaging material costs, and less underlying category inflation. This means that our revenue growth management strategies need to drive additional pricing and mix with lower levels of elasticity as we look to improve organic sales growth in the second half of the year.

Because we have a portfolio with broad-based strength across geographies categories and price tiers. We think we're very well positioned for the current environment where sharpening our offerings to appeal to Consumers, who are looking for value.

And the work we have put into core innovation over the last 6 years means that our big core brands provide consumer-recognizable value.

We are actively leveraging price pack architecture to deliver consumer perceived value. This can be through larger size multi-packs, where consumers pay a lower price per usage or to smaller sizes for consumers, who are looking for a lower? Out-of-pocket expense? We can then leverage our Global Supply chains breath. Resiliency and Agility to respond to these changes in consumer preference,

Noel Wallace: As I talked about at CAGNY, AI will be a difference maker for us in our RGM efforts as we work with our retail partners to use data analytics and machine learning to optimize our portfolio and promotional spending to solve for the best combination of sales and profit growth. What is not changing is our commitment to our long-term growth strategy. We are focused on driving household penetration and brand health, which we see as the key building blocks of organic sales growth and consistent, compounded earnings per share growth. We are doing this by launching innovation to help drive category growth for Colgate-Palmolive and our retail partners. Even in difficult environments, there are still many consumers that are looking to trade off what innovation delivers incremental benefits.

The cost environment is difficult as we deal with a pair of increases: higher raw and packaging material costs and less underlying category inflation. This means that our revenue growth management strategies need to drive additional pricing and mix with lower levels of elasticity. As we look to improve organic sales growth in the second half of the year.

As I talked about at Kaggy, AI will be a difference maker for us in our RGM efforts as we work with our retail partners to use data analytics and machine learning to optimize our portfolio and promotional spending to solve for the best combination of sales and profit growth.

Growth strategy. We are focused on driving household penetration and brand Health which we see as the key building blocks of organic sales growth and consistent compounded earnings per share growth.

Noel Wallace: This is well represented in our investor presentation this morning through premium innovation like Colgate Miracle Repair Serums, EltaMD UV Skin Recovery, along with relaunches on core brands like Sanex, Protex, Suavitel, and of course, hello. Our commitment to core innovation is vital as we work to bring news and consumer-perceived value at every price point. We remain committed to building our brands through investing in advertising and scaling capabilities in areas like digital, data and analytics, and AI. Today, we also announced the Productivity Initiative that is focused on prioritizing incremental investment and accelerating our capabilities to build a more future-fit organization as we transition to our 2030 strategic plan.

We're doing this by launching Innovation, to help Drive category growth for Colgate Palmolive and our Retail Partners, even in difficult environments, there are still many consumers that are looking to trade up with Innovation delivers incremental benefits. This is well represented in our investor presentation this morning through premium Innovation like Colgate Miracle repair serums.

Delta UV skin recovery along with relaunches on core Brands, like Sanex protects Suave tail. And of course, sells our commitment to core Innovation is vital as we work to bring news and consumer proceed value at every price point.

And we remain committed to building Our Brands to investing in advertising and scaling capabilities in areas like Digital Data and analytics, and AI.

Noel Wallace: While RGM and our Funding the Growth Initiatives provide strong opportunities for investment and margin expansion, we are moving proactively to deliver incremental savings that can be levered to drive growth and create capabilities or apply to our bottom line. While we are mindful of the challenges in the current market, we are excited by the plans we have in place both for 2025 and beyond. We have the brands, the strategies, the capabilities, and most importantly, the people to deliver on our short and long-term goals. With that, I will take your questions.

Today, we also announced the productivity initiative that is focused on prioritizing incremental investment and accelerating our capabilities, to build a more future fit organization as we transition to our 2030 strategic plan.

Well rgm and our funding the growth initiatives. Provide strong opportunities for investment and margin expansion. We are moving proactively to deliver incremental savings. That can be levered to drive growth and create capabilities or apply to our bottom line.

While we are mindful of the challenges in the current market, we are excited by the plans we have in place for 2025 and beyond. We have the brands, the strategies, the capabilities, and, most importantly, the people to deliver on our short- and long-term goals.

And with that, I'll take your questions.

Betsy: We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please limit yourself to one question. If you have further questions, you may re-enter the question queue. Once again, if you would like to ask a question, please press star, then one. The first question today comes from Dara Mohsenian with Morgan Stanley. Please go ahead.

Will. Now begin the question.

1 on your touchtone phone.

The first question today comes from darra moinian with Morgan Stanley. Please go ahead.

Dara Mohsenian: Hey, good morning.

Stan Sutula: Morning, Dara.

Hey, good morning.

Dara Mohsenian: First, just wanted to get a bit more detail on the restructuring program. What are the key operational changes? How should we think about the savings payback versus the charges? Why now? Is this just sort of a natural evolution after the conclusion of the prior program and as you look forward to the 2030 strategy? Then, I was just hoping you could also touch on U.S. category growth. We've obviously seen a slowdown in household products. It seems fairly unique versus other parts of the world, keeping in mind your geographic diversity. It also seems fairly unique versus the broader U.S. consumer. I'd just love a bit of perspective on what you think is occurring in the category in the U.S. and any thoughts on a potential recovery as we look going forward. Thanks.

Um, first just wanted to get a bit more detail on the restructuring program.

What are the key operational changes? How should we think about the savings? Payback versus the charges? And why now is this just sort of a Natural Evolution after the conclusion of the prior program and as you look forward to to the 2030 strategy,

And then B, I was just hoping you could also touch on us category growth. We've obviously seen a Slowdown in household products, it seems fairly unique versus other parts of the world. Keeping in mind, your Geographic diversity. It also seems fairly unique versus the broader us consumer. So I just love a bit of perspective on what you think is occurring in the category in the US. Um, and any thoughts on a potential recovery is as we look going forward. Thanks.

Noel Wallace: Yeah, thanks, Dara. Let me talk about the Productivity Initiative. If I can take the audience back to 2020 or 2019 when we put together our 2025 growth strategy, the intention of that was very much about our growth mindset and where we needed to start to invest more in order to accelerate the growth of the company. Importantly, within that program, we had a lot of capability building, data analytics, our digital transformation, more resources, and obviously AI at the early onsets of that, and particularly innovation. Similarly to what we did in 2020, this plan is intended to accelerate all of the things we want to do and the excitement we have with our 2030 strategic plan. I will be talking to the teams more in detail at CAGNY as well as the back-to-school conferences, but you will hear us talk more about our 2030 strategy moving forward.

Yeah, thanks Tara. So let me uh let me talk about the productivity initiative. So if if I can take um the audience back to 2020 or 2019 when we put together our our 2025 growth strategy, the intention of that was very much about our growth mindset and where we needed to start to invest more in order to accelerate the growth of the company. And importantly within that program, we had a lot of capability building data analytics or digital transformation uh more resources in in obviously AI at the early onset of that and particularly innovation.

Noel Wallace: This program is intentionally set up to get us on our, keep us on our front foot relative to how we are thinking about driving growth for the organization. So we are going to invest in more capability building, particularly in innovation. We are going to invest in getting omnichannel correct, our omni-demand generation initiatives. We are going to bring those to a much more harmonious view on the ground so we can continue to execute more efficiently and effectively on the ground all over the world. We are putting more resources into innovation and AI, into our data analytics.

Noel Wallace: So it is an exciting aspect for the company right now as we embark on our 2030 plans to have this tailwind behind us so we can continue to invest back behind the business. I have asked Stan Sutula to lead this initiative, and so maybe I will turn it over to Stan to give you a bit more detail on how we are thinking about the savings and, more importantly, the cost associated with the program.

Similarly, to what we did in 2020. This plan is intended to accelerate. All of the things we want to do. And the excitement we have with our 2030 strategic plan, I'll be talking to the teams more in detail, uh, at Kagney, as well as the back to school conferences, but you'll hear us talk more about our 2030 strategy moving forward. But this program is in intentionally. Set up to get us on our, keep us on our front foot relative to how we're thinking about driving growth for the organization. So we're going to invest in more capability building particularly in Innovation, we're going to invest in getting Omni Channel. Correct our Omni demand generation initiatives, we need going to bring those to a much more harmonious view on the ground. So we can continue to execute more efficiently and effectively on the ground, all over the world we're putting more resources in the Innovation and AI into our data analytics. So it's exciting aspect for the company right now, as we embark on a 2030 plans to have this Tailwind behind behind us, so we can continue to invest back behind

the business.

Stan Sutula: Yeah, thanks, Noel. As Noel said, our areas of focus are going to be to continue to invest in our strategic imperatives here, accelerating the innovation, our investments in data and analytics, optimizing our supply chain. Of course, AI is a big focus on driving our omnichannel demand generation. As part of that, we have announced a productivity program here that will be $200 million to $300 million of a charge over a three-year period. That program will encompass a number of items, including optimizing our supply chain and looking at where we need to make key strategic shifts. In terms of a savings profile, if you look back at history and how we have achieved those in our last initiative, you should think about savings roughly in the same range as what we have demonstrated in the past.

This initiative and so maybe I'll turn it over to stand and give you a bit more detail on how we're thinking about the the savings and more importantly, uh, the cost associated with the program. Yeah. Thanks. No. Uh so it's null said you know our areas of focus are going to be to continue to invest in our strategic imperatives here. Accelerating The Innovation our investments in data and analytics optimizing our supply chain. Uh of course, AI is a big focus on driving our Omni Channel demand generation. So as part of that, we've been announcing a productivity program here that will be 2 to 300 million of the charge uh over a 3-year period that program will Encompass a a number of of items including optimizing our supply chain and looking at where we need to make key strategic shifts in terms of uh a savings profile. You know, if you look back at history and how we've achieved uh those in our last initiative, you should think about savings roughly in the same range as what

Stan Sutula: While this program, we have done a lot of planning, we are ready to go. It is going to be done thoughtfully and done with the right opportunity to drive our structural changes to continue to invest in the key objectives for our 2030 strategic plan.

we've demonstrated in the past.

Noel Wallace: Yeah, Dara, so let me come back on the North America. You clearly, excuse me, heard it from others. There is a persistently cautious consumer in North America right now. We saw some rebound in April, May. The categories took a little step back in June, which we were not expecting. So ultimately, over time, we fully expect all the categories to normalize and get back to historical growth rates. But right now, given the level of uncertainty that we see externally, and particularly in the U.S., I think you are going to see the categories kind of hold where they are right now in the short term, but certainly get better as we start to exit 2025. Clearly, the North America, particularly on a volume standpoint, we have got good plans in place in the back half.

So while this program, we've done a lot of planning, uh, we're ready to go, it's going to be done thoughtfully and done with the right, uh, opportunity to drive our structural changes to continue to invest in the key objectives for our 2030, uh, strategic plan.

Hey there. So let me come back on on the North America. You know, you clearly excuse me. Heard it from from others.

Noel Wallace: As I mentioned in my upfront commentary, we are very focused on getting price pack architectures right, building innovation both at the premium side as well as our core businesses. Overall, the market shares improved during the quarter. So as we lapped some of the significant promotions we had last year, we are pleased with where we see things now. The overall promotional environment is still quite constructive. I think everyone is focused really on innovation and driving value back into the categories. Again, you know when you go back to our productivity initiative, a lot of this is about generating more investment in the categories to get the categories growing again based on the current cautiousness that we see with the consumer.

There's a, a persistently cautious consumer in North America right now. We, we, we saw some Rebound in April. May the categories took a little step back in June, uh, which we weren't expecting. So, ultimately over time we fully expect all the categories to normalize and get back to historical growth rates. But right now, given the level of uncertainty that we see externally in particularly in the US I think you're going to see the categories kind of hold where they are right now in the short term but certainly get better as we start to exit 2025 uh clearly the North American big on a volume standpoint. Uh, we've got good plans in place in the back half as I mentioned in my upfront commentary, we're very focused on getting price pack architectures, right? Building Innovation both at the premium side, as well as our core businesses overall. The market shares improved during the during the quarter. So as we we laughed some of the significant promotions we had last. Year were pleased with where we see things. Now, the overall promotional environment is still quite constructive.

I think everyone is focused really on innovation and driving value back into the categories. And again, you know, when you go back to our productivity initiative, a lot of it is about generating more investment in the categories to get the categories growing again. Uh, based on the consumer, uh, current cautiousness that we see with the consumer.

Betsy: The next question comes from Robert Ottenstein with Evercore ISI. Please go ahead.

The next question comes from Robert Odsonne with Evercore ISI. Please go ahead.

Robert Ottenstein: Great. Thank you very much. I know the total relaunch had a great start this year, particularly in Latin America. I am wondering if you could give us an assessment of how it is going around the world, what you are seeing. Then, drilling back to Latin America, we are hearing from some other companies that maybe things are getting a little tougher in Mexico and Brazil. So perhaps give us an update in terms of what you are seeing in Latin America and if you have to pivot there at all. Then, just big picture, what we should be expecting in the second half of the year from the global program. Thank you.

Noel Wallace: Great. Thank you, Robert. Good morning. So, total, as we talked about, big core relaunch for us, out of the gates, quite strong. In Latin America, we are seeing good incremental share and incremental growth coming from that. It has a wonderful formulation. We obviously launched it collectively for the first time in quite some time with a whole new regiment of portfolio associated with that launch. It is not just the toothpaste. It is a toothbrush and a mouthwash that complement each other, that give us the opportunity for very strong efficacy claims. We are at about 75 markets so far with that launch around the world, and LATAM was the lead. We are encouraged by what we are seeing there. We are also very encouraged by what we are seeing in Asia with some of the early onsets of that, as well as Europe.

Great, thank you very much. Um, I know the uh, the total relaunch uh, had a great start this year. Uh, particularly in Latin America. I'm wondering if you could, you know, kind of give us an assessment of how it's going on around the world, uh, what you're seeing uh and then you know drilling back to Latin America we're hearing from some other companies that maybe things are getting a little tougher and Mexico uh and Brazil. So perhaps give us an update terms of what you're seeing, uh, in Latin America. And if you have to uh, to Pivot there at all, uh, and then, you know, just big picture, you know what, we should be expecting in the second half of the Year from the global program. Thank you.

Great, thank you, Robert. Good morning. So you know, total as we talked about big core relaunch for us, you know, out of the gates of you know, quite strong and and Latin America. We're seeing good incremental, share and incremental growth coming from that. It's got a, you know, Wonderful formulation, we obviously launched it collectively for the first time in quite some time, with a whole new regimen, uh, portfolio associated with that law. And so, it's not just the toothpaste, it's a toothbrush and a mouthwash that complement each other to give us the opportunity for for very strong efficacy claims. Uh, we're at about 75 markets so far with that launched uh around the world and left hand was the lead. So we're

Noel Wallace: Early days, but the early indications are very positive for us driving our share in premium and certainly driving some incrementality into the toothpaste business. Overall, pretty good there. LATAM, as you said, we have seen a little bit of improvement in Mexico in terms of the categories, but a little bit of deceleration in the categories in Brazil. Overall, LATAM, I think likewise, is seeing a bit of cautiousness right now relative to the consumer environment in general across Latin America. I expect that, as things get the tariff noise gets behind us, you will start to see that improve through the back half of the year. We will obviously, we talked about taking a little bit of pricing in the first quarter. That has happened, and we have seen that start to flow through through the back half of the second quarter.

Noel Wallace: We will see that benefit as we move through the back half of the year. Good innovation plans across Latin America, good investment there. I think our responsibility is to drive more excitement into the categories, and that is certainly how we are approaching the back half of the year.

That, you know, as things get the, Tariff noise Gets behind us. You'll start to see that improve through the back half of the year. Uh, we will obviously, we talked about taking a little bit of pricing in the first quarter that has happened. And we've seen that start to flow through through the back of half of the second quarter. And we'll see that benefit as we move through the back half of the Year. Good Innovation plans across Latin America, good investment there. So I think our responsibility to drive more excitement into the categories and that's certainly how we're approaching the back half of the year.

Betsy: The next question comes from Andrea Teixeira with JP Morgan. Please go ahead.

Andrea Teixeira: Thank you. Good morning. I just wanted to perhaps know, you spoke about the program a bit on an earlier question, but just to drill down where we should see this. I mean, you clearly said that we are not going to see the benefits, obviously, this year. But just thinking how we should see it go through the P&L is just more ammunition for innovation, digital, as you said, AI, and how we should be thinking in terms of timing there. Then on a separate question, just to follow up on around the world, you gave us some color on Latin America, but then in Europe, can you talk about how we should be seeing both Western and Eastern European or EMEA? Thank you.

The next question comes from Andrea to Shara with JP Morgan. Please go ahead.

Thank you. Good morning. Um, I just wanted to perhaps know you, you spoke about the program a bit, uh, on an earlier question but just to, um,

To drill down where we should see.

Noel Wallace: Let me let Stan take the Productivity Initiative, and I'll come back and answer your question on Europe.

Uh, this I mean you you clearly said that you are not going to see. We're not going to see the benefits obviously this year, but just thinking how we should see it go through. The pnl is just more ammunition for Innovation. Um, digital. As you said AI um and how we should be thinking uh, in terms of timing there and then on a separate question, just to follow up on on around the world, you you gave us like some um, caller on Latin America. But then in Europe, can you talk about how we should be seeing both Western and Eastern European or immediate? Thank you.

Stan Sutula: Yes, on the Productivity Initiative, you should not have seen many major impacts here in the back half of the year. As we go to execute this, it can be over a two to three-year period. We believe we will conclude within three years. As you see, you might see some cash here late in the year as we start to execute those programs. You will see that roll through the P&L both in overheads as well as in margins because they are going to be a combination of events. In terms of the investment, those investments will occur over that period as well. Any of those are incorporated into what we have for our guidance for this year. Overall, for this, not a material impact for the back half of the year.

Yeah, let me let uh, Stan take the uh, the productivity initiative and I'll I'll come back and answer your question on your own.

Yes, I'm a productivity initiative. You shouldn't assume any major impacts here in the back half of the year. So, as we go to execute, this can be over a 2 to 3 year period. We Believe will conclude within 3 years. And as you see, you might see some, uh, cash here in late in the year as we start to execute uh, those programs and you'll see that roll through the p&l. Both in overheads, as well as in margin because they're going to be a combination of events.

Noel Wallace: Yeah, Andrea, the only thing I would add is, we are very excited about some of the opportunities we have identified within our 2030 plan. Again, this program will serve as a catalyst to get ahead of those programs as quickly as we can. Clearly, in investments in the area of innovation and resources, we are putting AI into our innovation process. So there is going to be investments there. Getting our tech stacks, continuing to use technology to enhance productivity across the organization, we are going to accelerate that. I talked a little bit about omni-demand generation. We think that is a significant opportunity for us to get the consistency of how we deploy our marketing and commercial strategies on the ground more in line with each other.

In terms of the investment, those investments will occur over that period as well. So, you know, any of those are incorporated into what we have for our guidance for this year. Overall, for this, um, not a material impact for the back half of the year.

Noel Wallace: We have seen some opportunities based on some of the success we have seen at Hill’s Prescription Diet and other markets around the world to drive more consistency of that deployment around the world. So overall, we will see that is an exciting space to invest behind. On Europe and some of the other geographies, we have a little softness in the Europe business as we saw some of the volumes come down. Volumes obviously still positive, pricing still positive in that region. Again, I think a little bit of pushback from consumers as they wait and see what is going to happen with inflationary pressure. I think one of the things we are seeing both in the U.S. and around the world is the inflation has hit food a little bit quicker than it has hit other products.

Yeah, and the only thing I'd add is, you know, we're very excited about, you know, some of the opportunities we've identified within our 2030 plan. And again, this program will serve as a catalyst. Uh, to get ahead of those programs as quickly as we can not just clearly in in investments in the area of innovation and resources. We're putting AI into our Innovation process. So there's going to be Investments there. Getting our Tech Stacks continuing to use technology to enhance productivity across the organization. We're going to accelerate that I talked a little bit about Omni demand generation. We think that's a significant opportunity for us to get the consistency of how we deploy our marketing and Commercial strategies on the ground. More in line with each other.

Noel Wallace: As a result of that, consumers are spending more money on their food choices. As a result, perhaps being more cautious in other categories right now. The key for us is getting exciting innovation back in the categories and making sure that we can continue to trade up consumers into some of our brands as we think about the innovation moving forward.

Other and we've changed some opportunities based on some of the success we've seen at Hills and other markets around the world to drive more consistency of that deployment around the world. So, overall, we'll we'll see that, uh, an exciting space to invest behind, uh, on Europe and some of the other geography, a little in a softness in the Europe business. As we saw some of the volumes come down volumes. Um, obviously still positive pricing, still positive in that region, but again, I think a little bit of of push back from consumers. Is they wait and see what's going to happen with inflationary pressure. I think 1 of the things we're seeing both in the US and around the world is the inflation. Has hit food a little bit quicker than its hit other products. And as a result of that, consumers are spending more money on their food choices. And as a result, perhaps be more cautious in other categories right now. But the key for us is getting exciting Innovation back in the categories and making sure that we can continue to trade up, consumers into some of our, Our Brands. As we think about the

Innovation, moving forward.

Betsy: The next question comes from Filippo Falorni with Citi. Please go ahead.

The next question.

Will Forney with City, please go ahead.

Andrea Teixeira: Hi, good morning, everyone. I want to talk about the gross margin outlook for the balance of the year. Obviously, there is a lot of puts and takes, lower tariffs, now $75 million versus your prior $200 million. You mentioned offset by higher raw material costs. Can you give us a sense within the raw material costs what is driving the increase? It seems mainly palm oil, but maybe give us a sense of the rest of the cost basket and any other offsetting factor that you can think in terms of offsetting the tariffs on the productivity front. Thank you.

Hi, good morning everyone. Um, I want to talk about the gross margin outlook for the balance of the year. Uh, obviously there's a lot of puts and takes lower tariffs now. 75 million versus your prior 200 million, but you mentioned, an offset by higher. Uh, raw material costs. Can you give us a sense within the raw material?

Stan Sutula: Yeah, so let me take that here. For gross profits, the gross margin went down year over year in the quarter, driven by a combination of greater anticipated raw material inflation and tariffs. Although tariffs are lower than earlier expectations, there is still an impact to the margin. One point to note, Q2 2024 was our lowest level of material inflation. If you look at last year, it was 140 basis points versus 420 basis points this year, so you can see the impact of the raw material cost. Our gross margin guidance stays roughly the same. It is based on lower tariff exposure, offset by higher raw material cost and lower organic sales. We guided that gross margin to be roughly flat for 2025. As a point of context, that guidance, if you look at the first half gross profit, it is flat year to year.

Zero cost. What is driving the increase? It seems mainly palm oil but maybe give us a sense of the rest of the, um, of the cost basket and any other offsetting factor that you can think, in terms of uh of setting the tariffs on a productivity on the productivity front. Thank you.

Driven by a combination of Greater anticipated, raw material inflation and terrorists and although terrorists are blow our earlier expectations. You know, it's still an impact to the margin, uh, but 1 point to note, you know, Q2 to 24 was our lowest level of material inflation. So if you look at last year, it was 140 basis points versus 420 basis points this year so you can see the impact of of the material. Uh, raw material cost.

Stan Sutula: We feel like we are in a good position here to deliver the guidance. Now, in terms of outlooks around the raw materials, as we go into that, it is primarily what we said in the prepared comments. That is that palm, veg oils, fats, and tallow all have moved higher. They are higher on a year-round basis. We do not see a lot of relief here yet. Keep in mind that, like most companies, we have a buy-ahead program, so we lock in. These are largely locked in for the third quarter. If they ease, we will see some of that easing in the back half of the year. Some of the other categories have softened a bit, but in total, we still see that increase driven by fats and oils.

You know, our growth marketing guidance, uh, days roughly the same. It's based on Lower care, exposure offset by higher raw material cost, and lower organic sales. So we guided that uh gross margin be roughly flat for uh 2025 and as a point of contact, you know, that guidance, if you look at the first half gross profit, it's flat year year. So we feel like we're in a good position here to deliver the guidance.

now, in terms of,

What's driving the raw materials as we go into that, as is primarily what we said in a prepared, uh, prepared comments. And that is that Palm, uh, veg oils and fats, and Tallow all have moved higher. Uh, they're higher on a year on basis, we don't see a lot of relief here yet. Keep in mind that like most companies, we have a, a buy ahead program so we lock in. So these are largely locked in for the third quarter and if they ease we'll see some of that easing in the back half of the year. Now some of the other categories have

Noel Wallace: Yeah, the only thing I would add, Filippo Falorni, is we, you know, we had strong funding to growth in the quarter as well. We are encouraged by the 250 basis points that we saw move through the reconciliation. Obviously, we are very focused on that and accelerating our programs as much as we can in the back half to continue that strong pace.

Have uh, softened a bit. Uh, but in total we still see that uh increase driven by Fats and oils.

Yeah, the only thing I would add to lipos we, you know, we had strong funding the growth in the quarter as well and we're encouraged by uh the 250 basis points that we saw move through the reconciliation. And then obviously we're very focused on that and accelerating our programs as much as we can in the back half to continue that strong pace.

Betsy: The next question comes from Kumil Gargawalas with Jefferies. Please go ahead.

The next question comes from Kumo. Guardia Wallace with Jeffrey. Please go ahead.

Filippo Falorni: Hey, guys. Good morning. Can you talk maybe a bit about Hill’s? We are seeing, you are seeing a bit of an acceleration. There has been some kind of debate about the category, the pet food category in general on if it had been fading. So obviously, you have your new, you have new products out and such, but is there a macro component to it, or is it more some of the initiatives that you have made that is leading to some of the acceleration?

Noel Wallace: Yeah, thanks. Great performance on Hill’s in the quarter. What you characterize, which is what we see, it is roughly a flat category operating environment, particularly in North America. But we delivered mid-single-digit organic across almost every hub on Hill’s, including the U.S. and Europe. Hill’s ex-private label, as you probably run the numbers already, was 5% organic, consistent with where we were in the first quarter. That is obviously in a flat category. We are really encouraged with the fact that volume was 2% and price was 3%. So well balanced on the quarter. The comp as well, remember, the comp was just shy of 8% last year. So again, I think supporting the fact that the underlying business remains very, very strong. What was different in the quarter and particularly encouraging for us is the therapeutic side of the business continues to grow faster than the wellness side.

Uh, Hey guys. Good morning. Can we, um, can you talk maybe a bit about hills? We're seeing, um, you know, you're seeing a bit of an acceleration, there's been some kind of debate about the category, the, you know, the pet food category in General, on on if it had been fading. So obviously, you have your new, you know, you have new products out and such but is, is there a macro component to it or is it more? Um, some of the, uh, initiatives that you've made? That's leading to some of the acceleration.

Yeah, thanks. Uh,

Great performance on hills in the quarter and what you characterize that which is what we we see is roughly a flat category. Operating environment particularly in North America but we delivered mid single digit organic across almost every Hub on Hills, including the US and Europe. Uh Hills ex-private label as you probably run. The numbers already was 5% organic consistent with where we were in the first quarter.

Noel Wallace: That is very consistent with our strategy and the professional advocacy that we continue to generate behind the brand. Good mix and obviously some good growth on the margin line. We did see a greater impact from private label this quarter, about 300 basis points, as you picked up in the commentary. We are not in the business, as I repeatedly have said, of producing private labels. So I continue to insist that the best way to look at the underlying health of both the Hill’s and the total Colgate-Palmolive business is ex-private label. We grew organic sales in every combination this quarter of wet, dry treats, dog, cat, you name it, Hill’s Prescription Diet particularly, and Hill’s Science Diet. So the good news is the growth is broad-based across all of our segments, the strategic areas that we are focused on, as well as geographies.

And that is obviously, in a flat category, and we're really encouraged with the fact that volume was 2 and price was 3. So, well balanced on the quarter. The comp, as well. Remember, the composition is just shy of 8% last year. So again, I think supporting the fact that the underlying business remains very, very strong. What was different in the quarter and particularly encouraging for us is the therapeutic side of the business continues to grow faster than the wellness side. So, and that's very consistent with our strategy and the professional advocacy that we continue to generate behind the brand. Good mix and obviously some good growth on the margin line.

Noel Wallace: We also launched a new advertising campaign in the quarter, which we are excited about. It seems off to a great start. The margin performance was good, again, driven by a lot of the fundamentals and the resurgence of funding the growth opportunities that we have seen across that business. The category growth has stabilized. We have not seen a decline any further, and we anticipate that it will continue to be more or less flat for the next quarter or so. But overall, the long-term dynamics of this category would suggest that we will continue to get some tailwinds perhaps in the latter part of the year. I will say that we have stopped producing private label as of July. So we will continue to have some shipments through the quarter, but the private label will cease to be produced as we exited July.

We did see a greater impact on private label this quarter about 300 basis points as you you picked up in the commentary we're not in the business as I repeatedly have said I'm producing private label. So I continued to insist that the best way to look at the underlying health of both the hills and the total Colgate from all the business is ex private label. We grew organic sales in every combination. This quarter of wet dry treats, dog, cat. You name it prescription diet particularly in Science Diet. So the good news is the growth growth is broad-based across all of our segments, Mr. Strategic areas that we're focused on as well as geographies. We also launched a new advertising campaign in the quarter uh which we're excited about seems off to a great start. The margin performance was good. Again driven by a lot of the fundamentals and the Resurgence of funding the growth opportunities that we've seen across that business category.

Void growth has stabilized. We haven't seen a decline any further, and we anticipate that it will continue to be more or less flat for the next quarter or so. But overall, the long-term dynamics of this category suggest that we'll continue to get some tailwind.

Perhaps ladder in the latter part of the year.

Noel Wallace: So overall, good business, good results for Hill’s.

Shipments through the quarter. Uh, but the private label will cease to to be produced as we move exit, as we exited July, so overall, good business, good results for Hills.

Betsy: The next question comes from Bonnie Herzog with Goldman Sachs. Please go ahead.

Bonnie Herzog: All right. Thank you. Good morning, everyone. I had a question on your FY25 EPS guidance. You have previously talked about building P&L flexibility over the years, ultimately to deliver consistent performance year on year. I am curious, what gives you the confidence in your low single-digit EPS growth expectation this year? If end market trends do not pick up meaningfully, the promotional intensity remains elevated, and then tariffs, certainly lower now, still weigh on margins. I am hoping you could walk us through the key growth drivers given all of that. Thank you.

The next question comes from Bonnie hog. With Goldman Sachs. Please go ahead.

All right. Thank you. Good morning everyone. I, um, I had a question on your FY, 25 EPS guidance. You know, you've previously talked about building, p&l flexibility over the years.

Ultimately to deliver consistent performance year on year, so I guess I'm curious. What gives you the confidence in your low single digit EPS growth expectation, this year, I guess if n Market, you know Trends don't pick up meaning please you know the promotional intensity remains elevated and then tariffs, you know, certainly lower. Now you know still wait on margins. So I guess I'm hoping you could maybe walk us through the key growth drivers, even all of that. Thank you.

Noel Wallace: Sure. Thanks, Bonnie. Clearly, there's a lot of uncertainty in the market, and we built that into our guidance level. We feel pretty good about where we are in terms of the first half of the year, at least in what we see for the outlook of the year. Things could go materially different if the categories go into further decline and we see heightened tariffs and raw material prices continue to move north. Based on where we see things today, based on current spot rates of raw material prices, current spot rates of FX, we feel very good about the guidance that we provided on the call this morning. Overall, we feel we're in a good situation. The strategy seems to be working. We would like to see the categories turn. We've got good investment in the back half of the year combined with good innovation.

Uh, sure. Thanks, Bonnie. So, you know, clearly there's a lot of uncertainty in the market, and we built that into our guidance level. We feel pretty good about where we are in terms of the first half of the year and, and at least in what we see for the outlook of the year. Now, things could go materially different if the categories go into further decline and we see heightened tariffs and raw material prices continue to move north. But based on where we see things today, based on current spot rates of raw material prices, current spot rates are...

Noel Wallace: We feel we'll see some excitement go through the categories through that. Overall, we seem to be in a pretty good place. Stan?

Stan Sutula: The only thing I would add to that, if you kind of look at what changed from last guidance to this guidance, we saw a reduction in tariffs. We saw a benefit in FX, but those were offset by slowing categories where we saw that impact on organic and then the increase in raw materials. So those kind of balanced out. When we look underneath, what gives us confidence for the year? We are still going to invest in this business. We have roughly flat advertising. We are going to deliver roughly flat gross profit margin. So the team's ability to manage productivity, to drive funding to grow, to manage our expenses, we are confident in those to be able to deliver this guidance down the year.

FX. We feel very good about the guidance that we provided on on, uh, this the call this morning. So overall, we feel we're in a good situation. The strategy seems to be working. We would like to see the categories turn. We've got good investment in the back half of the Year combined, with with good Innovation. So we feel we, we'll see some excitement go through the categories through that. But overall, we're we seem to be in a pretty good place sense. The only thing I'd ask is that if you kind of look at what changed from last guidance,

To this guy, we saw a reduction in tariffs we saw benefit and effects. But those are offset by slowing categories, where we saw, you know, that impact on organic and then the increase in, in raw materials.

So those kind of balance out, but when we look underneath, what gives us confidence for the year we're still going to invest in this business. We have you know roughly flat advertising. We're going to deliver roughly flat growth, uh profit margin. So the team's ability to manage productivity to drive funding the growth to manage our expenses. We're confident in those to be able to deliver a disguise on the year.

Betsy: The next question comes from Robert Moskow with TD Cowen. Please go ahead.

The next question comes from Robert Moscow. With TD Ken, please go ahead.

Robert Moskow: Good question. I heard another CPG company mention.

John Faucher: Sorry, Robert. Robert, we are having a real hard time hearing you. It sounds like you had a connection issue.

Noel Wallace: Is this any better?

John Faucher: Sorry about that. Can you hear better now? I heard another CPG company mention higher food prices in Brazil as putting pressure on consumer spending in their category. Now you are raising prices in Brazil. Can you give us a ballpark, how much are you raising prices? What is your confidence level that competitors follow your increase and that the elasticity will be strong? You know, raising prices in the U.S. has not worked out so well. Why will the Brazilian consumer absorb it better?

Um, I heard another CPG company mentioned. Sorry, Robert. Robert, we're having a real hard time hearing you. Is it something you have a connection issue? Is this any better? Sorry about that. You're better now.

Noel Wallace: Yeah, first of all, we have taken prices consistently over the years in Brazil, and that environment tends to be far more accommodating to price increases. We have seen the food prices, as you mentioned, move pretty quickly. Overall, I think that has created a short-term cautiousness with the consumer. But again, this plays back to the fact that we have been investing in brand health for the last four or five years, and the brands are as strong as they have ever been in Latin America relative to how we measure them. So we feel quite comfortable, particularly with the innovation that we have, that we can take pricing through the innovation on the premium side. We talked about Colgate Total and some of the success we are having in incrementality there, and that was launched at a premium price.

I heard another cpg company mentioned higher food prices in Brazil, as putting pressure on consumer spending and their category and now you're raising prices in Brazil. Can you give us a, like, just kind of ballpark like, how much are you, raising prices and, and what's your confidence level that competitors, follow your increase. And that, um, the elasticity will be strong. Um, you know, you're right, raising prices in, in the US hasn't worked out so, well, you know what, what, what, how, why will the Brazilian consumer absorb it better.

Yeah. Uh, you know, first of all,

We've taken prices consistently over the years in Brazil and that consume that environment tends to be uh, far more accommodating the price increases. Now we've seen the food prices as you mentioned, move pretty quickly. And overall I think that's created a short term cautiousness with the consumer. But again, this plays back to the fact that we've been investing in brand health for the last 4 or 5 years and the brands are as strong as they've ever been in Latin America relative to how we measure them. So we feel quite comfortable, particularly with the Innovation that we have, that we can take pricing through the Innovation on the premium side. We talked about Colgate Total and some of the success we're having incrementality there and that

Noel Wallace: So we feel a collection of innovation, good RGM efforts, and the strength of the brand give us confidence that we can continue to take some pricing. Foreign exchange was obviously a headwind initially, so we have had to adjust for that. We took some pricing in Q2 at the end of the quarter. We will see that balance through the back half of the year. But overall, we feel good about where we are from a pricing standpoint. As I mentioned upfront, the Brazilian categories have been a little softer than we expected. But we will anticipate that as we move through the back half. I talked about price sizing changes, getting the elasticity across our different price points in the right place. We feel that we have got a good strategy as we have done historically in that market where things have slowed.

Different price points in the right place and we feel that we've got a good strategy as we've done historically in that market. Where things are slowed.

Betsy: The next question comes from Steve Powers with Deutsche Bank. Please go ahead.

The next question.

Comes from Steve Powers with Deutsche Bank, please go ahead.

Dara Mohsenian: Great, and good morning.

Noel Wallace: Morning.

Dara Mohsenian: I wanted to see if I could pick back up on the prioritization of innovation within the 2030 strategy because it has been a big focus of the 2025 strategy. As we look forward, when you think about doubling down and stepping up innovation capabilities, is it simply an objective of more and more broad-based innovation? Is it specifically more premium innovation? Is it innovation better aligned to unique insights to enhance ROI? Probably a combination of all of the above, but I am just curious if we could hone in on exactly where you see the most opportunity for further innovation efficacy, again, in the context of what I think has been a pretty good innovation advancement story over the last five years. Thank you.

Noel Wallace: Yeah, thanks, Steve. So you are right. We feel very good about how we have deployed some of the funding that we used in the 2025 strategy to accelerate our innovation. The KPIs that we measure internally against that would suggest it is working. At the same time, we feel we need to do a much better job in H2 and H3 innovation. You have heard me talk about that. That is more of the breakthrough and the transformational innovation, which takes a little bit longer to develop and obviously a little bit longer to see come through. We are going to be looking at incubating more H2 and H3 innovation around the world. That takes resources and money, so that is going to be stepped up.

Great, and good morning. No, I wanted to see if I could pick back up on on. Um, the prioritization of innovation with, you know, within the 2030 strategy, um, because it's been a, it's been a big focus of the 2025 strategy. So, as, as we look forward, when you think about, you know, doubling down and stepping up, Innovation capabilities. Is it is it simply, you know, objective of, of more and more broad-based Innovation? Is it specifically more premium Innovation? Is it Innovation better aligned to Unique, you know, insights to enhance Roi. It's probably a combination of all the above but I'm just curious if we could hone in on exactly where you see the most opportunity for further Innovation efficacy. Uh again in the context of what I what I think has been a pretty good Innovation advancement story Over The Last 5 Years. Thank you.

Yeah, thanks Steve. Uh, so you're right, I mean we feel very good about how we've deployed some of the funding that we used in the 2025 strategy to accelerate Innovation and the kpis that we measure it internally against that was suggested it's working. But at the same time we feel we need to do a much better job at H2 and H3 Innovation. You've heard me talk about that. That's more the Breakthrough in the trans.

Noel Wallace: We have a couple of geographies where we are still not 100% comfortable that we are agile and quick enough with the H1 innovation. We need to do a better job bringing new news to the trade, particularly on H1, that we feel historically we were not bringing real big ideas on H1. We have done a much better job in that space. There are a couple of geographies where we would all say we need to step it up a bit, and that is where we will focus some of those resources.

Transformational Innovation, which takes a little bit longer to, uh, develop. And obviously a little bit longer to see, come through. We're going to be looking at incubating more H2 and H3 Innovation around the world that takes resources and money. So that's going to be stepped up. We have a couple geographies where we're still not 100% comfortable that we're agile and quick enough with the H1 Innovation. So we need to do a better job, bringing new news to the trade, particularly on H1 that we feel. Historically, we work bringing real big ideas on H1. Now, we need, we've done a much better job in that space, But there are a couple geographies where we would all say we need to step it up a bit and that's where we're focused some of those resources.

Betsy: The next question comes from Peter Grom with Bank of America. Please go ahead.

Peter Grom: Hey, good morning. Thank you for the question. I just wanted to circle back on Hill’s, and maybe one is, maybe this is a question for Stan Sutula, just a modeling point. So just as the private label, you exit that effective in July, right? That will still impact the P&L through, I guess, the first half of next year, just A, to clarify that. And B, look, Noel Wallace, I think at a 5% organic, you would probably not only be the best pet comp in North America, but probably globally. So just what is it about the category at this point that is allowing you to just outpace at such a high rate? Again, we cover a lot of the different pet food companies. They all seem to be struggling.

The next question comes from Peter, galbo with Bank of America, please go ahead.

Hey, good morning. Thank you for for the questions. Um, no. I just wanted to Circle back on on hills and and maybe 1 is maybe this is a question for Stan just just a modeling point. So just as the private label kind of you exit that effective in July, right? That'll still impact the p&l through. I guess the first half of next year just Aid to clarify that and and be you know, look no I think at a at a 5% organic you'd probably not only be the best um, you know, pet pet comp in in North America. But but probably globally. So, just what is it about the category at this point that that's allowing you to just outpace, you know, at at such a

Peter Grom: I know you have talked about the category kind of flattening out, but it is a very broad question, but I just want to maybe drill a little bit deeper on what really is allowing Hill’s to just, again, outperform at such a high level at this point. Thanks very much.

Noel Wallace: Great. Thanks, Peter. I will take the latter part of the question, and I will let Stan talk a little bit about the other part. Overall, the strategy is very consistent with what we have been talking about for the last four or five years. We have obviously stepped up the investment levels, but it is not just increasing advertising behind that brand that is paying off. It is the innovation and the breadth of innovation that we brought into the market and staying very, very true to the swim lane that we find ourselves in, and that is high-end therapeutic brands that drive real nutritional value for pet owners and getting the advocacy of those brands delivered through the profession.

A high rate again. We we cover a lot of the different pet food companies. Um, they all seem to be struggling. I know you've talked about the category kind of flattening out, but um, it's a very broad question, but I just want to maybe drill a little bit deeper on what really is allowing Hills just again, outperform it at at such a high level at this point. Thanks very much.

Great. Thanks. Peter. I'll take the, the latter part of the question on and I'll let Stan talk a little bit about the other part.

Noel Wallace: We have been very consistent with that strategy and very consistent on going after the growth segments where we see the brand can play the most effectively. We have talked about wet. We have talked about cat. We have talked about small dogs. We have been very strategic on investing R&D resources into the growth areas for the category. That is how we are seeing the growth coming through in the business. Certainly, this quarter, we saw great growth in wet, great growth in cat, great growth on therapeutic, which was driven by our Hill’s Prescription Diet innovation, and great growth on small paws. Again, I think it is the consistency of the strategy and again, recognizing that we still are a low brand awareness brand and low brand penetration.

So you know, overall the strategy is very consistent, what we've been talking about for the last 4 or 5 years. We've also put uh, stepped up the investment levels but it's not just increasing advertising behind that brand that's paying off. Its The Innovation and the breadth of innovation that we brought into the market and staying very very true to the swin Lane that we find ourselves in and that's high-end therapeutic brands that drive real, nutritional value for pet owners, and getting the advocacy of those Brands delivered through the profession. And so, we've been very consistent with that strategy, and very consistent ongoing, after the growth segments, that where we see the brand can play the most effectively. We've talked about wet. We've talked about cat, we've talked about small dogs. And so, we've been very strategic on investing R&D resources into the growth areas for the category and that's how we're seeing the growth coming through in the business, certainly we've this quarter. We saw great growth in wet grey growth and cats, great growth on Therapeutics.

Noel Wallace: There is a lot of upside potential for us as we continue to expand the awareness of the brand and get the distribution where we need to, and more importantly, get the omnichannel strategy executed as effectively as we possibly can. Overall, consistency of strategy.

Stan Sutula: Let me take the impacts of private label. As we said, we stopped producing private label in the month of July. There will be shipments here as we ship out that volume. That will be a modest amount here in Q3. If you think about what happened, we had private label last year, so there will be an impact in the second half. If you think about the impact in Q2, it was roughly 60 bps. It will be slightly more than that in Q3 and Q4 on a year-on-year basis. You will see that impact as we had private label last year, and we will have essentially zero here in the back half. The impact will be closer to 80 or 90 bps.

Consistency strategy.

Noel Wallace: That is factored into our guidance.

So let me take uh, the impact of private label. So as we said, we stopped producing private label in the month of July, there will be a shipment here as we ship out that volume. That would be a modest amount here in third quarter. But now if you think about what happens, uh, we have private label last year, so there will be an impact in the second half. If you think about the impact in Q2 it was roughly 60 basis points. It will be slightly more than that in 3Q and 4 Q on a year on your basis. So you will see that impact as we have private label last year and we'll have essentially zero here and and the back half. So the impact will be closer uh, to 80 or 90 basis points and that is factored into our guidance, correct?

Betsy: The next question comes from Chris Carey with Wells Fargo. Please go ahead.

The next question comes from Chris carry with Wells, Fargo. Please go ahead.

Robert Ottenstein: Hi, good morning, everyone. I wanted to unpack a little bit of the evolution in Asia. India has been a topic. This quarter, you called out maybe some softening in urban markets. Where are you seeing this business going from here? Can you just maybe balance the Colgate China versus JV performance and also just how you see the evolution of that important business going forward as well? Thanks.

Noel Wallace: Great. Let me take the overall Asia first. A little softer than we expected as volume and pricing came in weaker on the Hill's business in China. We were not pleased really with the performance we had in India, but we feel good about where we are headed in the back half. I will talk about that in more specificity when I get into India. Specifically on the China piece, again, it is kind of a tale of two cities. The Colgate business continues to perform exceptionally well.

Hi, good morning everyone. Um, I wanted to unpack a little bit of the evolution in Asia. Uh India has been a topic, you know, this quarter you called out maybe some softening in in urban markets. Where are you seeing? You know this uh this business going, you know, from here and and can you just, um, maybe balance the Colgate China versus JV performance? And also, uh, you know, to just how you see the evolution of uh, of that important business uh, going forward as well.

Right. Um, so let me take the, you know, overall Asia first, you know, little softer than we expected as volume and pricing, uh, came in a week or on the the Hawley and Hazel business in China. And, uh, we were we're now pleased really with the performance we had in India, but we feel good about where where we're headed in the back half and I'll talk about that more specific specificity when I get into India.

Noel Wallace: The learning that we are getting from that is the go-to-market execution that we have that we have revamped over the last three to four years is playing out very effectively in the market and how we are targeting the growth opportunities we see in that market, as well as a very comprehensive and concerted and thoughtful digital strategy to grow in the e-commerce class of trade, which is obviously growing very, very quickly. On the Hill's side, we are having to make adjustments in terms of what we do with our go-to-market there, particularly in China, where we need to get the go-to-market addressed and get the wholesaler channel addressed in a more effective way.

Noel Wallace: More importantly, make sure that we effectively compete on the digital in the online world, where we are stepping up our resources that we have learned both on the Colgate side as well as in other parts of the world to ensure our Hill's people have the tools necessary to grow in a very competitive online environment moving forward. Again, we feel we are starting to see things improve. It will take some time for sure for the Hill's business, but over time, we feel comfortable we will get that back. On India, as you said, we saw some softness in the urban class of trade. We will certainly address that as we move into the back half through a very stepped-up innovation strategy. We are relaunching our biggest core business in India as we speak. We have introduced and relaunched the Colgate Total line in India as we speak.

Specifically on the China piece again it's kind of a tale of 2 cities. The Colgate business continues to perform exceptionally. Well uh the learning that we're getting from that is to go to market execution that we have that we've revamped over the last 3 to 4 years is playing out very effectively in the market and how we're targeting the growth opportunities. We see in that market as well as a very comprehensive and conservative and thoughtful, digital strategy to grow in e-commerce, uh class of trade, which is obviously growing very, very quickly on the Hawley and Hazel side. We're having to make adjustments in terms of what we do with our go to market their, particularly in China, where we need to get to go to market addressed and get the wholesaler cha Channel addressed in a more effective way. And more importantly, make sure that we've effectively compete on the digital in the online world where we're we're stepping up our resources that we've learned both on the Colgate side as well as in other parts of the world to ensure our high and Hazel people have the tools necessary to

Noel Wallace: We have some more higher-end premium innovation coming through the back half and into 2026. Getting the urban markets right and executing more effectively there is critically important. Pleasingly, we are seeing great growth through our e-commerce business there. We are up almost 500 basis points in market share in e-commerce. As that trade class grows, we will see some tailwinds come from that. Overall, executing better in the urban, keeping the rule and getting the core brands relaunched. We also have some price pack architecture that needed to be addressed at the entry price point. We had completed on the INR 20 part of our business, but the INR 10, which is the entry price point, was not addressed. We are addressing that as we speak. We are optimistic that we will see the benefits of that come in the second half.

To grow in a very competitive online environment, moving forward. So again, we feel we're starting to see things improve. It will take some time for sure, for the Hawley and Hazel business. Uh, but over time we feel comfortable, we will get that back on India. As you said, we saw some sluggishness in the urban in urban class of trade. Uh, we will certainly address that as we move into the back, half through a a very stepped up Innovation strategy, where we launching our biggest Core Business. Uh, in India as we speak, we've entered the relaunched, the Colgate Total Line in India as we speak. And we have some more uh, higher-end premium. Innovation coming through the back happen in 22026, so getting the urban markets, right? And executing more effectively, there is critically important pleasingly. We're seeing great growth through our e-commerce business there. Uh we're up almost 500 basis points in market, share and e-commerce. So is that trade class grows? We'll see some Tailwinds come from that but overall executing better

In the urban uh keeping the rule and uh getting the the core Brands relaunched. We also have some price pack architecture that needed to be addressed at the entry price point. And we had done, we had completed on the 20 rupee, part of our business, but the 10 rupee which is the entry price point was an address and we're addressing that as we speak. So we're optimistic that we'll see the benefits of that come in in the second half.

Betsy: The next question comes from Olivia Tong with Raymond James. Please go ahead. Olivia, your line is open. You may ask your question.

The next question comes from Olivia, Tom. With Raymond James, please go ahead.

Andrea Teixeira: Sorry about that. Thanks. Good morning. I was wondering if you could talk about the sales run rate and the expectation to improve slightly in the second half versus first half to get to sort of a 2% for the full year. If you could talk a little bit about what is going to drive that acceleration, is it more of a view of a slight rebound in the category growth or more your initiatives to improve your share? On the restructuring, a lot of the things you discussed on the restructuring sound like things you were already doing. Is there a component of it that is new, or is it more of a fast track of existing initiatives? Is there any headcount reduction or a particular look at a region or category that will be more of a focus? Thanks so much.

Olivia, your line is open, you may ask your question.

Noel Wallace: Great. Thanks, Olivia. Good morning. Let me take the first part of that. I will let Stan take the second. On our confidence on the guidance relative to the back half, first and foremost, we have got good advertising levels planned in the back half, consistent with where we were in 2024. We feel good about that. We have got a strong innovation pipeline that we have executed in some of it in the second quarter, which will play out more in the second half. We have taken some pricing and have opportunities in certain geographies to take more pricing in the back half. Clearly, we do not expect the categories to get worse from here. In fact, we expect them to get modestly better, but not significantly better. The guidance anticipates all of that.

Your share. And then on the restructuring, a lot of the things you discussed on the restructuring sound like things you were already doing. So, is there a component of it? That's new? Or is this more of a fast track of existing initiatives? And is there any headcount reduction or um a particular look at a region or category? Um that will be more of a focus. Thanks so much.

Noel Wallace: Again, we will see where the consumer goes, but we are being cautiously optimistic and prudent based on what we are seeing in the categories right now, and that is reflected in our guidance.

Stan Sutula: On the productivity program, as we have said, 2 to 300 million completed in three years. We are not going to go into detail specifics here, but as we said, it would be a combination of optimizing our supply chain and then looking at areas where we think that we can optimize where we have our allocation of resources. As we look to invest in some areas, we are going down to get more efficient in other areas. What I would say is, as we grow over time, inherently, we have to rebalance those assets over time. That includes hard assets as well as headcount. We will disclose more on that in time as we execute those programs.

Great thanks, Linda, good morning. Uh let me take the first part of that and I'll get let's stand take a second. So on our our confidence on the uh the guidance relative to the back half again, uh, first and foremost, we've got good advertising levels planned in the back half, you know, consistent before we were in 2024. Uh, so we feel good about that. We've got a strong Innovation pipeline, uh, that we've executed in some of it in the second quarter, which will play out more in the second half, we've taken some pricing and have opportunities in certain geographies to take more pricing in the back half and clearly, we don't expect the categories to get worse from here. Uh, in fact, we expect them to get modestly better but not significantly better. So, the guidance anticipates, all of that. So, again, uh, we will see where the consumer goes. But we're being cautiously, optimistic and prudent based on what we're seeing in the categories right now and that's reflected in our guidance.

So on the uh, on the productivity uh, program as we said, you know, 2 to 300 million. Uh completed in 3 years we're not going to go into details, specifics here. But as you said it'd be a combination of optimizing our supply chain and then looking at areas where we think that we can optimize uh where we have our allocation of resources. So as we look to invest in some areas, we're going to have to get more efficient in other areas. And what I would say is you know, as we grow over time, uh inherently we got to rebalance uh those assets over time. That includes, you know, hard assets as well as headcount. So we'll we'll disclose more on that in time and as we execute those programs

Betsy: The next question comes from Lauren Lieberman with Barclays. Please go ahead.

Andrea Teixeira: Great. Thanks so much. I wanted to go back, Noel, to the prepared remarks on this call, not the published ones. You talked about sharpening offerings, value to the consumer and so on. So I was curious, and that was in the tactical bucket. So I was just curious, any particular markets where you would call out the need to do that? In tandem, you also mentioned needing to drive, find ways to drive incremental pricing with RGM because there's less inflation. So it's a bit of like needing to do two things at once. So I would just love to understand better how one can approach that if we are sharpening value, but also needing to find incremental price. So first is the markets where sharpening price points. The other is pursuing these two different streams, if you will. Thanks.

The next question comes from Lauren Lieberman with barklay, please. Go ahead.

Great. Thanks so much. Um, I want to go back and look to the, the prepared remarks just on this call. And that the, the P ones. And you talked about, um, you know, sharpening offerings, you know, value to the consumer and so on. So I was curious um and that was in the Tactical kind of, you know, buckets. So I was just curious any particular markets, where you would call out, um, the need to do that. And then, in tandem, you also mentioned, you know, needing to drive find ways to drive incremental pricing with our GM, because there's less inflation. So, you know, sort of

It's, you know, it's a bit of, like, trying needing to do 2 things at once. So, um, I just love to understand better how 1 can approach that if we're sharpening value, you know, but also needing to find incremental price. So first is the, you know, markets where sharpening price points, the other is kind of pursuing these 2 kind of different

Noel Wallace: Sure. Yeah, thanks, Lauren. On the price pack, this is pretty much going to be consistent around the world. The areas where we see a little bit more sensitivity are clearly in some of the emerging markets where opening price points are critically important. I mentioned the 10 rupee price point in India, getting the price pack architecture right on that. We see some opportunities in Latin America. I would say likewise in Europe and in the U.S., getting price pack architectures in some of our categories is critically important to ensure that we not only are providing value at the opening price point, but making sure that that value transcends through the entire portfolio. The way we balance that is the portfolio, we compete at opening price points, mid-price points, and premium price points.

Noel Wallace: We have a very concerted effort to continue to drive premiumization, and that continues to be the biggest growth opportunity we have around the world in terms of where our category sits today. The Colgate Total we launched as an example, we have taken significant pricing behind that in certain markets. It will give us more RGM and more pricing and value in the category. We will continue to execute that. Our premiumization in the whitening category, likewise, we will continue to execute and support that quite aggressively to drive the top end of the market. It really is a balanced approach. How do we think about making sure we are being a little bit more tactical with price pack architecture from promo packs, while at the same time making sure that we are driving value through the categories by some of the premiumization opportunities we have?

You know, strains if you will. Thanks sure, yeah, thanks Lauren. So, you know, on the on the price side this is you know pretty much is going to be consistent around the world but the areas where we see a little bit more sensitivity are clearly uh in in some of the Emerging Markets, we're opening price points are critically important, so I mentioned the 10 rupee price point in India uh, getting the price pack architecture right on that. We see some opportunities in Latin America, I would say likewise in Europe and and and in the US getting price back architectures. Uh, in some of our categories is critically important, uh, to ensure that we not we we not only are providing value at the opening price point, uh, but making sure that that value transcends through the entire portfolio. Now, the way we balance that is the portfolio. We competed at opening price points, mid-price points since premium price points and we have a very concerted effort uh, to continue to drive premiumization and that continues to be the biggest growth opportunity. We have around the world in terms of what

Noel Wallace: Again, balance between the two.

Where our category sits today. So the Colgate Total we launched is an example, we've taken significant pricing behind that in certain markets that will give us more rgm and more pricing and value in the category. So we'll continue to execute that uh our premiumization in the whitening category likewise will continue to execute and and support that quite aggressively to drive the top end of the market. So it really is is a balanced approach. How do we think about? Making sure we're being a little bit more tactical uh with price back, Arctic extra from promo packs while at the same time, making sure that we're driving value through the categories, uh, by some of the premiumization opportunities we we have. So, again balance between the 2

Betsy: The next question comes from Kevin Grundy with BNP Paribas. Please go ahead.

The next question comes from, Kevin Grundy with BNP paraba. Please go ahead.

Dara Mohsenian: Great. Thanks. Good morning, everyone. Noel, I want to come back to North America, but I wanted to ask in the context of balance, that balance between top-line growth and margin restoration. We spent a lot of time on these calls talking about the appropriateness of focusing on profit dollars and not necessarily margins. I get that firm, given the competitive landscape, soft as a consumer, market share issues, you kind of had both where top line has been not where you would like it to be, and margins are down considerably. As we think about, and as you think about where you would like the North America business to go, how much of a priority is restoring some of the North America profit margins where we have seen a considerable amount of erosion here in recent years? Your thoughts there would be appreciated. Thank you.

To North America. Um, but I wanted to ask you in the context of balance.

Noel Wallace: Yeah, thanks, Kevin. Listen, simple, a significant priority for us. We need to get the profit margins back up in the U.S. That is going to be through a combination of our innovation strategy and the resources we put into North America to ramp up the innovation, particularly on the premium side. We have seen some of our competitors do some innovation that is driving some real value in the categories. We know we can replicate and do better than that. We will continue to accelerate that.

Uh, you know, that balance between Topline growth and and margin restoration. We spent a lot of time on these calls, talking about, you know, the appropriate needs of focusing on on profit dollars and not necessarily margins but I guess for given the competitive landscape. So often consumer market share issues you kind of had both where it's been Topline has been not where you'd like it to be and margins are down considerably. So as we think about and as you think about where you'd like the North American Business to go, how much of a priority is restoring some of the North America profit margins, where we see a considerable amount of erosion here in recent years. So your thoughts there would be appreciated. Thank you.

Noel Wallace: But getting profit margins both from a dollar and a % up in the North America business continues to be a significant priority. I am very encouraged by how the team is approaching the business, how we are thinking about the opportunities across all of our categories, not just the focus that we had on all care, but both on personal care and home care. As we look at some of the productivity initiatives, we clearly will be allocating some resources into North America to dial up the innovation, particularly. But good funding there. We need to get the profit margins up both dollar and percentage-wise, and that is the focus for that team.

Yeah, thanks Kevin. Listen simple, a significant priority for us. We need to get the profit margins back up in the US. Uh that's going to be through a combination of our Innovation strategy and the resources we put into North America to ramp up the Innovation, particularly on the premium side. Uh, we've seen, you know some of our competitors, do some Innovation, that's drive driving. Some uh, real value in the categories, we know we can replicate and do better than that so we'll continue to accelerate that but getting profit margins, both from a dollar and a percent up in the North America business continues to be a significant priority. I'm very encouraged by how the team is approaching the business, how we're thinking about the opportunities across all of our categories. Uh, not just the focus that we have on oil care, but both of them,

Personal care and home care. And as we look at some of the, um, the productivity initiatives, we've clearly, will be allocating some resources in the North America to dial up the Innovation particularly, uh, but good funding there. Uh, we need to get the profit margins up, both dollar and percentage wise, and that's a focus for that team.

Betsy: The last question today comes from Peter Grom with UBS. Please go ahead.

The last question today comes from Peter Grom with UVS, please go ahead.

Filippo Falorni: Thanks, operator, and good morning, everyone. I wanted to just round out the category commentary. Noel, you mentioned that you expect categories to get modestly better as we move through the balance of the year. I would be curious, is that a broad-based comment, or are there certain markets where you have greater confidence in that improvement? Conversely, are there any markets where you see category trends moderating or at risk of moderating? Thanks.

Noel Wallace: It's pretty much a broad-based comment. Overall, if I take on a constant dollar basis, maybe provide some granularity here, our categories are growing somewhere between 2% and 3% on a constant dollar basis globally. Volumes are slightly positive if we take the aggregate category growth around the world. If you go back historically, you've seen obviously volume perform a little bit better, closer to 1% historically, and the constant dollar is improving probably 100 basis points historically. We expect a very modest acceleration across the board. Certainly in categories like toothpaste, we'll see that probably come back sooner rather than later. Some of our categories are not necessarily discretionary, they're daily use categories, but there are certain businesses in the home care where consumers amortize their usage over longer periods of time and are more cautious.

Thanks operator and good morning everyone. So I wanted to just round out the category commentary and all you mentioned that you expect categories to get modestly better as we move through the balance of the year, and I would be curious. Is that a broad-based comment or are there certain markets where you have greater confidence in that Improvement and conversely, are there any markets where you see category trans moderating or or at risk of moderating, thanks?

It pretty much a broad-based comment, you know, overall, if I take on a constant dollar basis, maybe provide some granularity here, you know, our categories are growing. You know, somewhere between 2 and 3, uh, on a on a constant dollar basis of globally volumes are, you know, slightly positive, if we take the aggregate category, growth around the world. So if you go back, historically, you've seen obviously volume perform a little bit better closer to 1% historically and the cost in dollars improving, you know, probably a hundred basis points historically. So, we expect a very modest acceleration across the board.

Noel Wallace: We expect some of the home care categories to perhaps come back a little slower than we'd see some of the personal care and oral care categories.

Uh, certainly in categories, like toothpaste. We'll see that probably come back sooner rather than later. Some of the all of our categories, not necessarily, um, discretionary, uh, their, their daily use categories. But there are certain businesses that in the home care where consumers advertise their, their their usage over longer periods of time and a more cautious. So, we've seen some of the Home Care categories to perhaps come back, a little slower than we'd see some of the personal care and oil care categories.

Betsy: This concludes the Q&A portion of our call. I will now return the call to Noel Wallace, Colgate's Chairman, President, and CEO for any closing remarks.

This concludes the Q&A portion of our call.

Noel Wallace: Yeah, thanks, everyone. Again, I think we're deploying our strategy very effectively around the world. We saw that through the consistency and the improvement in the quarter. We have great confidence in our ability to keep an eye on both the short term and the long term with our strategy, particularly excited about the 2030 and getting started with that. Let me put a special thanks out to all Colgate-Palmolive people around the world who are operating in obviously a more challenged environment, but we appreciate all the hard work and what they're doing to deliver for our shareholders. Thanks, everyone. We'll talk to you soon.

I will now return the call to Noel Wallace, Colgate's Chairman, President, and CEO, for any closing remarks.

Yeah. Thanks everyone. Again, I think we're we're deploying our strategy very effectively around the world. Uh we saw that through the consistency and the Improvement in the quarter. Uh we have great confidence in our ability, to keep an eye on to both the short term and the long term with our strategy, particularly excited about the 2030 and getting on, getting started with that. Let me put a special thanks out to all Colgate for all the people around the world who are operating and obviously a more challenged environment. Uh, but we appreciate all the hard work and what they're doing to deliver for our shareholders. Thanks everyone. We'll talk to you soon.

Betsy: The conference is now concluded. Thank you for attending today's call. You may now disconnect.

The conference is now concluded. Thank you for attending today. Call, you may now disconnect