Colgate-Palmolive Company

Good morning. Welcome to today's Colgate Palmolive 2025 First Quarter Conference Call. This call is being recorded and is being simulcast live at www.colgatepalmolive.com. Now, for opening remarks, I'd like to turn this call over to Chief Investor Relations Officer and Executive Vice President, M&A, John Fauché.

Thanks, Bethany. Good morning and welcome to our first quarter 2025 earnings release conference call. This is Jon Foshay. Today's conference call will include forward-looking statements. Actual results should differ materially from these statements. Forward-looking statements inherently involve risks and uncertainties and are made on the basis of our views and assumptions at this time. Please refer to the earnings press release and our most recent filings with the SEC, including our 2024 annual report on Form 10-K and subsequent SEC filings, all available on our website, for a discussion of the factors that could cause actual results to differ materially from these statements. These remarks also included discussion of non-GAAP financial measures, which exclude certain items from reported results. including those identified in Tables 3, 5, and 6 of the first quarter earnings press release. A full reconciliation of the corresponding GAAP financial measures and related definitions are included in the earnings press release, which is available on our website. Joining me on the call this morning are Noel Wallace, Chairman, President, and Chief Executive Officer, and Stan Satula, Chief Financial Officer. Noel will provide you with his thoughts on our results and our 2025 outlook. We will then open it up for Q&A.

Noel? Great. Thanks, John. And good morning, everyone. And thanks to all of you for joining us today as we discuss our Q1 results. We came into 2025 prepared for the volatility and uncertainty. As such, we built flexibility into our plans, knowing that this year would be more difficult than the years that preceded it. And while 2025 is shaping up to be even more volatile than expected, We believe the work we have done and the work we continue to do leaves us well-positioned to deliver solid results in this challenging environment. I see two key challenges and two key opportunities as I look to the rest of 2025. The first challenge is the weaker consumers you've heard throughout the week. While a slowdown in category pricing was always built into our assumptions for 2025, The macroeconomic and consumer uncertainty we saw on Q1, not just in the U.S., but also in other countries around the world, had a negative impact on volume growth and, therefore, category growth in the quarter. Our strategy is focused on selling daily-use products. We believe that consumers are still brushing their teeth, taking showers, cleaning their floors, and feeding their pets. While there may have been some pantry deloading and some modest retailer destocking in the quarter as a result, We have seen some signs of category improvement in April, and our experience tells us that consumers will return to these categories. And we're focused on giving consumers reasons to come back to our brands. We will continue to deliver value-added, science-based core innovation like the relaunch of Colgate Total and the relaunch of Hill Science Diet with Active Biome Technology to add meaningful value to our products so that consumers choose our brands. The second is tariffs. As we said in the prepared commentary, we expect the impact of terrorists that have been announced since our conference call in January and that are currently in effect to have an incremental impact of roughly 200 million in 2025 versus our initial guidance. This is a fluid situation, and we will continue to monitor and to respond to it over the course of the year. That's why we remain focused on continuing to take advantage of and build on the flexibility we have built into our supply chain over the past several years. As I mentioned on the Q4 call, we have changed many of our sourcing strategies and also invested approximately $2 billion in our supply chain in the United States over the past five years, which leaves us better positioned to adapt to this changing environment. We have developed and are continuing to develop plans to deal with the tariffs over the short, medium, and long term, including alternative sourcing, formless simplification, shifting production, and revenue growth management. But we also have opportunities in this environment through advantages we have built up in our commitment to executing against our strategy. We are taking advantage of the breadth and strength of our global portfolio. In the majority of our categories, we offer products across all price tiers. We are fine-tuning our promotional strategy so that consumers can still choose the right Colgate-Palmolive product, even if they feel less certain about their own financial well-being. And our geographic breadth gives us more opportunities for growth as we are less exposed to any single market. Our focus over the past few years on building brand health means that our brands are stronger now than they ever were before. We believe healthier brands will perform better in a difficult market environment. The second advantage is the strength and flexibility we've built into our P&L and the balance sheet over the past several years. The strength of our P&L enables us to continue to invest in our brands and capabilities. While all companies may experience pressure on brand investment given the volatility, We entered 2025 with the advertising spending at an all-time high and feel that our focus on driving ROI needs us well-positioned to compete effectively. We also remain committed to investing in and scaling capabilities like AI, data analytics, and innovation, areas that will take an even greater importance in this more volatile environment. We also have the advantage of a strong balance sheet with low levels of net debt and plans to drive significant cash flow to fund growth and productivity. We think you can see the results of this focus on the P&L and balance sheet in our first quarter results, where we delivered strong profit growth despite the volatility in the quarter. So we look to the balance of 2025 knowing that we are well positioned to deal with the known challenges as well as the ones yet to come. our commitment to our strategy, and the strength of our execution and team give us the confidence that we will deliver on our 2025 goals while positioning ourselves to deliver long-term growth and strong shareholder return. And with that, I'll take your questions.