Colgate-Palmolive Company

Good morning. Welcome to today's Colgate-Palmolive 2025 Second Quarter Conference Call. This call is being recorded and is being simulcast live at .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 Fochet.

Thanks, Betsy. Good morning and welcome to our Second Quarter 2025 Earnings Release Conference Call. This is John Fochet. 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 10K and subsequent SEC filings, all available on Colgate's website for 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 31, 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. 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 Sotula, 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?

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 basis points to 2.4 percent in the Second Quarter with slightly positive volume during by the improvement in North America and Africa Eurasia. We also generated additional pricing through strong revenue growth 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 best 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. This preparation is paying off as the COVID-19 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, 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. 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, and 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 size multipacks where consumers pay a lower price per usage, or through smaller sizes for consumers who are looking for a lower -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're 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. As I talked about at Cagney, 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'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 off with innovation, delivers incremental benefits. This is well represented in our investor presentation this morning through premium innovation like Colgate Miracle Repair Serums, ELTA UV Skin Recovery, along with relaunches on core brands like Sanex, Protex, Suaveetel, and of course, Ells. Our commitment to core innovation is vital as we work to bring news and consumer perceived 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 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. 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. And with that, I'll take your questions.

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 Mosinian with Morgan Stanley. Please go ahead.

Hey, good morning. First, just wanted to get a bit more detail on 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 the 2030 strategy? And then B, I was just hoping you could also touch on US category growth. We've obviously seen a slow down in household products. It seems fairly unique versus other parts of the world, keeping in mind 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. And any thoughts on a potential recovery as we look going forward? Thanks.

Yeah, thanks, Dara. So, let me talk about the productivity initiative. So, if I 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. And importantly, within that program, we had a lot of capability building, data analytics or digital transformation, more resources in obviously AI at the early onset 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'll be talking to the teams more in detail at Cagney 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 intentionally set up to 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're 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 into innovation and AI into our data analytics. So, it's an exciting aspect for the company right now as we embark on our 2030 plans to have this tailwind behind us so we continue to invest back behind the business. I've asked Stan to lead this initiative and so maybe I'll turn it over to Stan to give you a bit more detail on how we're thinking about the savings and more importantly the costs associated with the program.

Yeah, thanks Noel. So, as Noel said, our areas of focus are going to be to continue to invest in our strategic alternatives here. Accelerating the innovation, our investments in data and analytics, optimizing our supply chain. Of course, AI is a big focus on driving our omni-channel demand generation. So, as part of that, we've announced a productivity program here that will be two to three hundred 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, you know, if you look back at history and how we've achieved those in our last initiative, you should think about savings roughly in the same range as what we've demonstrated in the past. So, while this program we've done a lot of planning, we're ready to go. It's going to be done properly and done with the right opportunity to drive our structural changes to continue to invest in key objectives for our 2030 strategic plan.

Yeah, so let me come back on the North America. You know, you clearly, excuse me, heard it from others. There's a persistently cautious consumer in North America right now. We saw some rebound in April, May. The categories took a little setback in June, 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, and particularly in the U.S., 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. Clearly, the North America business improved in the quarter. You saw the improvements there, particularly on a volume standpoint. 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 share has improved during the quarter. So, as we laugh some of the significant promotions we had last year, we're 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 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.

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

Great. Thank you very much. I know the total relaunch had a great start this year, 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, what you're seeing. And then, you know, drilling back to Latin America, we're 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're seeing in Latin America and if you have to pivot there at all. 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. And good morning. So, you know, total, as we talked about, big core relaunch for us, you know, out of the gates, you know, quite strong in 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 regiment portfolio associated with that launch. So it's not just a toothpaste, it's a toothbrush and a mouthwash that complement each other to give us the opportunity for very strong efficacy claims. We're at about 75 markets so far with that launch around the world and left hand was the lead. So we're encouraged by what we're seeing there. We're also very encouraged by what we're seeing in Asia with some of the early onsets of that as well as Europe. So early days, but the early indications are very positive for us driving, you know, our share in premium and certainly driving some incrementality into the toothpaste business. So overall, pretty good there. Laptam is, as you said, I mean, we've seen a little bit of improvement in Mexico in terms of the categories, but a little bit of deceleration in the categories in Brazil. So overall, you know, Laptam, I think likewise, is seeing a bit of cautiousness right now relative to the consumer environment in general across Latin America. And I expect that, as things get, the tariff noise gets behind us, you start to see that improve through the back half of the year. We will obviously, we've talked about taking a little bit of pricing in the first quarter where that has happened and we've seen that start to flow through through the back 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.

The next question comes from Andrea Tichara with JPMorgan. Please go ahead.

Thank you. Good morning. I just wanted to perhaps know, you spoke about the program a bit on earlier question, but just to drill down where we should see this, I mean, you clearly said that you're not going to see the benefits of 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. And then on a separate question, just a follow-up 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.

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

initiative, you shouldn't assume any major impact here in the back half of the year. So as we go to execute this, it can be over a two to three year period, we believe we'll conclude within three years. And as you see, you might see some cash here in late the year as we start to execute those programs, and you'll see that roll through the P&L both in overhead as well as in margin, because it can be a combination of events. 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. So overall, for this, not a material impact for the back half of the year.

Yeah, and the only thing I'd add is, you know, we're very excited about some of the opportunities we've identified within our 2030 plan. And again, this program will serve as a catalyst to get ahead of those programs as quickly as we can. Now, clearly 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. And we've seen 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 see that's an exciting space to invest behind. On Europe and some of the other geographies, 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. But again, I think a little bit of a pushback from consumers is they wait and see what's going to happen with inflationary pressure. I think one of the things we're seeing both in the U.S. and around the world is the inflation has hit food a little bit quicker than it's 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 brands as we think about the innovation moving forward.

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

Hi, good morning everyone. I wanted to ask about the gross margin outlook for the balance of the year. Obviously, there's a lot of puts and takes, lower tariffs, now $75 million versus your prior $200 million. But you mentioned offset by higher raw material costs. Can you give us a sense within the raw material cost, 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.

So let me take that here. For gross profits, so the gross margin is down a year over a year in a quarter, driven by a combination of greater anticipated raw material inflation and tariffs. Although tariffs are lower earlier expectations, there's still an impact to the margin. But one point to note, Q2-24 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 the raw material cost. Our gross margin guidance stays roughly the same. It's based on lower tariff exposure offset by higher raw material cost and lower organic sales. So we guided that gross margin be roughly flat for 2025. That's a point of context, that guidance, if you look at the first half gross profit, it's flat year to 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, it's primarily what we said in the prepared comments. And that is that palm, veg oils, and fats, and tallow all have moved higher. They're higher on a year-round basis. We don't see a lot of relief here yet. Keep in mind that, like most companies, we have a apply 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 softened a bit, but in total we still see that increase driven by fats and oils.

Yeah, the only thing I would add to leap is we had strong funding to growth in the quarter as well. We're encouraged by the 250 basis points that we saw move through the reconciliation. And 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.

The next question comes from Kumil Garjawala with Jeffery. Please go ahead.

Hey guys, good morning. Can we talk maybe a bit about hills? You're seeing a bit of an acceleration. There's been some kind of debate about the category, the pet food category in general, if it had been fading. So obviously you have your new products out and such, but is there a macro component to it or is it more some of the initiatives that you've made that's leading to some of the acceleration?

Yeah, thanks. Great performance on hills in the quarter and what you characterize that, which is what 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 U.S. and Europe. Hills ex-private label, as you probably run the numbers already, was 5% organic, consistent with where we were in the first quarter. 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 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. 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. We did see a greater impact from private label this quarter, about 300 basis points, as you picked up in the commentary. We're not in the business, as I repeatedly have said, of producing private labels. I continue to insist that the best way to look at the underlying health of both the hills and the total Colgate-Palmola 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 diets. So the good news is the growth is broad-based across all of our segments, the strategic areas that we're focused on as well as geographies. We also launched a new advertising campaign in the quarter, 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 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 would suggest that we'll 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 exit in July. So overall, good business, good results for Hills.

The next question comes from Bonnie Herzog with Golden Facts. Please go ahead.

All right, thank you. Good morning, everyone. I have a question on your FY25 EPS guidance. 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-budget EPS growth expectation this year? I guess it's end market, trends don't pick up meaning-free, the promotional intensity remains elevated, and then tariffs certainly lower now, still weigh on margin. So I guess I'm hoping you could maybe walk us through the key growth drivers given all of that. Thank you.

Sure, thanks, Bonnie. So clearly there's a lot of uncertainty in the market, and we've built that into our guidance level. We feel pretty good about where we are in terms of the first half of the year, 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 what 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. 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 good innovation, so we feel we'll see some excitement go through the categories through that. But overall we seem to be in a pretty good place.

Stan? The only thing I'd add to that is 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 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 roughly flat advertising. We're going to deliver roughly flat gross 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 this guidance down the year.

The next question comes from Robert Moscow with TD Cowan. Please go ahead.

Hi. I heard another CPG company mentioned... Sorry, Robert. Robert,

we're having a real hard time hearing you. Can you get a connection? Is this any better? 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, and now you're raising prices in Brazil. Can you give us a like to kind of follow your increase in that the elasticity will be strong? Raising prices in the US hasn't worked out so well. Why will the Brazilian consumer absorb it better?

Yeah. First of all, we've taken prices consistently over the years in Brazil, and that environment tends to be far more accommodating to price increases. Now, we've seen the food prices, as you mentioned, move pretty quickly, and overall, I think that's created the 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 four or five 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 was launched at a premium price. 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've had to adjust for that. We took some pricing in the second quarter. At the end of the quarter, we'll see that balance through the back half of the year. But overall, we feel good about where we are from the pricing standpoint. As I mentioned up front, though the Brazilian categories have been a little softer than we expected, but we'll 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, and we feel that we've got a good strategy as we've done historically in that market where things are slow.

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

Great, and good morning. I wanted to pick back up on the prioritization of innovation within the 2030 strategy, because it's been a big focus of the 2025 strategy. So as we look forward, when you think about doubling down and stepping up innovation capabilities, is it simply 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'm 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.

Yeah, thanks, Steve. 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 internally against that would suggest 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. It's more the breakthrough in the transformational innovation, which takes a little bit longer to 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 weren't bringing real big ideas on H1. Now 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'll focus some of those resources.

The next question comes from Peter Galbo with Bank of America. Please go ahead.

Hey, good morning. Thank you for the question. Noel, I just wanted to circle back on Hill's, and maybe one is, maybe this is a question for Stan, just a modeling point. So just as the private label, you exit that effective in July, right? That'll still impact the P&L through, I guess, the first half of next year, just A, to clarify that. And B, look, Noel, I think at a 5% organic, you'd 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's 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. I know you've talked about the category kind of flattening out, but it's a very broad question. But I just want to maybe drill a little bit deeper on what really is allowing Hill to just, again, outperform at such a high level at this point. Thanks very much.

Great. Thanks, Peter. I'll take the latter part of the question, and I'll let Stan talk a little bit about the other part. So overall, the strategy is very consistent, what we've been talking about for the last four or five years. We've obviously stepped up the investment levels, but it's not just increasing advertising behind that brand that's paying off. It's the innovation and the breadth of innovation that we brought into the market and staying very, very true to the swim chain 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 on going after the growth segments where we see the brand can play the most effectively. We've talked about wet. We've talked about cats. 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 come 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 prescription diet innovation, and great growth on small paws. So again, I think it's the consistency of the strategy. And again, recognizing that we still are a low brand awareness brand and low brand penetration. So there's 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 omni-channel strategy executed as effectively as we possibly can. So overall consistency of strategy.

So let me take the impact of private label. So as we said, we stopped producing private label in the month of July. There will be a shift in us here as we ship out that volume. That will be a modest amount here in third quarter. But now if you think about what happens, 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 basis points. It will be slightly more than that in 3Q and 4Q on a -on-year basis. So you will see that impact as we had private label last year, and we'll have essentially zero here in the back half. So the impact will be closer to 80 or 90 basis points.

And that is backward indoor guidance.

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

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 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. Great. So let me take the overall Asia first. A little softer than we expected as volume and pricing came in weaker on the Holly and Hazel business in China. And we were not pleased really with the performance we had in India, but we feel good about where we're headed in the back half, and I'll talk about that more specificity when I get into India. Specifically on the China piece, again, kind of a tale of two cities. The Colgate business continues to perform exceptionally well. The learning that we're getting from that is the -to-market execution that we have, that we've revamped over the last three to four 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 concerted and thoughtful digital strategy to grow in the e-commerce class of trade, which is obviously growing very, very quickly. On the Holly and Hazel side, we're having to make adjustments in terms of what we do with our -to-market there, particularly in China, where we need to get the -to-market addressed and get the wholesaler channel addressed in a more effective way, and more importantly, make sure that we effectively compete on the digital in the online world, where 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 Holly and Hazel people have the tools necessary 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 Holly and Hazel business, but over time, we feel comfortable we will get that back. On India, as you said, we saw some sluggishness 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're relaunching our biggest core business in India as we speak. We've introduced and relaunched the Colgate Total line in India as we speak, and we have some more higher-end premium innovation coming through the back half into 2026. So getting the urban markets right and executing more effectively there is critically important. Pleasingly, we're seeing great growth for our e-commerce business there. We're up over 500 basis points in market share in e-commerce, so as that trade class grows, we'll see some tailwinds come from that, but 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, and we had completed on the 20 rupee part of our business, but the 10 rupee, which is the entry price point, wasn't addressed, and we're addressing that as we speak. So we're optimistic that we'll see the benefits of that come in the second half.

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

Olivia Tong Sorry about that. Thanks. Good morning. I was wondering if you could talk about the sales run rate and the expectations to improve slightly in the second half versus first half to sort of a 2% for the full year. If you could talk a little bit about what's 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? 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 it more of a fast track of existing initiatives, and is there any headcount reduction or a particular look at a region or category that will be more of a focus? Thanks so much.

David Morgan Great. Thanks, Olivia. Good morning. Let me take the first part of that and I'll get let's stand face to second. So on our confidence on the guidance relative to the back half, again, first and foremost, we've got good advertising levels planned in the back half, you know, consistent with where we were in 2024. So we feel good about that. We've got a strong innovation pipeline 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. In fact, we expect them to get modestly better, but not significantly better. So the guidance anticipates all of that. So again, 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.

David Morgan So on the on the productivity program, as we said, you know, two to 300 million completed in three years, we're not going to go into detailed 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 where we have our allocation 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, inherently, we have to rebalance those assets over time. That includes, you know, hard assets, as well as headcount. So we'll disclose more on that in time as we execute those programs.

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

Great, thanks so much. I want to go back to the the preparator marks on this call, not the published ones. And you talked about, you know, sharpening offerings, value to the consumer and so on. So I was curious, and that was the tactical kind of, you know, bucket. So I was just curious, any particular markets where you would call out the need to do that? And then in tandem, you also mentioned, you know, needing to drive, find ways to drive incremental pricing with RGM, because there's less inflation. So, you know, sort of, it's a bit of like trying, needing to do two things at once. So I just love to understand better how one can approach that if we're sharpening value, you know, but also needing to find incremental price. So first is the markets where sharpening price points together is kind of pursuing these two kind of different, you know, streams, if you will.

Thanks. Sure. Yeah, thanks, Lauren. So, you know, on the price back, 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 in some of the emerging markets where opening price points are critically important. So I mentioned the 10 rupee price point in India, getting the price back architecture right on that. We see some opportunities in Latin America. I would say likewise in Europe and in the U.S., getting price back 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. Now, the way we balance that is the portfolio, we compete at opening price points, mid-price points, and premium price points. And we have a very conservative 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. So the Colgate Total we launched as an example, we've taken significant pricing behind that in certain markets. It will give us more RGM and more pricing and value in the category. So we'll continue to execute that. Our premiumization in the whitening category likewise will continue to execute and support that quite aggressively to drive the top end of the market. So it really is a balanced approach. How do we think about making sure we're being a little bit more tactical with price back architecture from promo packs while at the same time making sure that we're driving value through the categories by some of the premiumization opportunities we have. So again, balance between the two.

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

Great. Thanks. Good morning, everyone. So, Noel, I wanted to come back to North America, but I wanted to ask you in the context of balance, you know, that balance between top line growth and margin restoration. We spent a lot of time on these calls talking about, you know, the appropriate needs of focusing on profit dollars and not necessarily margins. But for given the competitive landscape, soft consumer market share issues, you kind of had both where it's been top line 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 America 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.

Yeah, thanks, Kevin. Listen, simple, a significant priority for us. We need to get the profit margins back up in the U.S. 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. We've seen, you know, some of our competitors do some innovation that's driving some 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, not just the focus that we had on oral care, but both on personal care and home care. And as we look at some of the productivity initiatives, we clearly will be allocating resources in the 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's the focus for that team.

The last question today comes from Peter Graum with UBS. Please go ahead.

Thanks, operator, and good morning, everyone. So 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. 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 trends moderating or we're at risk of moderating? Thanks.

It's pretty much a broad-based comment. Overall, if I take on a constant dollar basis, maybe to 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. So 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. So 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. All of our categories, not necessarily discretionary, they're daily use categories, but there are certain businesses that in the home care where consumers amortize their usage over longer periods of time and are more cautious. So we've set some of the home care categories to come back a little slower than we've seen some of the personal care and home care categories.

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.

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 and ability to keep an eye on 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 Pomola 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.

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