Colgate-Palmolive Company

Good morning. Welcome to today's Colgate Palmolive 2025 fourth quarter and year-end earnings 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, Betsy. Good morning and welcome to our fourth quarter and full year 2025 earnings release conference call. This is John Cochet. Today's conference call will include forward-looking statements. Actual results could 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 discussion of the factors that could cause actual results to differ materially from these statements. These 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 fourth quarter earnings press release. Full reconciliation to 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 2026 outlook. We will then open it up for Q&A. Noel?

Thanks, and good morning, everyone, and thanks for joining us today as we discuss our stronger than expected Q4 results and more importantly, our outlook for 2026, which marks the beginning of our new 2030 strategy. I'll give some brief thoughts on 2025 before heading into why I'm excited for what 2026 could bring, despite a very volatile environment as we enter the year. We delivered organic sales, net sales, gross profit, base business earnings per share, and free cash flow growth in 2025, despite lower than expected category growth higher than anticipated raw material inflation, and the impact of higher tariffs. I believe our ability to deliver dollar-based earnings per share growth in a year with that much volatility is a sign that the flexibility and resilience we have built into our operating model is working effectively to drive value for our shareholders. Encouragingly, we are exiting the year with improved momentum, with organic sales growth in all four categories in the fourth quarter, and sequential improvement in organic sales growth versus the third quarter in every division except North America. And we delivered modest volume growth in Q4, excluding the impact of both the Prime 100 acquisition and the planned exit of the private label business. Last year, we completed our 2025 strategy where we added $5 billion in sales and this year marks the transition to our new 2030 strategy, which we believe provides the building blocks to accelerate change at our company to continue to drive top-tier growth and total shareholder return. The five key areas where we're focused on are, first, we have strong brands with global reach. We believe this provides a competitive advantage. For example, the Colgate brand is the most penetrated brand in the world, and this helps us drive distribution for our portfolio particularly in emerging markets. Second, we are accelerating our investment in new innovation models with additional resources focused on delivering more impactful science-based innovation across all price tiers with greater investment in key strategic growth markets. Next, we're harnessing the power of best-in-class omnichannel demand generation by adapting how the right products with content and messages are delivered to the right people at the moments that matter in order to drive purchase behavior. The goal is to deliver consistency of this consumer-centric model around the world to build brand strength and penetration. Fourth, we'll continue to double down on and accelerate investments in scale capabilities, digital, data, analytics, and AI, including our efforts in revenue growth management and AI-driven innovation to generate faster growth, higher return on investment, efficiency, and productivity, and to integrate new ways of working across the company. We are also executing on our plans to optimize our supply chain through predictive analytics and automation to handle customization and personalization in a new dynamic environment. This is intended to deliver personalization at scale, drive optimal asset utilization, minimize downtime, improve service levels, and enhance quality systems. Finally, anyone who has worked for me knows how much I believe in culture as a competitive advantage. We are laser-focused on continuing to develop a high-impact culture by aligning key performance indicators in our training and development programs. We also announced our Strategic Growth and Productivity Program, which should unlock the organizational changes and funding necessary to help us deliver on our new strategy. Combined with our Funding the Growth initiatives, which delivered another strong year in 2025, We believe we are well positioned to invest to grow our brands, build our capabilities, and deliver productivity to help offset cost inflation and drive margin expansion. We have several reasons for optimism in 2026. Our new strategy and the resilience and strength of our operating model gives us the ability to adapt to this volatile environment. Emerging markets where we have significant exposure continue to perform ahead of developed markets. We delivered improved momentum on our business in Q4 in terms of organic sales growth and market share, and we have seen stabilization of category growth rates as we exit 2025. But we still face significant uncertainty. While category growth may have stabilized, growth rates remain low. This is difficult in and of itself, but also could lead to higher levels of promotion and other competitive activity. Foreign exchange is favorable right now, but has been a negative impact for eight of the past 10 years. The geopolitical environment, including tariffs, is volatile, particularly in Latin America, and the U.S. market remains sluggish while we think trends will improve. We're not building in a big rebound. Because of this uncertainty, we're giving a wider range than normal in our net sales and organic sales growth guidance to incorporate various levels of category growth. So to finish up, I'm confident in our ability to navigate through this uncertain environment. I believe we have the correct long-term strategy, very well-designed 2026 plans, and of course, the best people and culture so that we can continue to deliver value to all of our stakeholders through achieving our long-term ambitions. And with that, I'll take your questions.