NEW YORK — Pet food continues to be a harbinger of growth for parent company Colgate-Palmolive, as its Hill’s Pet Nutrition business accounted for 22% of the company’s total net sales in the second quarter of 2024.
“Clearly [Q2 was] a great quarter for Hill’s, strong performance across the board, quite frankly, and we’re particularly pleased with the strong volume in light of the significant pricing,” said Noel Wallace, chairman, president and chief executive officer, during Colgate-Palmolive’s second quarter financial results presentation on July 26.
For the second quarter ended June 30, Hill’s net sales totaled $1.11 billion, a 5.5% increase compared to $1.06 billion in the second quarter of 2023. Organic sales for the quarter increased 6.1% compared to those of the prior year. Reported volume for the pet food company increased 2.5% and organic volume also rose 2.5% compared to the prior year. Pricing rose 3.7% year-over-year.
Hill’s operating profit was $235 million in the second quarter, a significant 23% increase from $191 million year-over-year.
For the six months ended June 30, net sales for the pet food division totaled $2.22 billion, a 4.7% increase from $2.12 billion year-over-year. Organic sales increased 5.2% compared to the first six months of 2023. Reported volume and organic volume for the division dropped 0.7% year-over-year.
Operating profit for the first half of 2024 was $433 million, a nearly 16% increase from $374 million compared to the first six months of 2023.
According to Colgate-Palmolive, Hill’s continues to face a challenging pet food market, however, the company continues to gain market share across specialty channels. Increases in capacity, including Hill’s new smart facility in Tonganoxie, Kan., are providing the division with greater flexibility throughout its supply chain, particularly regarding the availability of its Prescription Diet range in wet formats. Increased capacity is also supporting the Hill’s expansions into new can sizes, flavors and textures.
Wallace highlighted the wet pet food space as a continued opportunity for Hill’s as it seeks to deliver increased household penetration, as well as penetration in retail stores.
“We’re continuing to invest aggressively to drive that household penetration and couple that with a really strong innovation pipeline, we see that in the first half of this year and we see that moving into 2025 as well,” he said. “…We saw a good inflection on Prescription Diet this quarter that’s been partly due to the capacity expansion that we’ve had. It allowed us to get more diets on the shelf, allowed us to provide more sustained consistent delivery to the vet professionals on the prescription diet business, and we saw a good mix benefit of that in the quarter.”
Pricing wise, Wallace noted that Hill’s has witnessed a “bit of flattening” on commodity pricing. The pet food company has also benefited from a more moderate inflation environment on input costs, according to Wallace, which will help it sustain volume.
Overall, Colgate-Palmolive reported net sales of $5.06 billion, an increase of 4.9% from $4.82 billion in 2023. Organic sales increased 9%. Gross profit margin rose 280 basis points. Net cash from operations was $1.67 billion for the first six months of 2024.
“We are very pleased to have delivered another quarter of strong top and bottom line results,” Wallace said. “Net sales increased 4.9% and organic sales grew 9.0% (on top of 8.2% organic sales growth in the year ago quarter) driven by a healthy balance of accelerated volume growth and higher pricing. We are particularly pleased that every operating division delivered positive volume growth in the quarter, as we look to increase brand penetration to drive category growth.
“This is our fourth consecutive quarter delivering gross margin expansion and double-digit growth in operating profit, net income and earnings per share,” he added. “This combination of sales growth and operating leverage allowed us to continue to invest for the long-term health of our business, with an 18% increase in advertising in the quarter. The strong levels of investment should continue in the balance of the year as we focus on building brand health and scaling the capabilities needed to drive growth in both the short and long term.”
Throughout its entire business, Colgate-Palmolive expects raw and packaging material costs to increase modestly over the year. Commodity costs are also expected to increase in the second half of 2024.
Additionally, the company updated its financial guidance for the full year of 2024. It expects net sales growth of between 2% and 5%. Organic sales growth guidance has risen to between 6% and 8%, an increase from the previous 5% to 7%.
“Our strong results this quarter and in the first half of the year add to our confidence that we are executing the right strategies to deliver on our increased 2024 organic sales and Base Business earnings growth expectations, drive cash flow and generate consistent, compounded earnings per share growth,” Wallace said.
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