Good day and welcome to today's Colgate-Palmolive Company's Second Quarter 2021 Earnings 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 the call over to Chief Investor Relations Officer, John Faucher. Please go ahead, John.

Thanks, Heidi. Good morning and welcome to our 2021 second quarter earnings release conference call. This is John Faucher, Chief Investor Relations Officer. 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 our most recent filings with the SEC, including our 2020 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. This conference call will also include a discussion of non-GAAP financial measures, including those identified in tables 8 and 9 six of the earnings press release. A full reconciliation to the corresponding GAAP financial measures is included in the 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. I will provide commentary on our Q2 performance as well as our latest thoughts on 2021 guidance before turning it over to Noel to provide his thoughts on the current operating environment and how we will continue to deliver on our growth trajectory. We will then open it up for Q&A. As usual, we request that you limit yourself to one question so that as many people as possible get to ask a question. If you have further questions, you are welcome to re-enter the queue. As we report results at the halfway point in 2021, we remain pleased, but not satisfied with our performance so far as we navigate through what can charitably be described as a complicated year. For both the second quarter and on a year-to-date basis, we delivered growth in organic sales, net sales, operating profit and net income.…

Thanks, John, and good morning, everyone. Hope you're all safe and well this morning. So the overriding message I want to leave with you today is that our strategy to reaccelerate profitable growth by focusing on our core adjacencies all over the world, new channels and markets is really working. As we'd like to say nothing moves in a straight line, but we now have 10 straight quarters of organic sales growth at or above our long-term target range. Year-to-date, we're at the high-end of the range despite difficult comparisons, and continued volatility in the business. We're making good progress on our journey, but we still have more work to do. And as I look back at my comments to you over the past 18 months that we've been dealing with the implications of COVID, there's one consistent theme that we keep coming back to, managing through this crisis with an eye on the future. This is still the appropriate theme, although obviously, some of the elements have changed. The prevalence of the vaccine in many developed markets gives us a sense of guarded optimism. But we've highlighted that many emerging markets which represent almost half of our revenues, the availability of the vaccine remains a very -- remains very low. Case rates are high, and governments continue to put in restrictions to help stop the spread of the virus. We remain hopeful that we will get to a post-COVID sooner rather than later, but we're not there yet. We will continue to manage to the retail and supply chain disruptions, changes in consumer behavior and government actions to stem the spread of the virus, all while doing our best to protect the health and safety of our employees, which remains our number one priority. But there are changing headwinds…

Thank you. [Operator Instructions] We'll take our first question from Peter Grom with UBS.

Hey, good morning, everyone. So I just wanted to ask around Latin America in the quarter. I know it's not all the same category and country exposure. But the read through from a lot of other companies that have reported thus far was that the region was really strong with most seeing better performance sequentially. So I know you mentioned Columbia, so is there any way to quantify how much of a headwind you think the disruptions they're causing the quarter? And then maybe just more broadly, can you provide an update on your performance versus the category in the region? And how you're thinking about growth in the back half of the year, just kind of on the heels of your positive GDP commentary there?

Sure. Thanks, Peter. Overall, we're really, really happy with Latin America. You mentioned that, obviously, we saw significant headwinds from the Columbia disruption, which in many respects took almost a month of sales out of that specific country. And despite that, we obviously still delivered very strong top line growth. If you look at our two key markets, Mexico and Brazil, both delivering double-digit growth in the quarter. You've seen now Brazil deliver four consecutive quarters of double-digit growth. So obviously, the market seems to be returning despite the fact that we're definitely not out of the woods relative to COVID. But we think as vaccinations improve, particularly in those markets that will continue to help categories. Categories are up on the year, which is good. Despite the fact that we still see limited mobility, we still see some disruptions in particularly the down trade around how retail environments are behaving. But overall, the categories are up, which is good. We had strong innovation in the quarter. We got some good innovation on our core business Colgate Total, which John mentioned, which is driving good share growth. We resist a little bit of the transactional couponing and deep discount in some of those markets. Overall, we've lost a little bit of promotional share, but our baseline shares look good. And the innovation process plans we have in place for the back half are strong as well. Likewise on pricing, we've always been a strong driver of pricing in those markets. We continue to obviously see a lot of headwinds on commodity prices, particularly on tallow prices coming out of Brazil. And we're ramping up for obviously a strong back half relative to how we see pricing evolving, and obviously continuing to drive the volume in the quarter. So overall, I think we're pleased despite the fact that Columbia was a significant headwind to the quarter. Bear in mind, if you look at the overall of Latin America, that region continues to perform exceptionally well on balance, 10.3 -- 10.6 in the fourth quarter, 9.5 in the first, and 8.5 now. So again, I think despite the headwinds, good consistent growth.

Thank you. We'll take our next question from Rob Ottenstein with Evercore.

Great. Thank you very much. Noel, I'm wondering if you could go around the world and talk a little bit about your actual pricing power. I think we all understand less promos, and that was an effect on the reported pricing in Europe and Asia. Obviously, there's mixed effects. But if we kind of clear through all that, can you talk about actual headline pricing that you got in the quarter or that you expect to get later in the year? And to what extent you're able to do that given disposable income in the various markets and competitive activity. Thank you.

Sure, Rob. Thank you. So let me start macro. Obviously, if you look at developing markets versus developed, developing have obviously moved pricing a little faster than the developed world. And when I say developed, I'm referring to Europe and the U.S. We've seen good pricing movements in Latin America, good pricing movements in Africa. And we've seen competition likewise in those regions follows. Similarly, in Asia, John mentioned in the upfront comments that we took some pricing obviously in the fourth -- first quarter. We were lapping promotions from the second quarter last year, although we have pricing planned quite aggressively in the back half across the Asia region. If you take the developed world, U.S has been a little slow in terms of the market. I think everyone is focusing on promotions and couponings to drive pricing. We haven't seen a lot of list price changes in North America yet and I would say that particularly holds true for Europe as well. Our strategy continues to be as we've outlined, very disciplined approach to revenue growth management. We're taking list pricing where we see the opportunity. We're optimizing our promotional spend, we're looking at price tag architecture, we're looking at all the levers within in revenue growth management to drive pricing overall. The other point is, as you've heard, we're very focused on premium innovation. We continue to under index as I've mentioned, and that's a real opportunity for us to drive overall gross margin percent and dollars, as we look at the back half of the year. So I think the headline is pricing, is going to have to come up in the back half. Everyone is faced with the same challenges. And we anticipate that as we move into the back half, we'll see a little bit better environment around developed markets and continue to focus on our revenue growth management discipline across the world to do that with.

Thank you. We'll take our next question from Kamil Jagrulla with Credit Suisse.

Hi. Thank you. Good morning, everybody. A couple questions on local competition. It wasn't really that long ago we were talking about market share gains from local competition in a very in a variety of your kind of major markets. Can you maybe talk about how that's evolved through the pandemic? What position were in -- you're in now, particularly maybe as it relates to pricing couponing promo right at a time where it's necessary to push the pricing through the market because of inflation?

Sure. Kamil, thanks for the question. We talked about, I think, throughout 2020 and perhaps touched on it a bit in the first quarter, the strength of our brands and the efficacy of our brands has certainly brought consumers back into the mainstream, so to speak. I mean, a lot of the local brands relative to the credibility they had in the market, which was questionable, we saw consumers returning to big brands and certainly trusted brands in the market. And that was very prevalent in market and categories, like Personal Care, like Home Care, like pet nutrition as well as Oral Care, quite frankly. And so that certainly has benefited us in terms of how we've seen the categories evolve. And I think that will continues particularly given the overarching issues around COVID around the world, consumers are still looking for big, trusted, efficacious brands. And we expect that to continue as we move through the balance of the year.

Kamil, it's John. If I could add something to that, what I would say is, if you look at the success of the local brands over the last 5 or 6 years, it's been a lot of differentiated benefits. Naturals -- the way Naturals is expressed in a number of different markets, different types of packaging, different media strategies, and mostly at premium prices. So as I think as you look at our innovation strategy that Noel talked about, and you look at the type of innovation we're putting out, whether it's Elixir in Europe, or whether it's a Naturals relaunch in Afro-Eurasia, we have the ability to compete more effectively with some of these local brands, and we can drive that premiumization at the same time.

Thank you. We'll take our next question from Andrea Teixeira with JPMorgan.

Hey, good morning, everyone. It's actually [indiscernible] on for Andrea. Thanks for taking the question. So just at a high-level, can you maybe talk a little bit more about some of the specific actions that you plan to take to help reverse some of those share losses, particularly in the U.S., really in the core toothpaste and distribution categories?

Sure. Obviously, the North America performance was below our expectations. We had a lot of factors driving that. Obviously, the impact of logistics challenges that we alluded to in the first quarter, we continue to have some case fill [ph] issues in the second quarter, which obviously had an impact on our promotional ability to put promotions in the market and obviously therefore share. We're working those behind us. And as we move into the back half, those will be ideally gone. So we expect some of that to come back. We've pushed a lot of the premiumization. That market has become highly competitive. We saw increased activity in promotion and couponing in the second quarter. We have adjusted our plans for the back half of the year and our guidance reflects those plans for North America. Likewise in the dish business, we saw similar promotional activity, we've adjusted our promotional plans for the back half. So by and large, we saw obviously some logistics challenge and competitive activity. Obviously some of the comparisons that we had last year dealing with elevated categories, obviously softening the dish liquid and the liquid hand soap category in the second quarter, but we anticipate as we move through the back half things will set down, and we have strong innovation and promotion plans to rebuild the North America shares.

Thank you. We'll take our next question from Chris Carey with Wells Fargo Securities.

Hi. Thanks so much for the question. I had a question specifically on China. I’m conscious the margins were better in APAC than the rest of the world, but also on a pullback in marketing spending with China declining. Can you just provide any additional perspective on what you're seeing in that market, and maybe by category and the rationale behind the marketing and how you see that going forward? Thanks.

Sure. So as John alluded to in his comments, we did see some weakness in the China business from our Hawley & Hazel partner that was specifically driven by -- that's a business that heavily driven down trade. We have very strong distribution in CDE cities and as we've seen e-commerce continue to grow, our distributor network has been cautious on managing inventories as we've seen the brick-and-mortar categories, fundamentally flat not growing so far in the first half of the year. As e-commerce will potentially continue to accelerate and those inventories get drawn down, we expect that will sort of through in the back half of the year. Importantly, I think we're seeing terrific growth on our e-commerce business, as we talked about over the last couple quarters. In fact, our Colgate franchise and our Darlie franchise were two of the three fastest growing brands in e-commerce retail environment in the quarter. And obviously up significantly versus where we were in the first quarter from a share standpoint, which is really nice to see. That's driven behind a lot of good premium innovation that we've had in the quarter, the miracle repair continues to do well. We've launched a series of premium Enzyme toothpaste as well. So that continues to perform well. And the advertising is there in the back half to continue to grow that business as we go out the year. So we're comfortable with where we are from an advertising standpoint. Obviously, the comps versus a quarter last year where we had drawn down a bit of our advertising, we saw a little bit of elevation in Asia in the second quarter, but good plans in the back half to continue to drive share.

Thank you. We'll take our next question from Mark Astrachan with Stifel.

Hey, everyone. Good morning. This is actually Chris Armes on for Mark. Just wanted to talk a little bit about Hill's growth, obviously very good. Maybe on the growth, if you could parse out how much is share gains versus just elevated category growth? Can you kind of talk also about growth by geography? And then also the growth from kind of new -- from expansion to new markets versus existing markets? Thanks.

Sure, Chris. Yes, overall, listen, Hill's had another fantastic quarter, 50% comping, obviously a really strong quarter last year where we did double-digit growth as well. So we're hitting on all cylinders on that business. Growth is across the world. We had all of our regions up with exception of Japan. Market share is up across the board typically and where we're gaining market share is mainly in the U.S., which is our largest market as you know. We saw a good share growth across most retail environments, both on the Base Business, the Science Diet business as well as the Prescription Diet business, that's behind a continued focus on the strategy, which is the core renovation, premium innovation, new channels, in this case continuing to grow online as well as farm and feed. And obviously continuing to see an increase in the Prescription Diet business, which has more and more pet owners return to their vets, we see the benefit of vet coming through as well. So across the board, very strong growth and we continue to obviously invest for growth in that business. And that continues to be the strategy moving into the back half of this year.

That will conclude our question-and-answer session. At this time, I would like to turn the call back over to our speakers for any additional or closing remarks.

Thank you. Obviously, an extremely volatile quarter. But again, I think we're continuing to execute our strategy. As we've talked about, for the last couple years, some real opportunities ahead and some challenges that will face as we have in the past. And so I'd simply want to extend my thanks to all the Colgate people listening for their incredible resilience during these difficult times and look forward to a good back half of the company. Thank you.

That will conclude today's call. We appreciate your participation.