Fitch Affirms Colgate Palmolive's 'AA-' Ratings; Outlook Stable

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed Colgate-Palmolive Company's (Colgate) ratings as follows:

--Long-term Issuer Default Rating (IDR) at 'AA-';

--Short-term IDR at 'F1+';

--Senior Unsecured Notes at 'AA-';

--Revolving Credit Facility at 'AA-';

--Commercial Paper Program at 'F1+'.

The Rating Outlook is Stable. Approximately $2.5 billion of debt is affected by these actions.

The ratings reflect the company's scale with approximately $15.7 billion in revenues at the last 12 months (LTM) ended June 30, 2010 based on today's earnings announcement, leading market shares particularly in oral care on a global basis, consistently strong operating performance, and considerable liquidity and credit protection measures. Strong profitability and very modest debt levels have led to leverage (Debt/EBITDA) declining steadily from 1.6 times (x) at FYE2002 to 0.8x at the LTM ended June 30, 2010. FFO adjusted leverage has shown a similar trajectory and was approximately 1.5x. Coverage (EBITDA/Interest) is very high at over 40 times at the LTM benefiting in part from the marked decline in interest rates. Colgate's credit protection measures and liquidity are strong for the rating category. The company has the ability to moderately increase debt without impacting its ratings.

Colgate is one of the most geographically diversified consumer products companies. It generates 76% of revenues outside the United States. Latin America (around 27% of revenues at June 30, 2010 the company's second quarter) is a particular stronghold where the company maintains very high oral care market shares of over 65%. The ratings also encompass potential volatility in revenues and profits from emerging markets which can be seen in Venezuela's currency devaluation and hyperinflationary status in January 2010. Venezuela however, represented just 6% of 2009's revenues.

The Stable Outlook is based on the company's track record of consistent profitability and considerable liquidity. Colgate's business strategies and conservative management posture also support the Outlook. Fitch understands that management is committed to maintaining its current strategies.

Colgate's EBITDA and cash flow from operations have increased steadily in each of the past 13 fiscal years. The company continues to focus on cost reduction through its 'Colgate Business Planning' and 'Funding the Growth' programs. As a result, Fitch expects that the company's EBITDA and operating cash flow should continue to improve over the medium term but will not be as high as 2009 (FY09) when working capital provided significant contributions. Free cash flow (operating cash flow less capital expenditures and dividends) has averaged $910 million over the past 10 years and was almost $1.8 billion at the LTM ended June 30, 2010. Over the medium term Fitch expects free cash flow to be higher than the 10 year average with volumes increasing over the prior year, muted foreign exchange impacts relative to the -6.5% in 2009, continued cost savings efforts and less capital expenditures after several years of large expenditures in connection with the 2004 restructuring program. Colgate's cash flow generation has been more than enough to finance high levels of share repurchases with no significant increase in debt levels.

The company is highly liquid with a $1.6 billion bank facility, which Fitch expects remains unutilized as it serves primarily to support commercial paper issuances, and $555 million in cash on hand at June 30, 2010 and has considerable access to the capital markets. Debt balances have been relatively stable in the $3.2-$3.7 billion range since 2002 and was $3.4 billion at end of the second quarter. Fitch expects that debt will remain in this range over the medium term leading to improved credit metrics as EBITDA grows. Debt maturities over the next five years are modest at an average of $385 million annually.

The following applicable criteria reports are available at 'www.fitchratings.com':

--'Corporate Rating Methodology' (Nov. 24, 2009).

Additional information is available at 'www.fitchratings.com'. The issuer did not participate in the rating process other than through the medium of its public disclosure.

Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=489018

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CONTACT:

Fitch Ratings
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Wesley E. Moultrie II, CPA +1-312-368-3186 (Chicago)
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