In late January 2014, the Venezuelan government made several
announcements affecting currency exchange and other controls. Although
the official exchange rate remains at 6.30 bolivares fuerte per dollar,
the government announced that the exchange rate for foreign investments
will move to the rate available on the SICAD (Supplementary System for
the Administration of Foreign Currency) currency market, which in the
last auction was 11.70 bolivares fuerte per dollar. While there is
considerable uncertainty as to the nature of transactions that will flow
through SICAD and how SICAD will operate in the future, effective with
the quarter ending March 31, 2014, the Company expects that the majority
of Colgate’s Venezuelan subsidiary’s (CP Venezuela) net monetary assets
will be remeasured at the SICAD rate since that is the rate the Company
now believes, based on the advice of legal counsel, will be applicable
for future dividend remittances. In addition, because the official
exchange rate remains at 6.30 bolivares fuerte per dollar, the Company
currently expects that the devaluation-protected bonds issued by the
Venezuelan government and held by CP Venezuela will not revalue at the
rate available on the SICAD currency market but will remain at the
official rate. If the SICAD rate were to remain at 11.70 during the
quarter ending March 31, 2014, the Company estimates it would incur a
one-time aftertax loss of approximately $180 million - $200 million, or
$0.19 - $0.21 per share.
Because the SICAD market is auction-based and auctions are held
periodically during each quarter, the exchange rate available through
SICAD may vary throughout the year which would cause additional
remeasurements of CP Venezuela’s local currency-denominated net monetary
assets and further impact CP Venezuela’s ongoing results.
Although, as described above, there is considerable uncertainty with
respect to the implementation of the SICAD rate, the Company anticipates
that there also will be ongoing impacts primarily related to the
translation of the local financial statements and, to a lesser degree,
the import of materials at the new exchange rate. While it is still
unclear, the Company believes that some of its imports may still qualify
for the official rate of 6.30 bolivares fuerte per dollar. Based on this
assumption and the SICAD rate at the most recent 11.70 bolivares fuertes
per dollar, the Company preliminarily estimates that the ongoing impacts
during 2014 would be in the range of $0.11 - $0.14 per share for the
year and $0.03 - $0.04 per share in the first quarter.
As part of the January 2014 announcements, the Venezuelan government
also issued a new Law on Fair Pricing, establishing a maximum profit
margin of 30%. At this time, it is unclear based on the current
regulations how this new law may affect CP Venezuela and its current
pricing structure and, as a result, its impact is not included in the
range of estimated ongoing impacts outlined above.
About Colgate-Palmolive (NYSE:CL): Colgate-Palmolive is a leading global
consumer products company, tightly focused on Oral Care, Personal Care,
Home Care and Pet Nutrition. Colgate sells its products in over 200
countries and territories around the world under such internationally
recognized brand names as Colgate, Palmolive, Speed Stick, Lady Speed
Stick, Softsoap, Irish Spring, Protex, Sorriso, Kolynos, elmex, Tom’s of
Maine, Sanex, Ajax, Axion, Fabuloso, Soupline and Suavitel, as well as
Hill’s Science Diet, Hill’s Prescription Diet and Hill’s Ideal Balance.
For more information about Colgate’s global business, visit the
Company’s web site at http://www.colgatepalmolive.com.
To learn more about Colgate Bright Smiles, Bright Futures® oral health
education program, please visit http://www.colgatebsbf.com.
CL-E
Cautionary Statement on Forward-Looking Statements
This press release contains forward-looking statements. Such statements
may relate, for example, to earnings growth, financial goals or the
impact of currency devaluations, exchange controls, price controls and
labor unrest, including in Venezuela. These statements are made on the
basis of our views and assumptions as of this time and we undertake no
obligation to update these statements. We caution investors that any
such forward-looking statements are not guarantees of future performance
and that actual events or results may differ materially from those
statements. Investors should consult the Company’s filings with the
Securities and Exchange Commission (including the information set forth
under the caption “Risk Factors” in the Company’s Annual Report on Form
10-K for the year ended December 31, 2012) for information about certain
factors that could cause such differences. Copies of these filings may
be obtained upon request from the Company’s Investor Relations
Department or on the Company’s web site at http://www.colgatepalmolive.com.
Copyright Business Wire 2014