For Investors: Financial Information

Reuben Mark:
"Colgate is capitalizing on strong top-line momentum as we enter 2005. This very positive trend combined with our new global restructuring program bodes well for strong profitable growth going forward. We remain focused on our high-margin core businesses and believe we are taking the right measures to invest strategically for profitable growth."

Bill Shanahan:
“We are carefully targeting increased commercial investment to support our priority businesses in key high-potential markets around the world. Our stepped-up advertising spending is already paying off in higher market shares and new category leadership positions around the world. With our sharp focus on new products, we remain dedicated to accelerating innovation and furthering our leadership positions worldwide.”

Q. Colgate achieved strong sales and unit volume growth in 2004. Do you expect this positive momentum to continue into 2005?
A. Reuben Mark: Colgate’s sales and volume did grow very strongly in 2004. Global sales increased 7.0% and global unit volume from continuing businesses grew 6.5%, the strongest unit volume growth in six years. We are especially encouraged that every operating division achieved solid volume increases and that growth momentum strengthened throughout the year with global unit volume from continuing businesses building to 9.0% in the fourth quarter. These positive results are reflected in rising market shares for Colgate brands all around the world. For example, Colgate’s toothpaste market shares are up in more than 100 countries around the world, including such competitive markets as the U.S., Mexico, China and Russia.

As we enter 2005, Colgate’s pipeline is very full with innovative new products planned for launch in all of our core categories. This bodes well for 2005 to be another year of top-line strength for Colgate

Q. Colgate’s advertising spending was up significantly in 2004, both in absolute dollars and as a percent of sales. Will this level of spending continue in 2005?
A. Bill Shanahan: Advertising is an important business-building activity, and we are committed to using this marketing tool to aggressively support new products and existing brands. Spending levels required to maintain market share have increased around the world. In 2004, Colgate’s advertising spending rose 10% to an all-time record level. In 2005, we expect our commercial spending to continue at competitive levels, including heavy increases in media.

This spending will be carefully targeted to support new products in the Company’s core, high-margin categories and in key competitive markets including the U.S., China, Russia, India, Mexico and Brazil.

This kind of effective, sustained advertising is essential for continued growth, and we are pleased with the acceleration of our market shares and excellent unit volume growth that has followed the stepped-up spending.

Q. Please comment on the Company’s 2004 profit trends.
A. Reuben Mark: After many years of strong growth, profits in 2004 were affected by several factors, including a heightened competitive environment requiring increased levels of commercial investment and steep increases in raw and packing material prices. These additional costs more than offset sizable savings generated by the Company’s ongoing “Funding the Growth” programs. Rather than cut back on critical marketing and promotional activities, management chose to continue to spend at an increased pace. We strongly believe this was the best approach for the Company’s medium and long-term business performance. The strong volume growth and solid market share gains seen throughout the year are evidence that these actions are already paying off.

In addition, profits in 2004 include a $48 million aftertax charge related to the 2004 Restructuring Program announced in the fourth quarter.

Despite a challenging year, we are pleased that gross profit margin grew more than expected, reaching a record 55.1% for the year.

This is not the first time we have confronted difficult business conditions. As in the past, Colgate is extremely focused on our proven business strategies and on emerging from these challenging periods even stronger than before.

Q. How will the 2004 Restructuring Program announced in December 2004 contribute to growth and profitability? When do the projected savings begin?
A. Reuben Mark: Colgate’s 2004 Restructuring Program, a four-year restructuring and business-building plan, is well under way and will begin to generate important savings in the latter part of 2005. The program is designed to accelerate growth and generate additional savings throughout the income statement in a number of ways, with almost 100 individual initiatives included in the plan.

Overall, we are moving toward a truly global supply chain with fewer, more sophisticated global and regional state-of-the-art manufacturing centers. Business support functions will be centralized into regional and global shared-service centers with larger and more effective sales and marketing organizations in key markets.

We expect the 2004 Restructuring Program to result in cumulative charges of between $550 and $650 million aftertax and to generate annual aftertax savings of approximately $40 million to $50 million starting in 2005 and reaching $250 million to $300 million aftertax annually by 2008. These savings will be used to further increase marketing spending, accelerate innovation and strengthen profitability. We are confident in this program, and in 2006 we expect to increase our goal of gross margin improvement to 75–125 basis points annually.

We expect the plan’s initiatives to help ensure continued solid worldwide growth in sales, unit volume and earnings per share.

As successful as we have been, we are never satisfied. To continue our innovation, we are expanding and upgrading new product groups both within and outside the U.S., and we are strengthening our consumer and instore shopper insight efforts that help us determine what products will appeal to consumers. At the same
time, we are increasing R&D spending in key categories such as Oral Care and Pet Nutrition, and are partnering with the scientific community to generate further ideas.

Colgate’s long-time presence in the developing world is a distinct competitive advantage. Local management has the know-how and experience needed to reach consumers in these vast markets with a wide range of quality products. Smaller sizes, refill packs and low-cost formulas are just some of the ways Colgate helps make products more affordable and desirable. Also key to our growth strategy in these regions is supporting our brands with educational and consumption-building programs that increase product usage.

This is just the beginning. Oral Care, as we have stated, is a high-margin priority business for Colgate, and we see much more opportunity for additional growth, including geographic expansion of GABA products into Eastern Europe and further leveraging GABA’s strong professional and academic relationships.

The courses are tailored to Colgate’s global business strategies and are taught by certified Colgate instructors who share best practices and emphasize business integrity. In addition to traditional classroom courses, training also takes place on the job and through e-learning.