DBRS Confirms Colgate-Palmolive Co. & Colgate-Palmolive Canada at AA(low) & R-1(middle), Stable Trends

Dominion Bond Rating Service (DBRS) has today confirmed the ratings of Colgate-Palmolive Company (Colgate or the Company) and Colgate-Palmolive Canada Inc. at AA (low) and R-1(middle). The trends are Stable.

Colgate’s earnings profile remains strong on the back of its portfolio of leading brands and superior geographic diversification. The Company continues to achieve above-average organic sales growth driven primarily by volume gains. Growth has been well balanced across geographic segments, but has been skewed toward the oral and personal-care product segments as Colgate focused on strengthening its leadership position and market share in these areas.

Colgate has been able to offset most of the impact of rising raw material and energy costs with (a) improved product mix, (b) operating efficiencies, and (c) cost-reduction initiatives from its ongoing restructuring program (announced in 2004). However, operating margins have been somewhat pressured as the Company increased expenditure on marketing and brand-building initiatives in order to support new product launches and increase global market share.

The Company’s strong earnings profile should remain stable in the near to medium term, as a result of continued strong organic growth and efficiency improvement initiatives, tempered somewhat by rising raw material costs in the near term. Colgate’s financial profile should also remain strong on the back of the Company’s strong free cash flow generating capacity.

DBRS does not expect further reduction in absolute net debt in the near future as Colgate is expected to emphasize cash returns to shareholders going forward; however, financial leverage should remain fairly stable on a relative basis (i.e., cash flow-to-debt). DBRS expects Colgate to remain highly selective and disciplined with regards to potential acquisitions. We believe Colgate is committed to maintaining its current strong credit ratings, and would maintain dividend levels and alter share repurchase should circumstances warrant.