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Colgate-Palmolive (NYSE:CL)

Q4 2013 Earnings Call

January 30, 2014 11:00 am ET

Executives

Bina Thompson

Ian M. Cook - Chairman, Chief Executive Officer and President

Analysts

Wendy Nicholson - Citigroup Inc, Research Division

Ian J. Gordon - S&P Capital IQ Equity Research

Joseph Altobello - Oppenheimer & Co. Inc., Research Division

Dara W. Mohsenian - Morgan Stanley, Research Division

William B. Chappell - SunTrust Robinson Humphrey, Inc., Research Division

Olivia Tong - BofA Merrill Lynch, Research Division

Christopher Ferrara - Wells Fargo Securities, LLC, Research Division

Nik Modi - RBC Capital Markets, LLC, Research Division

Alice Beebe Longley - The Buckingham Research Group Incorporated

Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division

William Schmitz - Deutsche Bank AG, Research Division

Javier Escalante - Consumer Edge Research, LLC

Michael Steib - Crédit Suisse AG, Research Division

Lauren R. Lieberman - Barclays Capital, Research Division

Constance Marie Maneaty - BMO Capital Markets U.S.

Caroline S. Levy - CLSA Limited, Research Division

John A. Faucher - JP Morgan Chase & Co, Research Division

Jon Andersen - William Blair & Company L.L.C., Research Division

Jason English - Goldman Sachs Group Inc., Research Division

Operator

Good day, everyone, and welcome to today's Colgate-Palmolive Company's Fourth Quarter and Fiscal Yearend 2013 Earnings Conference Call. Today's call is being recorded and is being simulcast live at www.colgatepalmolive.com.

Just a reminder, there may be a slight delay before the question-and-answer session begins due to the Web simulcast.

And at this time, for opening remarks, I would like to turn the call over to the Senior Vice President of Investor Relations, Bina Thompson. Please go ahead.

Bina Thompson

Thank you, Vicky, and good morning, and welcome to our fourth quarter earnings release conference call. With me this morning are Ian Cook, Chairman, President and CEO; Dennis Hickey, CFO; Victoria Dolan, Corporate Controller; and Elaine Paik, Treasurer.

This conference call will include forward-looking statements, and these statements are made on the basis of our views and assumptions as of this time and are not guarantees of future performance. Actual events or results may differ materially from these statements. So for information about certain factors that could cause such differences, investors should consult our most recent annual report on Form 10-K, filed with the Securities and Exchange Commission and available on our website, including the information set forth under the captions Risk Factors and Cautionary Statements on forward-looking Statements.

This conference call will also include a discussion of non-GAAP financial measures, which differ from our results compared in accordance with GAAP. We will discuss organic sales growth, excluding foreign exchange, acquisitions and divestitures. We will also discuss gross profit, gross profit margin, SG&A as a percent of sales, operating profit, operating profit margin, net income and earnings per share on a diluted basis, excluding the impact of certain items described in the press release. A full reconciliation with the corresponding GAAP measures is included in the press release and is posted in the For Investors section of our website at www.colgatepalmolive.com.

We are very pleased with our strong finish to a strong year. We exited 2013 with the strongest quarterly organic sales growth for the year at the high end of our targeted range of 5% to 7%. We enjoyed good gross margin growth, and this combined with a reduction in our fixed expenses as a percent of sales allowed us to increase advertising absolutely and as a percent of sales, while increasing our operating profit as well. This is, of course, a simple financial strategy that has served us so well over many years.

Cash generation was strong and our balance sheet is solid. Our savings programs continue to deliver. Our ongoing Funding the Growth contributed significant savings. And in addition, our Global Growth and Efficiency Program is on track, both from a cost and savings perspective.

For full year 2013, we realized savings of $40 million after-tax, and expect that number for 2014 to be between $90 million and $100 million after-tax or about twice as much. And we've made progress in all 3 areas of the program, expanding commercial hubs, extending shared business services and streamlining global functions and optimizing global supply chain facilities.

Market shares are strong and growing. We maintained our leadership share of the toothpaste category, with strong market share performance virtually everywhere in the world. Our global manual toothbrush share is up 40 basis points to almost 33% on a year-to-date basis. And our global mouthwash share is now at 17%, up 130 basis points on a year-to-date basis. Our relentless focus on innovation has paid off and we have more in the pipeline for this year and beyond.

So let's turn first to North America. We're pleased with our 3% organic sales growth in the quarter, given the sluggish macroeconomic environment, which resulted in slower category growth, as well as a continued promotional and highly competitive environment. As referenced in the press release, our shares are strong in a number of categories. Good cost control and gross margin increases have allowed us to continue to increase advertising support behind those existing and new products. Our innovation pipeline remains very full and we have some very exciting activities this quarter.

Our progress in manual toothbrushes and mouthwash in the U.S. has been excellent. We have already told you about our record manual toothbrush share of over 38%.

In mouthwash, both Colgate Optic White and Colgate Total mouthwashes launched within the last 1.5 years have delivered a full year combined share of 5.6%, with the most recent read at 7%.

Retail support behind Colgate Total Advanced mouthwash has been at record levels. The growth in the category has been totally driven by this new product and added nicely to retail sales. Over half of the mouthwash buyers are either new to the category or trading up, which drives incrementality. And in addition, trial and repeat rates are above previous competitive launches.

As you know, our Colgate Optic White products have been very successful, particularly as we have been able to drive a regimen approach with toothpaste, toothbrush and mouthwash.

New to the franchise this quarter is the Colgate Optic White manual toothbrush and built-in whitening pen. This product delivered all the benefits important to a whitening enthusiast. It's effective, affordable and convenient. The toothbrush combines stain-remover cups and polishing bristles, while the pen, which fits in the handle of the brush, uses a breakthrough formula with proprietary silicon adhesives. Together, they deliver whiter teeth in 2 days. The superpremium price increase is a growth opportunity for retailers while still providing affordable whitening for the consumer.

In the Personal Care category, this quarter, we are launching Speed Stick Gear antiperspirant and deodorant sticks, gels and body sprays. This new line in underarm protection is targeted towards the millennial male. It comes in distinctive premium packaging with preferred masculine fragrances and unique clinically superior technologies. The Speed Stick Gear antiperspirant contains DryCore technology, which absorbs better for 48-hour protection. Speed Stick Gear has been formulated to have excellent adhesion to skin and utilizes a highly effective active ingredient. As you expect with such an exciting new product, the launch will be supported with a full integrated marketing campaign, including traditional media, digital and other consumer engagement activity.

Also in the Personal Care category, we're launching Softsoap Décor Collection liquid hand soap. This new product appeals to the shopper who's looking for offerings found at upscale specialty stores at an affordable price more typical of mass retail. The Décor packaging and exquisite fragrances are inspired from specialty. And while more affordable, are still premium-priced to a base liquid soap line, which drives trade up and incremental dollars for the retailer. Initial trade acceptance has been excellent, with full distribution at a majority of accounts.

Turning to Europe/South Pacific. The macroeconomic environment continues to be challenging across most of Europe. Slowdown in the euro area has continued. While Germany and France recorded a positive GDP growth, Spain, Italy and Greece once again reported sharper decreases. The unemployment rate remains high at 12.1% in November 2013, even though it has been stable since April. Despite this, consumer confidence in the euro area shows nascent signs of recovery since the second quarter, which is a modest positive as we enter 2014. So against this backdrop, we're quite pleased with our fourth quarter performance in this region with positive organic volume growth of 3%, and solid gross margin and operating margin growth. In addition, as you know, many of our global growth and efficiency programs initiatives have been focused in this part of the world and are already manifesting themselves in a reduction of overhead expenses.

Market shares year-to-date are up in toothpaste, manual and powered toothbrushes, mouthwash, deodorants and fabric softeners. Our innovation program throughout 2013 has been critical to our good market share performance and we expect this to continue into 2014 across all our categories.

In Oral Care, we will be launching Colgate Maximum Cavity Protection plus Sugar Acid Neutralizer in select countries this quarter. As you know, this superior anti-cavity toothpaste was first introduced in Turkey last fall, and launched in Brazil late in the fourth quarter. This leading technology is incorporated in the first and only toothpaste that directly fights sugar acids and plaques, which are the #1 cause of cavity. The patented formula helps deactivate sugar acids before they can harm teeth, while strengthening and restoring the enamel that helps prevent cavity formation. The initial introductions in the Nordic group of countries, Spain and Portugal, will, of course, be supported by a full, integrated marketing campaign, including a public health campaign.

In Europe, as in other parts of the world, the whitening category is large and growing. This dynamic segment requires continuous innovation and so we are launching Colgate Max White One Optic premium toothpaste in high-impact packaging that offers an instantly visible whitening effect.

To complement the toothpaste, we are also relaunching our Colgate Max White One mouthwash, which contains an advanced stain-prevention system to seal out stains and seal in natural whiteness.

We're very pleased with the progress our Sanex business continues to make. Year-to-date, market shares are up in both shower gel and deodorants. And to help continue this momentum, we're continuing the rollout of our new Sanex Dermo shower gels with the Dermo Active 3 complex, as well as launching a new antiperspirant and a new deodorant.

The first is Sanex Dermo no perfume designed for consumers with very sensitive skin. The product contains no perfume, is hypoallergenic and delivers 24 hours protection. The second is Sanex Naturprotect extra efficacy containing natural milk mineral alum and an anti-wetness agent, which provides protection for 48 hours.

I mentioned earlier the increase in our fabric conditioner shares, up 30 basis points year-over-year to almost 25%. This quarter, we are rolling out in Europe a premium innovation, which has met with success in France, Soupline Perfect Glide, which has a unique formula with a polymer that allows for a perfect glide and an innovative aroma technology that makes ironing more pleasant. As you know, ironing is important, but most consumers view it as a chore they don't enjoy.

Turning to Latin America. This region exited 2013 with excellent momentum, delivering the strongest quarterly organic sales growth of the year at 12.5%. Our leadership continues in toothpaste and manual toothbrushes and our mouthwash share is closely approaching the leading competitor. Our year-to-date toothpaste market share in Brazil is at a record level of 71.5%. As you know, we launched Colgate Maximum Cavity Protection plus Neutrazucar in the fourth quarter. Early leads show a share of over 3%, which has added incremental share to our overall business. And in addition, both Colgate Luminous White and Colgate Total toothpaste's premium price offerings are gaining share.

Our year-to-date toothpaste share in Mexico remains over 80% despite continued competitive promotional activity. And our business in the traditional trade remains strong and we are building distribution and share in the growing pharmacy channel. Our year-to-date manual toothbrush share is up 1.5 points across the region, with every subsidiary delivering market leadership share gains and holding the #1 position. Both Brazil and Mexico achieved record shares as they continue to offer the consumer a wide range of offerings at all price points.

Across Latin America, in mouthwash, we closed the share gap from over 20 points in 2009 to just over 3 points year-to-date. Innovation have helped this result, as well as strong sampling plans across countries to maximize category growth and increase consumption. Year-to-date, our share increased over 50 basis points to 36.4%.

In Personal Care, our year-to-date market share increased in both bar soaps and deodorants, and we now lead the bar soap market with a 29.4% share -- with 29.7% in the most recent period. New products in both these categories should help us to continue to deliver strong results.

And as elsewhere, innovation continues in the first quarter. We will, of course, continue the rollout of Colgate Maximum Cavity Protection plus Neutrazucar toothpaste and expect to build on the success and learnings from our Brazilian launch.

In addition, we're beginning a comprehensive marketing campaign behind Colgate Total Professional whitening toothpaste, which promises up to 95% stain removal in 2 weeks.

A new offering in our Palmolive body cleansing business is Palmolive Naturals Royal Jelly and Yogurt. This new line of bar soap, shower gel and liquid hand soap contains ingredients well-known for body-cleaning solutions.

Royal jelly is known to nourish the skin, while yogurt is known for its properties to soften the skin.

In underarm products, this quarter, we are launching men's Speed Stick and Lady Speed Stick stress defense deodorant. Stress-related sweat is induced by a different set of glands that are primarily concentrated in the underarm area. Unlike regular or thermal sweat that is used by the body as a temperature-control mechanism, stress-related sweat comes in unexpected situations. Lady Speed Stick and Men Speed Stick stress defense formulas activate in those specifics sweat moments, offering effective sweat protection.

Turning to Asia. This region delivered another strong quarter of organic sales growth. And of particular note, both China and India grew organic sales double-digit, despite concerns regarding slowing growth in those regions.

Across the region, our year-to-date toothbrush share -- toothpaste share increased 20 basis points. In India, our share was up 70 basis points to 54.1% and the strong performance was across all price points.

In China, our share increased 30 basis points to almost 34%. In this market, premium brands have performed particularly well, our Colgate Optic White, as well as some of the Darlie products, for example.

Our year-to-date manual toothbrush share increased in 7 of 10 countries. Our targeted efforts to increase share in India has paid off with our share now at almost 42%, up 240 basis points on a year-to-date basis.

Our regional mouthwash share continues to increase, up 60 basis points year-to-date to 20.1%, breaking the 20% barrier. Our most recent share was 23.5%. China has been a particularly successful market for us. Innovation in both the Colgate and Darlie equities has helped us achieve almost a 35% share of the market, up 260 basis points year-to-date.

As you expect, we have a robust lineup of new products for this quarter as well. Our on the ground consumer innovation centers have identified some important consumer preferences and beliefs in which they have developed some relevant and exciting bundles. In China, for instance, charcoal has long been believed to have powerful antibacterial properties. Accordingly, last year, we launched Colgate Slim Soft Charcoal toothbrush, which has been well-received. This quarter, we're launching Colgate 360° Charcoal Deep Clean toothpaste, along with Colgate 360° Charcoal toothbrush. The toothpaste addresses the consumers concern that dirt can be left in between teeth even after brushing by reducing bacteria buildup by 99% even in between teeth.

The companion toothbrush offers charcoal bristles that are slimmer for better cleaning.

In the mouthwash category, we're launching Colgate Plaque Jasmine Tea, developed for the consumer who wants to use mouthwash to help keep their breath fresh who doesn't like the strong and burning mouth feel. This mouthwash contains jasmine and tea extracts, which provides fresh breath without the burning sensation.

Africa/Eurasia. Our winning on the ground strategies in this part of the world are resulting in strong performance as well. Innovation has played a key role in good market share progress. While our regional toothpaste market share is up 20 basis points on a year-to-date basis, it has increased 50 basis points in Russia to almost 33%, 170 basis points in Turkey to almost 29%, and 300 basis points in South Africa to 50%. As you know, Turkey was our lead country for our Colgate Maximum Cavity Protection plus Sugar Acid Neutralizer bundle, and while it is early days, initial shares are already at 2%.

In mouthwash, our regional share is up at almost [indiscernible] and is now the #2 brand. More innovation is planned for this quarter. Colgate Total Pro Interdental toothpaste, Colgate Altai Herbs mouthwash, and Colgate Slim Soft Charcoal toothbrush, just to name a few.

In the Personal Care category, an interesting new product developed for the African market is Protex African [ph] therapy. As you know, Protex is a premium brand sold in many developing markets with an antibacterial positioning. This new mini line contains a unique combination of some of Africa's greatest skin secrets. It helps protect natural healthy looking skin and comes 2 variants: glycerin and African herbs and cocoa butter and lemon.

Hill's. We're very pleased with Hill's continued solid performance. This marks the third quarter of volume growth and the strongest organic sales growth in 5 years. Also while gross margin, as expected, was down year-over-year, it increased from the third quarter to the fourth quarter, and we expect that trend to continue in 2014.

Our launch in Hill's Ideal Balance continues to meet this success. Early trial and repeat results are very promising. Now that the product is in the natural section of the large-format retailers, cannibalization of other Hill's brands is at an all-time low and sales of Ideal Balance are growing strong double-digits. Healthy support behind the products will continue in the first half of this year, including nutritional consultants at superstores and eye-catching pallet displays.

Our Prescription Diet business remains strong and growing. We've told you on previous calls about Prescription Diet metabolic. This breakthrough weight management diet is now sold in over 50 countries and sales are growing at a healthy double-digit rate, driving our global share of the weight category up by almost 2 points year-to-date.

This quarter, we will be launching another new Prescription Diet product, c/d Multicare stress, for the nutritional management of urinary tract health in cats. Stress is an important contributing factor for some urinary conditions in cats. Prescription Diet c/d Multicare stress has been clinically tested to reduce the recurrence of feline idiopathic cystitis, which can arise from stress. The Q1 launch will be supported by a comprehensive in-clinic communication plan and sampling program with veterinary professionals and their clients. The feline urinary category is the largest feline therapeutic nutrition category globally.

So in summary, we're extremely pleased with the way that we finished the year 2013. Our organic sales growth was strong around the world, our gross profit margin increased and our market shares are healthy. Colgate people around the world are all focused on our strategies and priorities, thereby delivering these consistent strong results.

Our Global Growth and Efficiency Program is on track, as are our ongoing Funding the Growth initiatives. Our innovation pipeline is full and we're excited about the many new product initiatives we just told you about. So we expect this momentum to continue in 2014, and look forward to sharing our progress with you as we go throughout the year.

That's the end of my prepared remarks, Vicky, and now, we can turn it over to questions.

Question-and-Answer Session

Operator

[Operator Instructions] And we will take our first question today from Wendy Nicholson with Citi Research.

Wendy Nicholson - Citigroup Inc, Research Division

My first question has to do with currency. In 2012, if currency was a 400 basis point headline, pressure on top line, can you tell us what it would've been roughly on EBIT and earnings? And to the extent currency rates remain where they are now, what are you modeling for 2014, again, both on the top and the bottom line?

Ian M. Cook

Thanks, Wendy, and thanks for the question. The -- I would, though, before answering it, just like to reaffirm how we're thinking about the year 2014. As we have said before, we have been deploying the strategy that Bina mentioned for some 8 years now, and we think, focusing on that, which you can say is focusing on the fundamentals, is serving us well. So as we look at 2014, we're thinking and planning for top line growth to continue in that 5% to 7% organic growth range. We are looking for our gross margin to expand between 75 and 125 basis points, and that traces to a slightly more benign commodity environment, the continued strength of our Funding the Growth program, the on-plan tracking of our global growth and efficiency program, which will also lower our overhead, allowing us to continue in 2014, as we did in 2013, to increase our advertising, absolutely and as a percentage to sales, behind the rich and broad range of new products worldwide that Bina mentioned. Foreign exchange, as we have said before, is -- from a top line point of view, has a lower impact on a profitability point of view. So the top line impact in 2014, we have, based on the release we sent out, a hit of 3%. And when you look at the operating impact of that, it is near a 4% to 5% on the bottom line. And I think we fairly consistently said the bottom line impact is greater than the top line impact, and that ratio has historically been roughly the same. I would add that with the confirmation of our comfort with the consensus of external analysts' estimates and many of the notes we saw this morning, have that spot on, you're looking at a dollar EPS increase around 9%. And I would say, that's around 13% on a currency neutral basis. And that's the way we're thinking about the year.

Wendy Nicholson - Citigroup Inc, Research Division

Just as a follow-up to that. Obviously, your savings are accelerating. So in theory, hypothetically, suppose the FX impact worsened, how do you think about the tradeoffs between taking some of that $100 million of savings and dropping it to the bottom line? Or do you think, if FX worsens, well, then the reported earnings growth would slow?

Ian M. Cook

I think, Wendy, in the world we're in, we'll respond to that when the time comes. We said in our release that the emerging news from Venezuela, while not yet clear enough to take a view, is not factored in, nor any other macroeconomic impact, which we cannot yet foresee. What I would say is that, I think, as we have shown in the past, our response and communication on the view we take would be timely and comprehensive.

Operator

And we'll now go to the next question which comes from Ian Gordon with S&P Capital IQ.

Ian J. Gordon - S&P Capital IQ Equity Research

Just on the commodities again. So I think you did again repeat that you're expecting a more benign environment to this year. Well, we have been hearing, I think, from some other companies that it's becoming a little bit more of a headwind. So maybe a little bit of color there and maybe that's a good opportunity to sort of give some of the drivers of the gross margin for the fourth quarter and maybe how you're thinking about what the individual components will be for 2014?

Ian M. Cook

Okay, Ian. Well, let me start first by doing our now customary walk-through of the fourth quarter and take that as a jumping off point. So if you take the fourth quarter of 2012, the start point is 58.6%. And if you then work your way through, pricing gave us nothing, restructuring gave us 10 basis points, Funding the Growth, strong at the end of the year as it customarily is, 290 basis points. Material prices, a headwind of 260, that's a combination of cost and transaction, a little bit of -- or another 10 basis points, which gets you to the 59 1 or the increase of 50 basis points. Now as we look at 2014, I said benign. Benign for us is around about a 1% increase in raw and packing material costs. And the way we have thought about oil as an input is around $110, and I would say it is in that zone today. The one thing I would stress is that, of course, with the recent foreign exchange impacts we have seen, there will be a related increase in transaction costs, which we are, of course, absorbing in the plan that we have for 2014, which is going to see our pricing at the higher end of our 1% to 2% pricing target for the year.

Operator

We will now go to Joe Altobello with Oppenheimer & Co.

Joseph Altobello - Oppenheimer & Co. Inc., Research Division

I guess, since we just mentioned pricing, I'll start there. In terms of the pricing in the quarter, it looked like it was flat overall. How much of the pricing -- is it easy to tell, how much of the pricing is that you took in this quarter or the promotion you took in the quarter was to benefit new product launches and how much of that was a response to competitive activity? And then, secondly, just a follow-up on Hill's, it looked like another very good quarter in the fourth quarter. Have we turned the corner there on profitability? And should we see a return to more 2012 levels in terms of margins and EBIT there?

Ian M. Cook

Okay. Well, thanks, Joe. For us, the mix effect -- we have a dollar-weighted volume. So mix effect is in the volume growth. So when you think about pricing, for us, what you see across the divisions is pricing up in the emerging markets obviously beginning to address the transaction impact, and pricing in Europe and North America beginning to react to the promotional environment we are in correspondingly negative. I think, the good news is that the organic was still 6.5, and that volume is very strong at 6.5. And I think, very importantly, as we think about our marketing mix modeling, notwithstanding that position in the fourth quarter, our gross margin was still up 50 basis points, right in the middle of the guidance we gave there. So as we think forward and as we have said many, many times, our innovation seeks to deliver premiumization and therefore be accretive to gross margin by developing ideas that consumers believe they get good value for the premium they pay. On the other hand, from a promotional point of view, we don't seek to chase what we think are unsustainable promotional efforts that simply load pantry but will take growth out of future quarters, although we will selectively adjust to defend our market share where we feel we need to. And Hill's, we're very pleased with the consecutive quarterly performance on Hill's. We think, it traces, as we have said before, to a growing portfolio of very competitive innovation in the early periods catch-up. But I think, as Bina went through both on the last call and this call, you're now beginning to see, I think, some innovative, market-leading innovation on the Hill's business. And as we said on the last call, we expect that innovation profile to continue on Hill's. Gross margin is a rebuild on Hill's, and we increased gross margin third quarter to fourth. And again, as Bina said earlier, we expect that to continue into 2014. So we're pleased with the pace and we plan to continue that momentum in 2014.

Operator

And we'll go to Dara Mohsenian with Morgan Stanley.

Dara W. Mohsenian - Morgan Stanley, Research Division

Ian, just one point of clarification. The comment about the sequential improvement in the Hill's margins versus Q4's level, is that as you move throughout the year in 2014, or is that more just looking at Q1 versus Q4?

Ian M. Cook

It's looking at the Q1 versus Q4.

Dara W. Mohsenian - Morgan Stanley, Research Division

Okay. And then, I was hoping you could walk us through what you're seeing from a macro perspective as you look across the various emerging markets, geographies, any changes in consumer spending or impact on your categories and some of this volatility in January, are you seeing any fallout from that?

Ian M. Cook

Well, the data we have from the categories is fourth quarter data. It seems to be the topic de jour, the emerging markets. And as we look around our world and we have had several of our executives traveling the world, I would say we are seeing consistently what we said on the third quarter call, which, if you go around the world, is basically to say that our categories, and I stress, we're talking our categories, not the macros or a general industry basket, our categories continue to grow mid to high single-digits in those emerging markets, which is pleasing. In the North American environment, our categories are growing around low single-digits, around 2. And as Bina said, in the fourth quarter, we saw that slow a little bit. And as we have said before, and it's a view we continue to take on Europe, notwithstanding a certain amount of growing enthusiasm for a macro turnaround, the overall category growth in Europe is essentially flat, with some categories modestly up and other categories down. And we continue to expect that to be the case for the next several years, which was why when we embarked upon our Global Growth and Efficiency Program, we said, and you've already seen some of it announced, that the impact would be disproportionate to Europe because we wanted to rightsize our cost structure against likely more muted category growth in the medium term, and that's exactly what we're doing. So I would say the world continues, in our businesses, to be pretty much the way we saw it in the third quarter and current data shows no overall change to that.

Operator

Next is Bill Chappell with SunTrust.

William B. Chappell - SunTrust Robinson Humphrey, Inc., Research Division

Ian, I just want to make sure, on the Max Cavi with sugar acid, I think, the comment was you're moving into Spain, Portugal and the Nordic countries this quarter. And I'm just trying to understand, I was kind of under the impression you were looking more at developing regions for that first before you moved into developed. So is that kind of a change and maybe you could give kind of an update of what countries you do plan to go into this quarter? I think, Bina mentioned a few of them.

Ian M. Cook

Well, the answer to that, Bill, is we're doing a few things. I have said before, we have said before, that we do think the biggest opportunity is in the emerging markets. Clearly, we're using Turkey and Brazil to see the pace of growth we can get there. The European entries is really to see, in a fairly simple regulatory environment, what sort of marketplace potential that product may have. As the year unfolds, you will continue to see more of a focus on the emerging markets, and the only reason we didn't mention it is that we didn't want to reveal, and still don't, when and where those entries would be.

William B. Chappell - SunTrust Robinson Humphrey, Inc., Research Division

Okay. And then, just to make sure I understand, you go in, is the entry margin-accretive? I mean, is this a higher-margin product than what you're replacing?

Ian M. Cook

We're happy with the margin, Bill. And we are happy with the margin. Let's just leave it at that.

Operator

And we'll go to Olivia Tong with Bank of America.

Olivia Tong - BofA Merrill Lynch, Research Division

Earlier in the call, you batted down some concerns with respect to growth and trade up opportunity in China and India, which was helpful. But are there other markets where you are seeing some pushback? It certainly sounds like growth in Brazil is balanced with growth in the anti-cavity and Neutrazucar, as well as Luminous and Total, but what about Mexico and other key countries?

Ian M. Cook

Yes. I think, I guess, there are 2 factors here. Consumers, and I think, this is the duty of a consumer marketing company, are prepared to buy things that work and deliver a benefit that they see a value with. And we don't believe that, that is limited to certain countries. We believe that one can develop products that deliver those benefits and that the consumers are prepared to pay for. And I would say, without being too cliché, that's a global statement. So premium innovation can work anywhere, and I think, it's our duty and our challenge to keep finding ways to make it work. In certain parts of the world, you see a promotional activity stepped up as perhaps some people chase our market share, and the view we have taken on these things is that all you are really doing is advancing purchases that, that is not a sustainable position to take. Now as we manage our business planning, we obviously manage a repertoire of activities that includes the premiumization, that includes an intelligent response to the marketplace environment we have and very much in those emerging markets where the down trade consumer struggles with cash, we put enormous focus on sizing and the pricing that goes with that sizing in order to provide an affordable entry point to those consumers, even if on a per mill basis, they're actually paying more for the product, you are meeting their cash outlay needs, so it can be accretive from a margin point of view and address the consumer. So all those 3 things are in play as we think about our business plans market by market.

Operator

Chris Ferrara with Wells Fargo is next.

Christopher Ferrara - Wells Fargo Securities, LLC, Research Division

Ian, I was hoping to get your perspective on Latin American pricing. All right, I guess, so the gap between price and FX, where there's usually some relationship, I guess, is almost as wide as it's been ever in the last 20 years. And each time it's been this wide, it's gone the other way, it's bounced back, right? So if you go back to 2002, 1995, you've basically taken pricing to cover the currency later. So I was just wondering if you can give a little insight into whether there's any difference in the relationship between those 2 things today relative to those historical periods that would make us think it wouldn't bounce in the future. And I know Venezuela is a piece of it, maybe some price is actually what's more like mix or volume today, but I was wondering if you could just comment on that?

Ian M. Cook

Yes. It's a difficult question to answer crisply. But you would have to say that Venezuela is definitely a piece of it because that is a constraining factor on pricing given the regulations that are in place today. And equally, one has to say, Argentina, while intelligent movement can be made, it has not been with the freedom that maybe history would have allowed. And the second point to make is there is always a lead lag to your ability to take pricing. And frankly, in today's world, you see such a rapid shift in foreign exchange as opposed to a steady erosion that can be reacted to in a timely fashion that I think, yes, one will see a catch-up, but there is a lag to the catch-up, and Venezuela and Argentina are outliers in that regard from a Latin American point of view. So I hope that was clear.

Christopher Ferrara - Wells Fargo Securities, LLC, Research Division

Yes. That helps. And I guess, just a quick follow-up on Venezuela. The news you're talking about, just to make sure I have it right, I mean, is this basically the announcement that the SICAD rate could be at VEB 11.3 instead of the VEB 6.3 that we've seen?

Ian M. Cook

It is, Chris. And the fact of the matter is, there is not enough clarity yet to make a definitive or come to a definitive conclusion as to how that is going to affect the business because you got translation, you got historical costs like inventory and you've got the cost of bringing raw materials and finished goods, and there is not yet enough definition around all of those things to take a view, but it is indeed that news that we are referring to. And as we said in our release, we're still reviewing and assessing to take a position there.

Operator

We'll now go to Nik Modi with RBC Capital Markets.

Nik Modi - RBC Capital Markets, LLC, Research Division

Ian, if you could just talk about any early insights from some of the Turkey test market or from Brazil on the anti-cavity product in terms of what's going on with category growth? Is it a trade-up? Any perspective you can share on just the dynamics around that product launch?

Ian M. Cook

Yes. First, I have to say, it is very, very early days. And I think, getting too excited is never a good thing ever in my view. So -- but I would tell you that from a distribution point of view, I would tell you, from a build of market share point of view and the early trial curve, they had been very good in both countries. We have not yet seen the full impact of the marketing plans, we have not yet felt the benefit of the sort of public health programs we're putting in place, nor do we have repeat number. But early indications are growing category, growing share, and certainly, a premiumization in that segment. So we'll keep you posted on how things unfold.

Nik Modi - RBC Capital Markets, LLC, Research Division

Great. And then, just a quick follow-up, unrelatedly. Just from a competitive intensity standpoint, I'm sorry if I missed this earlier, I had to hop off for a second, but as you look across all of your very heavy share markets, when you're 70%, 80% share, are you seeing some of the competitive intensity settle out or stabilize? I'm just trying to get an understanding of what some of the competitive behavior looked like recently?

Ian M. Cook

Yes. I guess, I would say, as a general view, there seems to be more promotional activity in the developed world and maybe that is people chasing a greater share of a pie that is not growing so fast, or in the European case, not growing at all. I would say, overall, in the emerging markets, nothing that we would point to, to say a dramatic difference in competitive activity, some country to country changes that we have observed, not enough to conclude a trend. And I think, we're meeting that hopefully intelligently and well. We're seeing our share in Brazil up. We're seeing our share in Mexico hold over 80%. We're seeing our share in Russia, over 33%. We're seeing our share in China up to 35%, and our share in India over 54%. So I think, we are balancing meeting the activity and yet bringing the innovation that provides true growth both from a category point of view and a market share point of view. But the big picture answer would be nothing to say there has been a noticeable trend change.

Operator

And we'll go to Alice Longley with Buckingham Research.

Alice Beebe Longley - The Buckingham Research Group Incorporated

A couple of follow-up questions on pricing. Overall, it was flat this quarter and yet you're projecting, I think, 2% for next year. So could you specify more where that acceleration is coming? And also, this is sort of about 2014, the North America, your organic sales growth was 3%. Is that something that's reasonable to expect for next year? And in answering that, can you talk about whether you think you'll start gaining share in toothpaste?

Ian M. Cook

Yes. Okay, Alice. Well, the pricing that we will recover in 2014 will, of course, be global pricing. But I think, it would be fair to say, given the transaction impact, the bias for that pricing would be more in the emerging markets. We are pleased with our North American organic growth prospects. The U.S. market share is one of many market shares that we have around the world. And as we said on the last call, there has been a, shall we say, slightly elevated promotional environment, some of which we are choosing to respond to, and some of which we have not and will not because we don't think it's reasonable. I do think we will see market share improve over the balance of this year, but I would make the comment, when you're thinking about a global business, you're going to have situations from time to time where certain geographies face short-term pressures. But if you take the long-term view in terms of our share, whether it's North America or all the world, you see pretty strong progress, and you raise toothpaste, as Bina mentioned, we're up to a 7% now in mouth rinse and we're fully global in that business, 7% share in the U.S. And of course, our toothbrush leadership share is now over 38%. So we will do what is right by the business and we believe that will lead to share growth. But we're not going to abandon sensible business principles just to chase market share.

Alice Beebe Longley - The Buckingham Research Group Incorporated

Ian, so you're going to be more second half-weighted for EPS growth this year?

Ian M. Cook

I wouldn't comment on that, Alice. I wouldn't comment on that.

Operator

We'll go to Ali Dibadj with Bernstein.

Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division

So just a first clarification. Moving from a 6% EPS growth that you delivered in 2013 to the 9% in 2014, I think, from your -- from the mosaic of your commentary, it sounds like it's more really gross margin-driven, particularly cost-cutting and FX. So just a clarification there. And then, what I've noticed is that a lot of the questions have to do with this volume price differential. And I know you guys resisted breaking out volume between kind of true volume and mix, but given that there's just so many new products coming out, it's actually pretty tough for us to figure out what actually is going on in your top line. So can you give us a sense of quantifying maybe how much of that -- [indiscernible] emerging markets there, just your overall "volume number" is mix versus true volume or how much premiumization you get when you, on average, put out a new product or just something of that nature? And why it's tough for you guys as opposed to every other company to kind of split out that volume and mix within that number?

Ian M. Cook

Well, the -- to come back to your point of clarification, yes, I would say, the broad headline is, that is a fair conclusion. We will see improvement in our gross margin. We will see improvement in our overhead, driven by the Global Growth and Efficiency Program, allowing us to increase absolutely and as a percent of sales our advertising. And as I said, although it's 9% from a dollar point of view, it's 13% from a local currency point of view. And as far as we're concerned, Ali, the way we have, for many, many years, explained the top line growth of our company is, we think, translatable. You see what the organic is, you know what the pure SBI [ph] is. And organic is organic. So it's in the numbers. And we think, an ability to deliver 5% to 7% organic growth consistently, and by expanding our gross margin, delivering healthy bottom line growth, is a reasonable and sensible model.

Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division

So I think, the direction is clear on it in terms of the growth, it's just difficult to know how much is actually volume growth versus premiumization because one could argue one has a different longevity than the other. But okay, so anyway, I'm not going to win that battle today. To switch on Hill's, can you give us a sense of what's going on, particularly in Japan? And also, just back to this margin question, there was a time when the belief was that these margins could go back to historical levels. And I just want to double check that -- make sure you still feel that. And in that answer, if you could, the margin degradation we've seen, how much of that is promotional spend, so that could go away versus how much of that is the ingredient cost on Ideal Balance is very different and that will remain for a while?

Ian M. Cook

Yes. Thanks, Ali. I think, first, let's take the Hill's business overall, and then the Hill's business gross margin in Japan. I have to say, we are pleased with the Hill's progress in a relatively short period of time. Remember, the U.S. is the largest part of that business by a long way. And we believe that we have the portfolio now and the innovation stream to remain competitive, not just in the U.S., but in other parts of the world going forward. We have said clearly and the plan we have built was to return the Hill's gross profit over the coming years to historical levels, and that remains the plan. We have seen the quarter-on-quarter increase to 4 [ph]. We talked that, that would continue into 2014, starting with the first quarter. And therefore, that will continue out in time. And of course, the innovation we are bringing gives us the opportunity to use the mix to further increase the gross margin. So the answer on that question is, yes, it is our plan to get back to historical levels, and we're on plan, and we feel good about that. Japan, which is not an enormous part of the Hill's business, we have had some market issues from a distribution and a portfolio competitiveness point of view. And the innovation work that we have done, driven by the U.S., is being deployed in Japan in 2014, along with some go-to market changes. And we believe that, that will correct the business in Japan over the coming little while.

Operator

[Operator Instructions] We will now go to Bill Schmitz with Deutsche Bank.

William Schmitz - Deutsche Bank AG, Research Division

I don't know if this is purposeful or not, but it seems like, regionally, when one region starts to sort of show accelerating margins, others fall. So the [indiscernible] the North American margins for instance and now they're hovering above 30%, but there's been obviously a fallback in Latin America and some other regions. So is that part of the broader strategy that we're going to focus on North America from a cost perspective, from a mix perspective, when that kind of runs its course, we're going to move to the next one or is this kind of the natural progression of things?

Ian M. Cook

I would say, Bill, it's the natural progression of things. We don't sort of rotate businesses across divisions in such a manner. Yes, no is the answer to your question.

William Schmitz - Deutsche Bank AG, Research Division

Okay. I mean, so the operating margin in North America at 30%, I mean, is that sort of hitting against sort of like the natural resistance level of how high margins can go or do you think there's still is kind of more room there to get it up? And then, I guess, conversely, obviously, the African business is still very much in investment growth phase because it's much sort of earlier on the consumption curve, but could that be the big upside maybe if that 30% starts stabilizing?

Ian M. Cook

Well, as you know, we don't tend to get into discussions on EBIT because it depends where the timing of innovation by geography. So I would simply bring you back to the gross margin. And there, our objective is to grow gross margins in all divisions year upon year. And you know that our gross margin in the emerging markets is higher than the developed. So that will continue to be our plan. And then, depending on the timing of events, the EBIT margin will be what the EBIT margin will be. We don't tend to think or talk about lines of resistance on the gross margin. When we get to the 65%, we'll have another discussion.

Operator

And we'll go to Javier Escalante with Consumer Edge Research.

Javier Escalante - Consumer Edge Research, LLC

First, a clarification. What is your current exposure to Venezuela as of the fourth quarter in terms of profit? My real question has to do again with this pricing topic that had been going on throughout the conference call and has to do with, it seems from the outside that you're being conservative in Latin America in terms of pricing. And at the same time, it looks as if when we look at Europe, very negative pricing, we don't know whether these are real price cuts or these are increases in trade or spending. But help us understand why you seem to be investing in terms of pricing in a region like Europe that has very little to offer going forward in terms of growth. And at the same time, you seem to be leaving pricing on the table in Latin America, at least this is the way that I see it from the outside.

Ian M. Cook

Well, Javier, let's start with the exposure. I think, for Venezuela point of view, we have been very clear in our Qs as to the exposure that Venezuela represents from a global point of view. And from an operating margin point of view, it's 3%. So that's what Venezuela represents. I think, in response to an earlier question, the question mark around pricing conservatism in Latin America, as I said earlier, Venezuela regulations currently don't permit across-the-board pricing, so we take what we can, when we can. And the same is the case for Argentina. And then, you have the customary lead lag between the deterioration of exchange rates and your ability to price to offset the transaction costs. In Europe, it's just a practical reality, Javier. The environment in Europe is basically no growth, and that brings pressure from retailers and competitors perhaps who had more of a footprint in Europe than we who want to wrest market share. And so we deploy the same strategies that we deploy, and we have seen terrific progress on gross margin from a European point of view. And therefore, as we think about marketing mix, we will do more at the store level in Europe than in other parts of the world, and that comes in the pricing line and not in the advertising and promotion line. And if you look at our market share performance in Europe, we think we've got the balance relatively right, and that is why -- because our market shares have been going up in Europe from an oral care point of view particularly, and that is why our focus in Europe is on structural cost, so that we can rightsize the structure to reflect the top line as reality will have it be and not go chase that top line, but rather grow more aggressively from an organic point, as you have seen in the emerging markets where we're growing double-digits. So it's a case of balancing against the market realities. And I guess, that's the answer.

Operator

We'll go to Michael Steib with Crédit Suisse.

Michael Steib - Crédit Suisse AG, Research Division

Ian, my question relates to geographic mix and what you're factoring in for 2014 really in your outlook. I mean, given that you have some very high-margin businesses in Latin America and in parts of Asia where currencies have been most under pressure, I was just wondering how you're looking at the impact of the geographic mix for 2014?

Ian M. Cook

Well, Michael, actually, we're quite pleased. As a matter of strategy with our geographic mix, we still believe that having 53% of our business in the emerging world pays us dividend from a growth point of view, with categories growing in the mid to high single-digits compared to low single-digits in North America, and essentially flat in Europe, so we like that. And when we released our earnings, and indeed, I said earlier on this call, we are happy with the focus on our current strategy. We think it has served us well for the last 8 years. So with the geographic mix we have, we are looking to continue a top line growth rate of between 5% and 7%, which obviously will be more accelerated in the emerging markets than it will be in the developed markets, just as we have seen this year. And with our Funding the Growth program and the Global Growth and Efficiency Program, be able to provide the funds to invest in advertising, absorb the transaction impact of the foreign exchange changes so far announced and which many of you have already captured and still deliver a 9% EPS growth or 13% on a currency neutral basis. So that's how we think about our split in the world.

Operator

And we'll go to Lauren Lieberman with Barclays.

Lauren R. Lieberman - Barclays Capital, Research Division

Just wanted to ask you about the Personal Care launch actually in North America. I just couldn't recall the last time you guys talked about fully integrated campaign, et cetera, and new technology in Personal Care, particularly in North America and in that deodorant business. If you could just kind of talk to us about your multiyear goals there, maybe where are -- I'm guessing your deodorant shares are in the single-digits today. That would be great.

Ian M. Cook

They are in the single-digits, Lauren. We're really quite pleased with this Speed Stick Gear innovation. It gives us a quality concept, a quality product, and conviction to put meaningful marketing spend behind. And the trade reaction has been a very, very good. Obviously, early days, a category that we are committed to globally and you will see a multiyear plan unfold in the United States. And of course, the objective is to get the market share up.

Lauren R. Lieberman - Barclays Capital, Research Division

Great. Okay. And just completely unrelated, I just wanted to make sure I read this statement in the press release correctly about currency -- that your current outlook has taken into account some of the dramatic moves that we've seen in emerging market currencies in the last 10 days or so, excluding Venezuela, but all the other kind of craziness out there, you have factored into your outlook?

Ian M. Cook

The craziness so far, yes. And you captured it perfectly in your note [ph]. Yes, you read it right.

Operator

And we'll go to Connie Maneaty with BMO Capital.

Constance Marie Maneaty - BMO Capital Markets U.S.

Just 2 questions. One is a follow-up on FX. If we exclude -- so if we exclude the special cases that are Venezuela and Argentina from FX, there is so much fear these days of a contagion of all the currencies falling. Do you think that's realistic or does your experience, since there was the Asian contagion, tell you differently about the current environment?

Ian M. Cook

To be candid, Connie, I think, you're asking the wrong person. The notion of contagion of emerging market currencies is not an area of expertise that I would have. So I wouldn't care to forecast.

Constance Marie Maneaty - BMO Capital Markets U.S.

Are there people that you consult about this? I'm just wondering if this is a media construct or if it's something you're seriously dealing with.

Ian M. Cook

I think, my experience over the last 5 years with foreign exchange is that everybody knows after the fact. And that coming into any year, projections which usually have a broad array of differing opinions are usually wrong. So we have taken multiple opinions and you can get the answer to the question that you want, and we would rather react. Obviously, one plans, it's not that one doesn't plan, but people coming into the year, predicting Turkey, predicting Ukraine, events in Thailand, as we have said multiple times in prior years, so many of the things that happen in our world these days, even some of the best minds don't know about until after they have happened. So we do run models and we do have discussions and we do take points of view, but it's something that we wouldn't care to predict.

Constance Marie Maneaty - BMO Capital Markets U.S.

Okay. That's helpful. And just one entirely different question. What does your market research tell you the appeal is of highly flavored toothpaste such as mint chocolate and vanilla mint that are coming on the market next month? And would you be playing in those categories?

Ian M. Cook

Well, I haven't tried -- I like mint and I like chocolate mint in ice cream. I must say, I had not tried the product, I think, you're referring to, Connie. We have seen in different parts of the world attempt to come with, shall we say, very differentiated, nontraditional toothpaste flavors, whether they be fruits or other things. And so we will be monitoring, as we have done in other cases, with interest, the performance. But I guess rather like our view on foreign exchange, we have no definitive answer to that question either.

Operator

And we'll now go to Caroline Levy with CLSA.

Caroline S. Levy - CLSA Limited, Research Division

Just a couple of things. Again, on the North American margin, which is the highest in the world, which is a little different from some multinationals, and you said the gross margin is higher outside [ph], but do you see upside to your North American EBIT margin over time, do you see steady growth there?

Ian M. Cook

Again, Caroline, you may have missed my prior answer. We don't comment on EBIT projections for the company. You can rest assured that our focus continues to be to get the gross margin up, as you said, and with the Global Growth and Efficiency Program, to lower our overheads. That, therefore, provides one the opportunity to invest some of those funds and bring other of those funds freed up to the bottom line. So -- and we will make those choices as we go forward.

Caroline S. Levy - CLSA Limited, Research Division

Got it. And then, in Funding the Growth, is there any geographic skew to that to where those savings happen?

Ian M. Cook

It depends from year-to-year, Caroline. Generally, they're pretty broad-based, both by geography and by category. Some years, you may have a particular initiative that is powerful in one particular category or for one particular geography. But usually, they're pretty broad-based.

Caroline S. Levy - CLSA Limited, Research Division

Great. And my final question would just be on GDP growth and demand for toothpaste. It would be intuitive that you'd be less sensitive to swings in demand in other categories. But if China's GDP growth goes from 9% to 5%, I mean, God forbid, but if it is 5%, would you expect that you would still be growing your business just because of the lack of penetration of toothpaste usage?

Ian M. Cook

Yes. Caroline, it's interesting. I would say, over many years, we have not seen a very strong correlation between modest slowdowns in GDP and the purchasing of our products. If we look, as I said earlier, at the emerging markets, even into Brazil with the GDP slowdown, our categories are still growing mid to high single-digits. And I think, that's a combination of the still emerging middle class, our ability to increase penetration, our ability to educate to increase usage and our ability to trade up intelligently consumers in the business. So whilst one can't say they're completely decoupled, there's no empirical evidence, at least on our data, that it directly affects our categories.

Operator

And we'll go to John Faucher with JPMorgan.

John A. Faucher - JP Morgan Chase & Co, Research Division

I'll try to keep this quick. The 13% currency neutral earnings guidance is very impressive, particularly given the difficulties out there. Was that in line with what you were thinking before in October when you guys first gave guidance or have things changed to maybe try to offset some of the incremental impact?

Ian M. Cook

It was entirely driven, John, by the foreign exchange slide that started in the middle of January. So when we were looking at the world in the fourth quarter, we genuinely were thinking and planning for double-digit in dollar terms. And as I said earlier -- and many people externally, to your point, in the notes we had seen already, reflected those exchange movements, excluding Venezuela, as we discussed earlier. And so, therefore, that change came subsequent to the way we were thinking about the year, and indeed, talking about the year, when we last spoke in October.

John A. Faucher - JP Morgan Chase & Co, Research Division

Well, Ian, that's great. Ian, I guess my question was, was 13% always the number on a currency neutral basis or did that actually move up a little bit?

Ian M. Cook

It probably moved up slightly, John.

Operator

We'll now go to Jon Andersen with William Blair.

Jon Andersen - William Blair & Company L.L.C., Research Division

I guess, most of the questions that could have -- must have already been asked, but I'll focus on online shopping. I wanted to know how meaningful that channel is for you today, is it growing faster than other parts of your business? And I guess, the second part would be what's your strategy approach to the online channel? Are there advantages there that you're looking to take advantage of lower cost, better margins, better targeting of consumers? Just any thoughts on that would be helpful.

Ian M. Cook

Yes, Jon. Well, obviously, it's much in the press area. We are today delivering our toothpaste using drones to people in Manhattan. That was a joke, Jon, or an attempt at a joke. It is a high-growth area, but it is still an extremely small part of our business today. We participate with all of the major online shopping portals, whether they be linked to a brick-and-mortar retailer or whether they be a standalone, both here, Europe and in China. For some businesses, we see the potential as greater, take Hill's, where you have fairly large bags of pet nutrition product in an urban area in Europe, we see a greater potential for online. So we have a multi-point strategy that is an awful lot of -- we call them tests and learns to see how we can engage and connect with the consumer. So we're experimenting broadly, but it is still not a meaningful part of our business, albeit with some potential on Hill's in Europe.

Operator

And we'll take our last question today from Jason English with Goldman Sachs.

Jason English - Goldman Sachs Group Inc., Research Division

So I had a question on pricing. No, just kidding. I think we've beaten that horse enough. Actually, most of the questions have been asked. So I just wanted to turn to the balance sheet really quickly. Your leverage ratio is incredibly low. What prevents you from taking on more leverage, whether it be to buy growth, invest in growth or return some cash to shareholders?

Ian M. Cook

Well, I think, Jason, it's funny, I think about the year leading into the sub-prime and the questions were remarkably similar, why don't you leverage up and do something? Our general thinking on this space is that you've seen our debt move up a little bit, although it's still very low, 7.5% of our market cap with all of our ratios in a good place. I guess, the view we tend to take is that we like to keep our powder dry, should an acquisition candidate present itself. As we think about 2014, obviously, we have not yet taken a decision, our board has not yet taken a decision on our dividend. You know we do that earlier -- a little bit later in this year. But you can imagine that our dividends would grow in line with earnings. This year, our share buyback was around $1.5 billion, and we're thinking in the same range for 2014, unless that appropriate acquisition candidate presents itself, and that's rather, if we were to prioritize where beyond dividend we would see the money going, on the sense that it is strategically of value to the company. The problem is, as you know, that an M&A strategy or an execution of an M&A opportunity is often a long and arduous and very unpredictable process, so they cannot be done at will. And of course, during the years of the restructuring program, we have seen our CapEx increase as we are putting in place some significant projects for the future. And bluntly, that's the profile we'd like to keep and plan to keep going forward.

Jason English - Goldman Sachs Group Inc., Research Division

So are you actively pursuing M&A? Or are those comments just meant to reflect your willingness were the right asset come to market?

Ian M. Cook

It depends what you mean by pursue, Jason. I don't think you would have to do an awful lot of detailed work to know the kinds of companies, businesses that are attracted to people in the consumer product space base. Garver [ph] was a multiyear journey. So I think, the most appropriate way to answer the question is to say that were the right opportunity to present itself, we would actively consider it, obviously, at the right evaluation.

Operator

That concludes our question-and-answer session, I'd like to turn it back to Ian for any additional or closing remarks.

Ian M. Cook

No. Thanks for the extensive list of questions and thanks for taking an interest in the performance of the company. We will, of course, keep you updated across the year, as is now customary. And especially, big thanks to all of the Colgate folk around the world who make these results happen. Talk to you soon.

Operator

Thank you very much. That does conclude our conference for today. I'd like to thank everyone for your participation and have a good day.

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