Colgate-Palmolive ( NYSE: CL ) announced plans to purchase three dry pet food manufacturing plants from Red Collar Pet Foods for $700M as it seeks to stoke growth for its Hill’s Pet Nutrition business.
The $700M purchase places three plants across three states, adding to growing operations in Kansas and Italy. Management noted that the investment in Hill’s should help the company meet demand for “science-led pet nutrition diets” that are increasingly coming into vogue.
“Our Hill’s business is growing well, and we continue to invest to expand production capacity, improve our capabilities with initiatives like our new Small Paws Innovation Center, and better engage pet parents, veterinarians and Hill’s retail partners,” CEO Noel Wallace said. “This investment will help further strengthen the Hill’s business today and for the long term.”
Pet food was a significant bright spot reported by the company during its earnings release on Friday. Indeed, the strength of the business was crucial given the narrow earnings beat posted by the consumer staples manufacturer and added the bullishness that prompted a raised sales forecast.
“But what really gives me confidence is the fundamental changes Colgate people have made to drive growth, which is why we are raising our organic sales growth guidance to 5% to 7% for 2022,” Wallace told investors on Friday. “Our second quarter results, including double-digit organic sales growth in Oral Care and Pet Nutrition, show that the growth strategies we put in place three years ago are delivering on our objectives and how the power of our global portfolio is working.”
Shares of Colgate-Palmolive ( CL ) gained about 1% in premarket trading on Monday.
Read the earnings call transcript from Friday .
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Colgate-Palmolive invests $700M to bolster pet food business