USA- The finances of Colgate-Palmolive-owned Hill’s Pet Nutrition followed a similar pattern as the final quarter of 2022, with net sales increasing by 14% to US$1,061 million and profits declining by 10% in quarter 1 of 2023.

Hill’s delivered another double-digit net and organic sales growth quarter despite a difficult comparison,” Colgate-Palmolive executives said in a press release. “Organic sales grew 14.0% in the quarter, as organic volume growth accelerated to 2.5% benefitting from the capacity additions from our recently acquired pet food businesses.

The US$1,061 million posted sales were up 17.2% from the same quarter last year when sales were US$872 million. 

Overall, Hill’s Pet Nutrition sales made up 22% of parent company Colgate-Palmolive’s US$909 million in sales for the quarter that ended March 31, with the United States and Europe leading Hill’s organic sales growth regionally. 

On the other hand, Hill’s operating profit in Q1 2023 was a 10% decline to US$183 million compared to the first quarter of 2022.

According to the company’s press release, pricing grew 11.5% in the quarter as the company looked to offset the continued pressure from higher raw and packaging material costs. 

The decrease in operating profit as a percentage of net sales was primarily due to significantly higher raw and packaging material costs, unfavorable mix primarily due to private label sales resulting from the previously disclosed acquisitions of pet food businesses and increased advertising investment, partially offset by higher pricing, lower overhead expenses and cost savings from the company’s funding-the-growth initiatives,” executives wrote in a press release.

Hill’s Pet Nutrition acquisitions affected profitability

In May 2022, Hill’s Pet Nutrition completed the acquisition of the manufacturing facility of Nutriamo, an Italy-based canned pet food manufacturer.

Additionally, in August 2022, Colgate-Palmolive announced plans to purchase three dry pet food manufacturing plants in the U.S. from Red Collar Pet Foods for US$700 million to support the global growth of its Hill’s Pet Nutrition business.

Thus, the operating margin remained under pressure in the quarter due to the impact of the acquired pet food businesses and a double-digit increase in advertising support.

The company expects raw and packaging material costs to increase in 2023 by several hundred million dollars and expects to make yet another acquisition. 

As we look to benefit from our increased capacity, both our acquired facilities and our new wet food manufacturing facility in the U.S. that will open in the third quarter, we are investing to drive additional volume growth,” the company executives commented.

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