Colgate-Palmolive Company (CL) Cash Flow Statement

The OCF/NI ratio has been consistently above 1.0 except in 2025Q1 (0.87) and 2025Q4 (negative due to a net loss), suggesting that accruals are not inflating earnings. The 2026Q2 ratio of 1.44 indicates robust cash generation relative to reported income, which may reassure investors that the EPS shortfall is not a cash flow problem. However, the negative net income in 2025Q4, driven by a one-time charge, temporarily distorted the ratio, but the subsequent recovery to 1.72 in 2025Q3 and 1.44 in 2026Q2 underscores the underlying cash-generative nature of the business.

FCF has been consistently positive and substantial, with the latest quarter's FCF margin of 16.2% slightly below the 2025Q3 peak of 21.6% but still above the 10-quarter average of 17.0%. The stability in FCF margins, even as revenue growth slows, suggests that the company is effectively managing its cash conversion cycle and capital expenditures. However, the deceleration in top-line growth, as noted in the income statement analysis, may eventually pressure FCF if pricing power weakens further, warranting close monitoring of future quarters.

The CapEx/Revenue ratio has been remarkably stable, ranging from 2.1% to 3.7%, with no significant spikes that would suggest a major expansion phase. This low capital intensity supports the company's ability to generate high FCF margins and return substantial cash to shareholders. The modest increase in CapEx in 2024Q4 (3.7%) and 2025Q4 (3.4%) may reflect investments in pet food capacity, but the overall trend suggests maintenance-level spending rather than aggressive growth capex, which aligns with the mature nature of the household products industry.

The working capital changes show a clear seasonal pattern: Q1 typically sees a cash outflow as the company builds inventory and extends receivables, while Q4 sees a large inflow as collections accelerate and inventory is drawn down. This pattern is consistent with a consumer staples company that experiences higher sales in the second half of the year. The 2026Q2 working capital change of $12M is minimal, suggesting that the company is efficiently managing its working capital in the current quarter, but the negative swings in Q1 quarters highlight the need for adequate liquidity to fund seasonal needs.

The company has consistently returned a significant portion of its cash flow to shareholders through dividends and buybacks, with the combined payout ratio averaging over 90% in the last ten quarters. In 2026Q2, dividends of $462M and buybacks of $291M totaled $753M, slightly below FCF of $867M, but in some quarters (e.g., 2024Q1), the payout exceeded FCF, indicating that the company may occasionally dip into cash reserves to maintain its shareholder return program. This aggressive capital deployment underscores management's commitment to returning cash, but it also limits flexibility for large acquisitions or debt reduction, which is a consideration given the recent EPS miss and potential need for investment in growth areas.

The cumulative gap between operating cash flow and net income is substantial, with OCF totaling $10.2B versus net income of $7.4B. This divergence suggests that the company's earnings are backed by strong cash generation, and that non-cash charges like depreciation and amortization (averaging $155M per quarter) are significant, but not excessive. The positive working capital contributions in several quarters also boosted OCF, but the overall trend indicates that reported earnings are of high quality. This cumulative cash surplus provides a cushion for the company to maintain its dividend and buyback programs even if earnings face temporary pressure from FX or margin compression.