Tags: colgate | earnings | profit | forecast

Colgate Profit Inches Higher on Price Increases, Cost Cuts

Thursday, 26 Jul 2012 08:05 AM

Colgate-Palmolive Co. said Thursday that its second-quarter net income edged up less than 1 percent as price increases and cost cutting helped offset high raw material costs and the stronger dollar.

The maker of consumer products including its namesake toothpaste and dish soap as well as Hill's Science Diet pet foods, Speed Stick deodorants and other brands, raised prices 2.5 percent during the quarter as global volume grew 5 percent.

Consumer product companies have raised prices on some products to help offset higher costs for raw material like oil, packaging and fuel, but they must tread cautiously with price hikes to avoid turning off budget-minded shoppers. Companies with a lot of overseas business are also hurt by the stronger dollar, which lessens the value of sales made overseas. Only about 18 percent of Colgate's revenue comes from North America.

Net income rose to $627 million, or $1.30 per share, for the April-June period from $622 million, or $1.26 per share, a year ago. Excluding one-time items related to a restructuring, earnings came to $1.33 per share. That matched analyst expectations, according to FactSet.

Revenue rose nearly 2 percent to $4.27 billion from $4.19 billion last year. Analysts expected $4.25 billion.

Price increases and cost cuts let the New York-based company increase its advertising for brands, CEO Ian Cook said in a statement.

Emerging markets drove growth, with revenue excluding acquisitions and the effect of the stronger dollar, up 13 percent. Revenue by that same measure rose 2.5 percent in developed markets.

The company still expects net income per share to grow at a double digit rate. However the company is facing a headwind with the stronger dollar. If exchange rates remain the same, the company expects it to decrease earnings per share growth by 6 to 7 percentage points.

North American revenue rose 2 percent and prices rose 3 percent. The company introduced new products including Colgate Optic White toothpaste and Softsoap brand Pampered Hands Jasmine Oasis hand soap.

In Latin America, which makes up 29 percent of Colgate's revenue, revenue rose 3 percent. Excluding a detergent business it sold off, however, revenue rose 9.5 percent. Revenue from Europe and the South Pacific, 20 percent of Colgate's revenue, fell 1 percent, despite a 9.5 percent jump in volume, hurt by the stronger dollar. In greater Asia and Africa, 20 percent of Colgate's revenue, revenue rose 5 percent.

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2012-05-26
Thursday, 26 Jul 2012 08:05 AM
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