UPDATE: Colgate 2Q Profit Rises 14% But Volume Drop
July 30 2009 - 12:30PM
Dow Jones News
Colgate-Palmolive Co.'s (CL) second-quarter earnings rose 14%
and profit margins improved due to cost cuts, but the toothpaste
and soap maker's volume dropped.
Colgate's stock was recently down $3.04, or 4%, to $72.81 after
the volume decline, which was larger than some analysts had
expected. Colgate has driven some of its recent profit gains by
boosting prices on its products. But the company said it now
believes pricing is "where it should be" and that it plans to put
more focus on boosting unit volume.
Analysts also raised concerns about a pullback in the company's
advertising spending. Colgate said its worldwide advertising costs
declined from a year earlier as a percentage of sales, partly due
to lower media rates. Colgate said it plans to increase ad spending
for new products and on marketing inside stores in the second half
of the year in order to improve volume.
The company said it is making some "pricing adjustment" in parts
of its Hills pet food business because recent increases took its
prices too high.
The company - whose products include its namesake toothpaste and
dish soap - reported a profit of $561.6 million, or $1.07 a share,
up from $493.8 million, or 92 cents a share, a year earlier. The
prior year included 6 cents in restructuring charges.
Revenue decreased 5.5% to $3.75 billion as volume fell 1.5%.
JPMorgan analyst John Faucher said he had expected volume to be
flat.
Analysts polled by Thomson Reuters had expected earnings of
$1.05 on revenue of $3.82 billion.
Gross margin rose to 58.8% from 56.5% as higher prices and
cost-cutting more than offset foreign-exchange impacts and lower
volume. The company's organic sales - a key measure that excludes
the effects of currencies, acquisitions and divestitures - rose
6%.
The company said it was comfortable with Street views for the
third quarter and year. Analysts expect, on average, 2009 earnings
of $4.25 on revenue of $15.14 billion, according to Thomson
Reuters. For the third quarter analysts expect $1.10 a share on
$3.9 billion in revenue.
-By Anjali Cordeiro, Dow Jones Newswires; 212-416-2200;
anjali.cordeiro@dowjones.com
(Tess Stynes contributed to this report.)