2nd UPDATE: Colgate-Palmolive 2Q Profit Rises 7.3%, Sales Disappoint

Colgate-Palmolive Co.'s (CL) second-quarter earnings rose 7.3% as new product launches in North America and growth in its Asian toothpaste business drove sales higher.

Still, the consumer company's stock slumped 8% to $77.04 premarket as sales missed analysts' expectations, partly due to softer-than-expected results in Latin America. Colgate faces increasing competition from rival Procter & Gamble (PG), which is making a bigger push into the oral care business in many parts of the world, particularly in developing markets.

Colgate also said the currency devaluation in Venezuela will hurt earnings more than previously thought. The company expects that devaluation to reduce 2010 earnings by 10 cents to 15 cents a share compared with its previous estimate of 6 cents to 10 cents a share. The company's Hill's pet food business was also a weak spot in the quarter as volumes and sales dropped during the company's ongoing effort to change package sizes and prices.

On a conference call, the company said it saw a slowdown in its categories in developed markets in the second quarter, even as price promotions have picked up.

Many consumer-product makers have raised spending on advertising and promotions and have rolled out new offerings to appeal to bargain-hunting consumers. In the U.S., Colgate said new product launches like Colgate Max White with Mini Bright Strips toothpastes are helping grow its oral care business. Colgate said its global market shares in toothpaste and manual toothbrushes are at record highs this year despite the increased competition.

Colgate reported a profit of $603 million, or $1.17 a share, up from $562 million, or $1.07 a share, a year earlier. Revenue increased 2% to $3.81 billion. Organic sales--which exclude currency fluctuations, acquisitions and divestitures--rose 3.5% as volume grew 3% and prices edged up 0.5%.

Analysts polled by Thomson Reuters most recently forecast earnings of $1.16 on revenue of $3.94 billion.

Gross margin was flat at 58.8% as cost-cutting benefits were offset by impact from Venezuela's currency devaluation.

North American sales, which account for 20% of the total, rose 4.5% as prices fell 1.5% and volume increased 5%.

In Latin America, where sales comprise 28% of Colgate's total, organic sales were up 8% as volume grew 1%. Volume increases in nearly every country offset declines in Venezuela.

Its Hill's pet-food segment sales were down 7.5%, while volume and prices both declined by 4%. The segment contributes 13% of overall sales.

-By Tess Stynes and Anjali Cordeiro, Dow Jones Newswires; 212-416-2481; Tess.Stynes@dowjones.com;

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