Colgate-Palmolive 3Q profit up on higher prices

AP News
Posted: Oct 27, 2011 8:20 AM
Colgate-Palmolive 3Q profit up on higher prices

Colgate-Palmolive's net income rose 4 percent in the third quarter, the consumer products company said Thursday, citing higher prices, cost controls and strong sales in emerging markets.

There was encouraging signs in developed markets as well, where sales had lagged for more than a year.

However, like other companies in the consumer field, quarterly gross profit margin was pressured by increased raw and packaging material costs. Colgate-Palmolive Co. expects full-year gross profit margin to fall this year.

The New York company stuck to its earnings per share forecast for the year, and says that there will be a double-digit percentage jump in per-share earnings next year.

Colgate-Palmolive is wrestling with prices it pays for the materials it uses to make and transport its products. Though some of those costs have leveled off, it's still paying out more than it did last year.

Consumer product companies have been able to raise prices to offset those costs, but that remains a delicate undertaking. Shoppers are more apt to jump ship, even on favorite brands, because they are being forced recalculate the family budget in today's economy.

Household names are still the company's strong suit, even as shoppers count their pennies. They are more likely to trade down to a tougher steak or cheaper bologna than give up their Palmolive soap or Colgate toothpaste.

Colgate-Palmolive earned $643 million, or $1.31 per share, for the period ended Sept. 30. That's up from $619 million, or $1.21 per share, a year earlier.

Revenue climbed 11 percent to $4.38 billion.

Earnings on a per-share basis edged out Wall Street expectations by a penny, according to FactSet, and the company topped revenue projections as well.

The biggest gains were seen in the Europe/South Pacific region, which posted an 18.5 percent revenue increase. Europe/South Pacific makes up 22 percent of company sales.

Latin America, which comprises 28 percent of company sales, posted a 16 percent rise in revenue in the quarter.

North American revenue climbed 3 percent. It makes up 18 percent of Colgate-Palmolive's total sales. Revenue for Greater Asia/Africa, which is 20 percent of company sales, rose 9.5 percent.

Chairman, President and CEO Ian Cook said in a statement that revenue was driven by strong sales growth in emerging markets, but that developed markets reported an increase in organic sales for the first time in six quarters. Cook said the revenue should continue to improve over the remainder of the year on new products in all categories and across all geographies.

Colgate-Palmolive said its share of the global toothpaste market rose 0.3 share points to 44.4 percent for the year to date. Its share of the manual toothbrush market rose 0.5 share points to 31.8 percent.

Colgate-Palmolive reported that its quarterly gross profit margin was 56.2 percent, a decline of 320 basis points from the prior-year period. Adjusted gross profit margin was 56.8 percent, off 260 basis points from a year ago. The company said its margin was hurt by higher costs for raw and packaging materials, which was somewhat offset by increased prices and cost containment efforts.

Colgate-Palmolive managed to lower its selling, general and administrative expenses to 34 percent of sales, compared with 35.3 percent of sales a year earlier. It also cut overhead expenses and domestic advertising spending. Worldwide ad spending rose 4 percent.

Colgate-Palmolive is trying to attract new customers in fast-growing emerging markets like Brazil and parts of Africa to make up for the U.S. economy's slowdown.

Cook said the company still expects a mid-single digit increase in earnings per share for the year, excluding a previously announced charge related to the transition to hyperinflationary accounting in Venezuela in the first quarter of 2010.