Colgate reports big jump in profits

By Simon Pitman

- Last updated on GMT

Related tags: Cent, Foreign exchange market, Colgate-palmolive

Colgate-Palmolive has successfully implemented increased pricing
and a greater emphasis on higher margin goods to help boost its
first quarter results despite the challenge of facing stiff
restructuring costs.

The personal and consumer goods manufacturer reported that profits were up from $300.1m in the first quarter of last year to reach $325.4m, a figure that included restructuring costs.

Excluding costs, profits stood at $383.4m, an increase of 11 per cent on the previous year, compared with $344.7m for the same figure in 2005.

Meanwhile sales rose by 5 per cent to reach $2.87bn, up from $2.74bn. The company's oral, personal and home care sales represented $2.49bn of the total amount, and grew by 4 per cent.

Colgate is currently in the midst of a four-year restructuring plan that was first announced in December 2004. The restructuring plans will ultimately shut one third of the group's factories over the next four years and reduce the company's workforce by an estimated 4,400 employees.

The move to consolidate its production and administrative operations is already starting to pay dividends, with the company reporting that its operating profit increased 5 per cent over the figure for 2005. Excluding charges for restructuring this figure stood at 11 per cent.

Colgate's increase in sales can be partly attributed to an 11 per cent increase in expenditure on advertising, which rose to $297.1m during the first quarter. Indeed, every division in the company was reported to have increased its advertising expenditure during the period.

Referring to a 110 basis point improvement in the company's gross profit, ECE Reuben Mark said: "This increase, aided by our ongoing savings programs, the benefits from restructuring, increased pricing and a continued shift toward higher margin profits, allowed us to fund a double-digit increase in advertising supporting Colgate brands."

COO Ian Cook pointed out that the company's oral care unit had increased its unit volume significantly in every geographic division, and that it was up by 10 per cent over all. He added that this had meant the company had been able to extend its position as the global leader in toothpaste.

On a geographic basis, the company sales grew by 7 per cent in the US market, accounting for 22 per cent of total sales. Sales in the European and South Pacific market, which accounted for 24 per cent of the total, fell by 4 per cent, having been hit by negative foreign exchange rate, which impacted the results by 9 per cent.

In the developing markets, dollar sales in Latin America grew by 17.5 per cent, accounting for 24 per cent of total sales. In Greater Asia and Africa sales accounted for 17 per cent of the total and grew by 8.5 per cent.

The company said that given the performance in the first quarter it was confident that it would be able to attain double-digit earnings per share growth for the 2006 financial year.

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