Colgate profits dip on restructuring costs

By Simon Pitman

- Last updated on GMT

Colgate-Palmolive has announced broad top-line growth for its
second quarter on the back of strong sales, adding that hefty
restructuring charges hit profits.

Net income for the quarter stood at $283.6m, a 17 per cent drop from the $342.9m reported for the corresponding quarter in 2005.

Restructuring charges were a hefty $115m for the second quarter, compared to $28m for the corresponding quarter in the previous year. The company introduced its restructuring program in 2004, leading to to slash its workforce and synergize its production facilities.

The restructuring program is scheduled to last a further two years and is eventually expected to help the company save approximately $300m a year.

The company pointed out that excluding the restructuring and stock compensation charges, second quarter profits actually stood at an all-time high of $407.8m.

Analysts have acknowledged the underlying growth, with the results largely falling slightly ahead of expectations.

Colgate CEO Ruben Mark said that the company had achieved its objectives for its gross margin, with spend on advertising, and profitability all being extended as a consequence.

"Our core businesses are robust, with our oral care sales growing 12 per cent worldwide, led by double digit growth in North America, Latin America and Greater Asia,"​ said Mark.

On a regional basis Latin America has been providing the company with outstanding growth. During the quarter sales were up 14 per cent to reach a total of 25 per cent of the company's total sales.

Colgate said that almost every country in the region contributed to the growth, with Brazil, Mexico, Venezuela, Central America, the Dominican Republic and Argentina leading the way.

New products contributing to the sales gain in the region were Colgate Max Fresh Toothpaste and the relaunch of colgate Total

In North America sales grew at 2.5 per cent, accounting for 21 per cent of total company sales - a respectable figure for this mature and highly competitive market.

The company said that future sales in this region would focus on the naturals market, boosted by its recent purchase of Tom's of Maine, a leading natural oral care player.

In Europe sales stood at 24 per cent of the company's total sales with growth said to be flat compared to the same period last year. The company said that strong gains in markets such as the UK, Denmark, Holland and Poland had been offset by volume declines in France, Italy and Germany.

Meanwhile in Greater Asia and Africa sales stood at 16 per cent of the company total, up 8 per cent. The country said that sales were led by gains in Hong Kong, Malaysia, Thailand, India and Philippines, while sales for greater China grew by 4 per cent.

Looking at the company performance as a whole, Ruben also pointed out that other key business fundamentals were looking good, with overheads down and gross margins up, giving the company room to offset increases in material costs.

Likewise aggressive ad campaigns have helped to boost sales, giving the company reason to believe that it will deliver a good performance in 2007, curtailed by pre-budgeted restructuring and stock compensation charges.

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