Cost cutting and emerging markets help boost Colgate profits

By Simon Pitman

- Last updated on GMT

Related tags: Percent, Colgate-palmolive

Colgate-Palmolive posted a significant rise in its third quarter
profits, lifted by strong sales in emerging markets and
cost-cutting measures that contributed to increased operating
income.

The company said that its worldwide sales grew 12 percent in the period ending September 30 to reach $3.53bn, from $3.14 in the same period last year, with sales volumes growing by 5.5 percent. The strong sales increase also helped feed a robust growth in net profits, which rose 22 percent to reach $420.1m, compared to $344.1m in the same period a year before. The profits looked even stronger when taking into consideration that the result accounted for a $36.3m restructuring charge and a $10m pensions charge. The bottom line was driven by a 22 percent increase in reported operating income, which came in at $668.8m, compared to $549.4m in the corresponding quarter last year. Company CEO Ian Cook said that both sales and profits had increased in every geographical region. He also stressed that the results marked the fourth consecutive quarter of double digit profits growth. Cook went on to point out that market share is also getting stronger in key markets throughout the world, underlining the fact that the company strengthened its global leadership in the toothpaste category during the quarter. The positive results came despite a 12 percent increase in advertising spend combined with a 1 percent rise in global pricing, implemented to help counteract rising material and transport costs mainly related to high oil prices. "The excellent operating profitability delivered higher than expected net income and earnings per share even after the significant advertising spend,"​ said Cook. On a regional basis, North America sales, which account for 20 percent of the group total, grew by 3 percent, while sales volume grew 1.5 percent, a figure that was negatively impacted by the divestment of its Canadian household bleach business. Sales in the US market were driven by new product launches in the super-premium oral care category, with the Total Advanced Clean and Max Fresh Burst toothpaste brands being singled out for particularly strong performances. The company also said that it is planning to make a series of new launches in the US market during the next quarter, including Softsoap brand Spa Radiant body wash and liquid hand soap, together with Irish Spring brand Moisture Blast and Reviving Mint body wash. In Latin America, which accounts for 25 percent of the group total, sales were up 7.5 percent, led by strong performances in Brazil, Mexico, Venezeula and Argentina. In Europe and the South Pacific, which also accounts for 25 percent of the total, sales were up 12 percent, reflecting strong sales in the UK, Romania and Denmark, which served to offset a volume decline in Germany, where retail conditions were described as 'challenging'. In Greater Asia and Africa, which accounts for 17 percent of the group total, sales were up 9.5 percent, on account of strong conditions in Russia, Ukraine, South Africa, Turkey, and the Greater China region. Summing up the results Cook said, "all this adds to our strong confidence that we will deliver double-digit earnings per share growth for the balance of 2007 and full year 2008."

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