Colgate-Palmolive sales up but rising costs take their toll

By Katie Bird

- Last updated on GMT

Related tags: Latin america, Generally accepted accounting principles, Revenue, Ceo

Sales for oral and personal care player Colgate-Palmolive were up for the first quarter of 2011, but the company said increasing raw material costs were affecting profit margins.

For the first quarter of this year sales stood at $3,994m, an increase of 4.5 percent compared to 2010 first quarter figures. However, this growth includes the positive effect of foreign exchange and organic sales for the period were up 1.5 percent.

Raw materials costs affect profit margin

Gross profit margin was 58.4 percent for the period, down 80 basis points compared to the previous year’s quarter. According to the company increasing raw materials costs can explain at least part of this decline.

Commenting on the figures, Colgate-Palmolive CEO Ian Cook said: “We are pleased to have met earnings expectations this quarter despite very sharp increases in material costs and an intense competitive environment globally.”

Furthermore, the CEO said pressure from high raw materials costs was predicted to continue throughout the year.

“Reflecting the significantly higher cost environment, we expect gross profit margin to remain at around the first quarter level throughout the rest of 2011,”​ he said.

Nevertheless, the CEO said the company’s planned cost saving measures and global pricing efforts will help it to achieve the mid-single digit earnings per share growth for the year, excluding the 2010 Venezuela charge.

Net income up when compared to difficult 2010

Net income for the period came in at $576m, significantly higher than the $357m recorded in the first quarter of 2010.

However, last year’s net income included a one off charge of $271m related to the hyperinflationary situation in Venezuela. Discounting this, net income fell 8 percent from 2010 to 2011.

Emerging markets strong

While Venezuelan currency movements weighed heavily on 2010’s figures, the country was highlighted as a strong performer in 2011. Sales volume gains were recorded in Venezuela, Argentina and Central America and overall the Latin America region recorded an organic sales increase of 5 percent during the quarter.

Another strong performer was the Greater Asia/Africa region, where organic sales were up 7.5 percent led particularly by the Greater China region, India and South Africa.

While emerging markets reported strong sales growth, the developed markets suffered. Organic sales declined 5 percent in the North America region and dropping 1.5 percent in Europe/South Pacific.

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