Colgate-Palmolive Co. (CL) reported Thursday a higher profit for its second quarter, helped by increased sales and volumes, despite negative foreign exchange. Quarterly earnings per share topped the market projections by a penny. For the full year, the consumer products company now expects the Venezuelan currency devaluation to have a higher negative impact on earnings than projected. However, it did not alter its double-digit growth guidance for full-year adjusted earnings.
The New York-based company's second-quarter net income attributable to Colgate-Palmolive increased 7% to $603 million from $562 million a year ago. On a per share basis, earnings rose 9% to $1.17 from last year's $1.07.
On average, 21 analysts polled by Thomson Reuters expected the company to report earnings of $1.16 per share for the period. Analysts' estimate typically exclude special items.
Worldwide sales for the quarter were $3.81 billion, up 2% from $3.75 billion in the previous year quarter. Eighteen Wall Street analysts expected revenues of $3.94 billion for the quarter.
In the second quarter, volume increased 3% and global pricing edged up 0.5%, while foreign exchange was negative 1.5%. On an organic basis, excluding foreign exchange, acquisitions and divestments, sales grew 3.5%.
On a geographical basis, North American sales rose 4.5% from last year, with 5% rise in volume and 1% positive foreign exchange, while pricing dropped 1.5%. Organic sales grew 3.5% during the quarter.
Latin American sales edged up 0.5%, with a 1% rise in volume. Volume excluding Venezuela increased 5%. Sales in Europe/South Pacific dropped 2.5%, as a 1.5% rise in volume was offset by 2.5% decline in pricing and 1.5% negative foreign exchange.
Quarterly sales in Greater Asia/Africa region rose 14% on 11.5% rise in volume, but pricing decreased 1.5%, Foreign exchange was a positive 4%. The company's Hill's pet food segment sales in the quarter declined 7.5%, with 4% drop each in volume and pricing, while foreign exchange was positive 0.5%.
In the second quarter, gross profit margin remained flat with prior year's 58.8%, as benefits from cost-savings initiatives offset the impact of negative foreign exchange, higher trade investments and a 90 basis point reduction due to Venezuela, the company said.
Operating profit increased 7% from last year to $948 million, and operating margin grew to 24.9% from 23.7% a year earlier.
Commenting on the results, Ian Cook, Chairman, President and Chief Executive Officer, said, "Overall, we are very pleased to have delivered solid results this quarter, despite heightened competitive activity and difficult economic conditions around the world.
"Colgate's share of the global toothpaste market strengthened to 44.4% year to date, led by share gains in Brazil, China, India, Russia, Venezuela, France and the United Kingdom. Colgate also strengthened its global leadership in manual toothbrushes, with its global market share in that category reaching 31.6% year to date, up 1.4 share points versus year ago," he added.
In its preceding first quarter, the company reported a net profit of $357 million or $0.69 per share, adjusted net income of $628 million or $1.21 per share, on net sales of $3.83 billion.
Looking ahead, the company currently estimates the full year impact of the currency devaluation in Venezuela to be a net reduction in full-year earnings of $0.10 to $0.15 per share. Its previous forecast was for a reduction of $0.06 to $0.10 per share.
The company also said that it remains optimistic that 2010 will be another year of double-digit earnings per share growth, excluding the previously announced one-time charge related to the transition to hyperinflationary accounting in Venezuela. Gross profit margin for the year is expected to be up nicely.
According to Cook, "As we look to the balance of the year, foreign exchange volatility worldwide and the economic environment in Venezuela remain challenging."
CL shares, which have been trading between $70.45 and $87.39 in the past 52 weeks period, closed Wednesday's trading session at $83.86, down 73 cents or 0.86%.
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