Colgate-Palmolive 3Q profit rises as sales jump

By: AP
By: AP

NEW YORK (AP) -- Colgate-Palmolive Co. posted a 19 percent gain in third-quarter earnings on Thursday after it raised prices, and the toothpaste maker gave a confident forecast for double-digit profit growth in 2009.

The company's shares rose nearly 5 percent.

Chief Executive Ian Cook said the pullback in commodity and energy costs - along with the company's higher prices and cost cuts - make the consumer products company optimistic it can improve its gross profit margin next year. He said those things would also ward off any drag on profits due to a stronger dollar.

Other consumer products companies such as Procter & Gamble Co. and Unilever PLC also reported growth in the quarter but took a more cautious tone about the future amid the worldwide financial turmoil.

Colgate said its third-quarter profit rose to $499.9 million, or 94 cents per share, from $420.1 million, or 77 cents per share, a year ago. Excluding a 6 cents per share cost for restructuring, the company said it earned 99 cents per share, beating a consensus estimate.

Analysts polled by Thomson Reuters on average had expected earnings per share of 98 cents. These estimates typically exclude items.

Revenue rose 13 percent to $3.99 billion, matching Wall Street's expectations, as sales volume grew 3 percent.

Shares in Colgate - which makes its namesake toothpaste, Tom's of Maine products, Hill's Science Diet pet food and Irish Spring soap - rose $2.85 to $62.85 in midday trading.

Colgate posted double-digit revenue increases from all operating divisions as it raised prices 6.5 percent and spent 6 percent more on advertising, reaching a record high for the company, it said. Favorable foreign-exchange rates added 3.5 percent.

Some cash-strapped consumers have started buying lower-price private-label items, forcing companies to spend more on advertising to keep them choosing their brands. And some are waiting longer to stock up on staples like toothpaste once they see the higher prices.

"We have witnessed some pantry destocking on the part of the consumer, particularly at our price increase in toothpaste was realized on the shelf," Cook told investors on a conference call. He added that sales of private-label products was held at low to mid-single digits.

Procter & Gamble Co. said Wednesday that it benefited from a range of pricing options such as cheaper "basic" versions of its Bounty paper towels and Charmin.

Cook put aside concern that a stronger dollar would hurt growth at the company, which generates 75 percent of its sales overseas.

"Our ongoing savings programs combined with the benefits of lower oil and commodity costs should fully offset the expected impact of the strengthening dollar," Cook said in a statement.

The company also said it planned new product introductions such as Colgate MaxFresh with mouthwash beads and Palmolive Pure and Clean detergent, among others.

Earlier Thursday, Unilever - the maker of Dove soaps, Lipton teas and Ben & Jerry's ice cream - said third-quarter profit rose 63 percent, mostly due to the sale of operations. But one analyst worried about the company's growth and said European consumers may switch to cheaper products, instead of name brands, during a downturn.

A day earlier, P&G posted a nearly 9 percent increase in its fiscal first quarter profit, but the maker of Tide detergent, Pampers diapers and Olay skin care dropped the low end of its earnings guidance for the full fiscal year.

Colgate said it had no problems in the commercial paper market, in which companies take short-term loans for daily operating money. Many other companies had problems with availability of these loans as the financial turmoil spread in recent weeks.

"We've continued to issue commercial paper at attractive rates and have had no difficulties in this regard," Colgate investor relations executive Bina Thompson said.

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