NEW YORK – Colgate-Palmolive Co. (CL) said on Wednesday quarterly profit fell due to restructuring charges and sent another signal that Chief Operating Officer Ian Cook may be in line to be the next chief executive.
Profit dropped to $300.1 million, or 53 cents per share, in the first quarter from $338.5 million, or 59 cents a share, a year ago.
Colgate, which is cutting 12 percent of its work force and closing a third of its factories under a restructuring plan unveiled in December, said profit excluding restructuring charges was $344.7 million, or 61 cents a share, meeting the average analyst estimate compiled by Reuters Estimates.
The maker of Colgate toothpaste, Ajax cleaner (search) and other household products said that William Shanahan, 65, plans to retire as president in the third quarter, at which point Cook, 52, would be elected president.
Cook was named COO last July, a move that industry watchers said signaled that he could become the next chief executive. Reuben Mark, 66, has been CEO of New York-based Colgate since 1984 and chairman since 1986.
Colgate shares were down 1.8 percent.
"Colgate met consensus expectations, but volumes were down in Western Europe, gross profit lagged our expectations, and pricing was more negative than we expected, particularly in Asia/Africa and Europe," Deutsche Bank analyst Bill Schmitz said in a statement.
Sales rose 9.1 percent to $2.74 billion, boosted by strong oral care product sales, an acquisition and the weak dollar, which raises the value of sales in other countries when they are translated from local currencies.
The Reuters Estimates sales estimate was $2.70 billion.
Volume, which excludes currency and price fluctuations, rose 7.5 percent. Sales and volume each got a 2.5 percent boost from the recently acquired GABA oral care (search) business, Colgate said.
First-quarter gross profit margin was 54.8 percent, or 55.2 percent excluding the restructuring charge, compared with 55.7 percent a year earlier. Gross profit was weighed down by higher raw and packing material costs, especially oil-related costs, and increased commercial spending, Colgate said.
Gross profit margin, before the impact of charges from the company's 2004 restructuring plan, should be up this year, Mark said in a statement.
Colgate should be able to post high single-digit earnings per share growth in 2005 and return to double-digit growth in 2006, excluding restructuring charges, he added.
Analysts, on average, currently expect Colgate to earn $2.61 per share in 2005 and $2.89 per share in 2006. The company earned $2.42 per share last year, excluding restructuring charges.
The company, whose other products include Palmolive cleansers and Hill's pet food, said it increased total advertising spending 13 percent in the quarter.
Colgate issued its first earnings warning in nearly a decade in September, due in part to higher costs for raw materials. In December, the company said it would cut about 4,400 jobs and shut some plants as it tries to fight rising costs and focus on higher-profit areas such as oral care.
Colgate previously said it expects annual after-tax savings of $250 million to $300 million by 2008 from the restructuring, and that savings should ramp up late in the second quarter.
The acceleration of restructuring should give Colgate "more earnings flexibility, but (the) road to recovery may be longer than expected," Schmitz said.
Shares of Colgate were down 92 cents at $49.78 after slipping to $48.50 earlier in the session.
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