NEW YORK – Colgate-Palmolive Co. (CL) on Wednesday said second-quarter profit fell 8 percent, dragged down by restructuring charges, but sales rose, topping Wall Street expectations.
Profit at Colgate, which is focused on more profitable businesses such as oral care under a restructuring unveiled last year, fell to $342.9 million, or 62 cents per share, from $373.9 million, or 66 cents per share, a year earlier.
Excluding $28.7 million of restructuring charges, Colgate earned $371.6 million, or 67 cents per share, matching the average forecast among analysts polled by Reuters Estimates.
The maker of Colgate toothpaste and Irish Spring (search) soap said sales climbed 10.5 percent to $2.84 billion, topping analysts' average forecast of $2.76 billion. Unit volume rose 8 percent, and 2.5 percent of the sales increase came from a foreign exchange lift.
Pricing was even with last year's quarter after being negative for six quarters in a row.
"This more positive pricing trend, which is expected to continue in the second half, combined with an apparent moderation in the amount of commercial spending required, bodes well for further increases in profitability," Chairman and Chief Executive Reuben Mark said in a statement.
Second-quarter gross profit margin, pressured by higher raw and packaging material costs, fell to 54.2 percent, or 55.1 percent excluding restructuring charges, from 55.4 percent a year earlier.
"Although the cost environment is expected to remain difficult, our ongoing focus on cost savings, the benefits of restructuring, and the impact of the recently announced sale of our North American detergent business should allow gross margin expansion in the balance of the year," Mark said.
Earlier this month, Colgate agreed to sell North American detergent brands such as Fab and Dynamo to Phoenix Brands LLC (search), which is controlled by Lehman Brothers (LEH).
Colgate should be able to achieve high single-digit growth in earnings per share in 2005 and return to double-digit growth in 2006, before restructuring charges, Mark said.
Analysts, on average, expect New York-based Colgate to earn $2.63 per share in 2005 and $2.92 per share next year.
Colgate, whose other brands include Mennen, Softsoap and Hill's Science Diet (search) pet food, is cutting 12 percent of its work force and closing one-third of its factories under a restructuring plan unveiled in 2004.
The company said it still expects total after-tax restructuring charges of $550 million to $650 million and annual savings of $250 million to $300 million by 2008.
Get all the stories you need-to-know from the most powerful name in news delivered first thing every morning to your inbox