Colgate brushes off slumping world economy with strong Q2
Consumer products giant Colgate-Palmolive Co. bucked growing economic headwinds and posted strong sales growth and record operating profits in its latest quarter.
On Tuesday, Colgate — which makes toothpaste, soap and antiperspirant among other well-known consumer items — said it earned net income of $494 million US, or 92 cents a share, for the April to June period. That figure represented a two cent per-share miss when compared to analysts' predictions.
Once charges related to a 2004 restructuring are subtracted, however, Colgate made $806 million in the quarter, an all-time record, according to the company's news release.
Three-month stock chart for Colgate-Palmolive"This is the seventh consecutive quarter of double-digit operating profit, net income and earnings per share growth. The strong results were truly across the board with every operating division achieving record sales and operating profit for the second quarter," said Ian Cook, Colgate's chief executive officer.
A major factor in Colgate's profit growth in the quarter was soaring sales, which topped out at $3.965 billion, up a hefty 16.5 per cent compared to the same period one year earlier.
Colgate's performance flew in the face of growing pessimism concerning the Canadian and American economies. In the first quarter of 2008, for instance, non-durable consumer spending in the United States dropped by 0.2 per cent. And many analysts say the U.S. economy along with Europe will continue to face dreary prospects for at least the remainder of 2008.
Yet, Colgate was able to boost unit sales, the number of tubes of toothpaste and other items it sold in the period, by five per cent. Product price increases accounted for 4.5 per cent of sales gain while favourable foreign exchange boosted revenue by seven per cent.
Within Colgate's sales envelope, Latin America accounts for the largest portion of the company's sales at 27 per cent. Colgate's revenue from that region jumped by 23 per cent with strong showings in Mexico, Brazil, Colombia and Argentina.
North America, which is Colgate's third-largest of its four geographical areas, posted a 6.5 per cent increase in sales for the second quarter. The company sold 4.5 per cent more units in Canada and the United States in the period than it did this time last year.
Cook said he expects the strong sales showing to continue through the remainder of the year and into 2009.
"We expect that our strong top-line and excellent savings initiatives will result in mid-teens earnings per share growth in 2008, and while we have not yet begun our 2009 budget process, we anticipate another year of solid double-digit earnings per share growth in 2009," he said.
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