Colgate-Palmolive Profit Up 50%; CEO Mark To Retire July 1
Colgate-Palmolive first-quarter profit rose 50% helped by growth across its businesses, but its shares slipped in early trading as the results only met expectations rather than topping them.
Colgate, which is in the midst of a four-year restructuring announced in late 2004, also forecast additional savings and charges from that plan, and said Reuben Mark would step down as chief executive on July 1.
Mark, who has been CEO since 1984, said last year that he planned to hand over the CEO post to President and Chief Operating Officer Ian Cook in mid-2007.
Net income rose to $486.6 million, or 89 cents a share, from $324.5 million, or 59 cents a share, a year earlier.
Results in the latest quarter include an after-tax charge of $8.2 million from the recall of certain Hill's Pet Nutrition cat food and an after-tax gain of $29.7 million from the sale of most of Colgate's Latin American household bleach business to Clorox.
Excluding special items, earnings rose to 77 cents a share from 68 cents, matching the analysts' average forecast, according to Thomson Financial.
Colgate shares were down less than 1% in morning trading after rising as much as 1.6% on Tuesday. The stock rose almost 2.4% during the first quarter, outpacing shares of larger rival Procter & Gamble, which declined 1.7%.
"With the stock's run-up yesterday, many were thinking (Colgate) would deliver an upside surprise ... but it didn't happen," said AG Edwards analyst Jason Gere.
The New-York-based company's results met expectations despite a 20% increase in advertising spending.
"Earnings were extremely high quality, and if Colgate didn't take advertising up 20%, they could have put up a higher number," said Bear Stearns analyst Justin Hott, who rates the shares "outperform."
Cook, who will be taking the top job at Colgate after a long succession-planning process, said in a statement that Colgate still expected to post double-digit percentage growth in earnings per share for the year, excluding restructuring charges and other items.
Pet Recall Impact Is Minimal
Sales rose 12% to $3.21 billion, topping the analysts' average forecast of $3.11 billion.
Sales at Hill's, which accounted for 13% of Colgate's total sales, rose 12%, including the recall of two products manufactured for Hill's by Menu Foods.
Those products account for just 0.5% of Hill's annual sales, so Colgate does not expect the loss of those sales to significantly affect total 2007 net sales or operating profit.
Colgate's restructuring has made it more focused on oral care, personal care and pet food. It now expects an additional $50 million in savings, bringing the annual after-tax restructuring savings rate to $300 million to $350 million by the end of 2008.
The company also now expects $125 million more in restructuring charges, bringing the total from the program to $675 million to $775 million after taxes.
Colgate said Mark would stay on as chairman for up to 18 months after relinquishing the CEO role.