January 30, 2014 / 1:19 PM / 5 years ago

Colgate's profit beats estimates due to cost cuts

(Reuters) - Colgate-Palmolive Co (CL.N), the world’s largest toothpaste maker, reported a better-than-expected quarterly profit as cost cuts offset the negative impact of a stronger dollar.

A display of Colgate toothpaste is seen on a store shelf in Westminster, Colorado April 26, 2009 file photo. REUTERS/Rick Wilking

Colgate shares rose as much as 4 percent on Thursday.

“The company continues to deliver solid results, despite macro challenges - which is impressive,” JPMorgan analyst John Faucher wrote in a note.

Colgate’s gross margins rose in the quarter ended December 31 as it cut costs by negotiating better lease terms with suppliers, using cheaper raw material and reducing packaging material in products.

Launch of higher-margin products, redesigning of some brands and introduction of successful regional products in other markets helped the company grow its sales.

Colgate, which controls about 45 percent of the global toothpaste market, said it expected gross margin expansion to continue and its 2014 adjusted earnings growth to be in line with analysts’ estimates.

Analysts on average are expecting earnings of $3.08 per share in 2014, according to Thomson Reuters I/B/E/S.

Faucher said Colgate’s guidance was “fine,” as there were concerns that a stronger dollar would bite into its profits.

Rival Procter & Gamble Co (PG.N) said last week that it would not change its 2014 forecast and that it expected organic sales to grow 3-4 percent.


Colgate’s organic sales, which strip out the impact of acquisitions, divestitures and foreign exchange, increased 6.5 percent in the fourth quarter, led by emerging markets.

In Latin America, its biggest market by sales, organic revenue rose 12.5 percent, led by new products such as Colgate Luminous White Advanced and Colgate Total Professional Gum Health.

Organic revenue in Asia, including India and China, grew 9 percent due to higher sales of products such as Darlie Expert White toothpastes and Palmolive Naturals White + Milk bar soap.

The company said its global volumes grew 6.5 percent, but pricing was flat.

Its net profit fell to $564 million, or 60 cents per share, in the fourth quarter from $598 million, or 63 cents per share, a year earlier.

The company earned 75 cents per share, excluding a $133 million aftertax charge related to restructuring.

Revenue rose 2 percent to $4.36 billion. Foreign exchange fluctuations hurt sales by 4.5 percent in the quarter, the New-York based company said.

Analysts on average expected earnings of 74 cents per share on revenue of $4.38 billion.

Colgate’s gross profit margins rose to 58.9 percent in the fourth quarter from 58.4 percent a year earlier.

The company’s shares were up 1.2 percent at $62.38 on the New York Stock Exchange on Thursday.

Editing by Kirti Pandey

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