Colgate-Palmolive profits hit by restructuring
reported an 11 per cent drop in net profits for its first quarter
results. However, the company said that increased advertising
expenditure had managed to ensure sales increases in every
division, writes Simon Pitman.
With sales coming in at $2.743 billion, the company said that net profits were impacted by a $44.6 million restructuring charge relating to the restructuring programme announced last year. This led to a net profit of $300.1 million for the first three months in 2005, down from $338.5 million in the corresponding quarter for 2004.
With the restructuring costs already on the cards for the quarter, there was no real shocks behind the results. The restructuring plans will shut one third of the group's factories over the next four years and reduce the company's workforce by an estimated 4,400 employees.
Reuben Mark, P&G chairman and CEO said, "The year has started with a continuation of the very strong top-line momentum that began building in second half 2004. Our focused category strategy is working well, with our oral care business up more than 10 per cent in North America and Latin America, with Europe, excluding the GABA acquisition, and Asia/Africa close behind, up 9 per cent and 7 per cent."
Acknowleding the fact that the company was coming under pressure from commodity prices and from the pricing strategies from its competitors, Mark said that continued cost savings derived from the restructuring programme had allowed the company to surge ahead in its priority business, oral care.
On a regional basis, the maker of Speed Stick deodorant and Colgate toothpaste revealed that sales growth in the European market, which accounts for 25 per cent of group sales, had outstripped that of North America, which accounts for 22 per cent of sales.
In North America sales had grown by 7 per cent, whereas in Europe a healthy 13 per cent was recorded, spurred on by positive currency gains against the US dollar.
Despite the slower pace of the North America market, the company said that its share of the US toothpaste market had grown to 35.9 per cent, up 170 basis points on the previous year. Further growth in this market is expected throughout the year, thanks to a full pipeline of new product launches, including 2 in 1 Oxygen toothpaste, and Softsoap brand Kitchen Fresh liquid hand soap.
The UK, Greece and Swizerland recorded strong growth, but most of the gains in the region were acounted for by central and eastern Europe. The company said that it has now extended its presence in the toothpaste market for the market to exceed 25 per cent market share.
Latin America also showed strong sales growth at 11.5 per cent, whereas in Asia strong performances in both China and India helped push sales growth up to 6.5 per cent.
"We expect top-line growth to continue throughout the year, and despite raw packing material cost increases, we also expect gross profit margin, before the impat of the 2004 restructuring charges to be up for the year," said Mark.
