J&J's consumer products may be hit by price increases

By Katie Bird

- Last updated on GMT

Related tags Cost

Johnson and Johnson (J&J) has reported strong second quarter
results although price increases within its consumer goods division
will be implemented throughout the year.

Although the consumer goods division performed well overall, the skin care sector reported mixed results with a strong US performance but flagging international sales.

Currency boost sales The New Jersey-based company reported sales for the second quarter of $16.5bn reflecting sales growth from last year of 8.7 per cent.

However, sales figures were significantly boosted by favorable currency movements.

At constant currency levels, its operational growth figure was 3.1 per cent.

Net earnings for the quarter amounted to just over $3.3bn, an 8 percent increase on last year's figure and earnings per share increased from $1.05 to $1.17.

In response to what the company refer to as 'solid earnings' it has increased its outlook for the year from $4.45 to $4.50 per share.

This differs significantly from the behaviour of consumer goods giant Kimberley-Clarke which released disappointing results earlier this week and cut its guidance for the year accordingly.

It is J&J's large healthcare division that is protecting the company from a difficult economic environment, according to chief financial officer Dominic Caruso.

As a general rule the effects of rising oil prices and increasing commodity costs do not affect the company's medical devices and pharmaceutical divisions as the raw materials make up a low percentage of the final cost of a product, said Caruso during an earnings conference call.

Consumer goods affected by oil prices With consumer goods the cost of raw materials makes up a higher percentage of the final products cost and they are therefore more likely to be affected by rising oil prices, he explained.

However, J&J's consumer division has performed well over the second quarter with sales of $4bn, a 6.8 percent operational growth on last year's figures (13.2 percent if the positive effects of currency are included).

Skincare outside of US struggles Looking in more detail within the division the company highlight a number of launches in the skincare sector that boosted sales in the US.

New product offerings within the Neutrogena, Aveeno, and Clean and Clear ranges led to a 12.1 percent growth in sales to $379m for the quarter.

However European skincare sales dropped by 1.1 percent reflecting lower Roc sales and the discontinuation of Evian facial refreshers, said vice president for investor relations Louise Mehrotra during the conference call.

Despite a fairly positive quarter for the division, Caruso did announce there would be price increases within the consumer goods division implemented throughout the year.

Price increases will not be across the board, instead only those products most affected by the increasing costs will be targeted.

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