Colgate-Palmolive saw restructuring charges take a bite out of first-quarter profits, but said that its highest ever level of advertising spending for the time of year had helped top-line growth in every division.
The US-based consumer products group said on Wednesday that first-quarter net income was $300.1m, or 53 cents per share, compared with $338.5m, or 59 cents last time.
The restructuring, which aims to cut about 4,400 jobs and close one-third of the group’s factories over four years, led to charges of $44.6m in the quarter.
Colgate, whose brands include Speed Stick deodorant and Palmolive soaps, announced the restructuring last December to help combat fierce competition from its main rival, Proctor & Gamble, by freeing up cash to boost advertising and product development.
The company said that gross profits were also hit by raw material and packing costs, but that its aggressive savings programme and shift towards higher margin oral care products largely offset these and the increased advertising spending.
Excluding restructuring charges, operating profit was up 2 per cent over the same period last year to $542.3m, which included a 13 per cent increase in global marketing spending to $267m, the highest first-quarter figure ever, the company said.
Reuben Mark, chief executive, said: “The year has started with a continuation of the very strong top-line momentum that began building in second half 2004.”
Mr Mark added that the group’s focus on the oral care markets had helped drive market share gains in more than 100 countries, expanding its global leadership.
“We expect good top-line growth to continue throughout the year, and despite raw and packing material cost increases, we also expect gross profit margin, before the impact of the 2004 Restructuring charges, to be up for the year,” he said.
Strong sales momentum and the restructuring programme, which aims to save $250m-$300m annually after tax by 2008, should help it acheive single digit earnings per share growth this year, excluding charges, and it should return to double digit earnings growth in 2006, he said.
The company also announced that William Shanahan, Colgate’s 65 year old president, would retire during the third quarter of this year. Ian Cook, the group’s 52 year old chief operating officer, would succeed Mr Shanahan, the compay said.
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