Vinnee Tong, THE ASSOCIATED PRESS

Stumble Upon

del.icio.us

Digg

Facebook

Print

Email

Speak Up

NEW YORK - Colgate - Palmolive Co. raised prices by 4.5 per cent, the biggest hike in more than a decade, without suffering a slowdown in either sales or profit in the second quarter. That led the company to predict strong profit growth into 2009.

Shares rose more than eight per cent Tuesday.

Colgate - maker of its namesake toothpaste, Hill's Science Diet pet food and Tom's of Maine personal care items - said Tuesday that its second-quarter profit rose 19 per cent on strong sales worldwide, as price increases helped offset rising input costs. The company forecast double-digit earnings-per-share growth for next year.

In the second quarter, the consumer products maker earned $493.8 million, or 92 cents a share, compared with $415.8 million, or 76 cents, a year ago.

Excluding restructuring costs, Colgate earned profit of $523.3 million, or 98 cents per share, in the latest quarter.

Revenue rose 16 per cent to $3.96 billion from $3.41 billion.

Analysts polled by Thomson Financial, who typically exclude one-time charges like restructuring costs, expected second-quarter earnings of 94 cents per share and revenue of $3.84 billion, on average.

The company has joined many other consumer products makers in raising prices in response to higher costs for commodities such as corn, soy beans and oil.

The company used a combination of higher pricing, cost cutting and the addition of higher-margin products to "almost completely" offset sharply rising raw materials and packaging costs, chief executive Ian Cook said in a statement.

Cook said on a conference call with investors that the prices would boost gross margins but not until next year. The company raised prices by three per cent in the first quarter.

"So far we continue to see our market shares grow," Cook said.

Goldman Sachs analyst Andrew Sawyer said the results were "decidedly positive," with very strong revenue growth even under the pressure of price increases.

"The one caveat to the solid quarterly performance is the continued gross margin pressure, particularly company indicators that this metric could continue to erode" in the second half of the year, Sawyer told investors.

New York-based Colgate-Palmolive Co., which also makes Palmolive, Ajax and Irish Spring products, increased advertising spending by 18 per cent to reach a record level for the company. It gained market share for toothpaste in the U.S., Mexico, Brazil, China and Russia.

All the business units reported higher revenue and operating profit.

Revenue in North America grew 6.5 per cent, and operating profit grew five per cent in the quarter. An advertising campaign that features Brooke Shields helped Colgate increase market share to 16.2 per cent for Colgate Total toothpaste.

In Latin America, revenue grew 23.5 per cent and operating profit increased 19 per cent.

Colgate's revenue in Europe/South Pacific was up 14.5 per cent, and its Asia/Africa unit reported revenue 17.5 per cent growth in sales.

Cook said he expects earnings-per-share growth in the mid-teen percentages for 2008.

Analysts polled by Thomson Financial currently forecast 2009 earnings per share of $4.28, up about 11.5 per cent from their expectation for 2008 of $3.84 per share.

Shares rose $5.59, or 8.2 per cent, to close at $74.15.