Colgate shares fall
NEW YORK (Dow Jones/AP) – Shares of consumer products giant Colgate-Palmolive Co. plunged Monday after it warned that its second-half results would be lower than expected because of increased marketing spending and higher packaging and raw material costs. The company said it now expects third and fourth-quarter earnings between 57 cents to 59 cents per share. Analysts surveyed by Thomson First Call had predicted the company would earn 67 cents in the third quarter and 68 cents in the fourth quarter. In 2003, Colgate-Palmolive earned 63 cents per share in the third quarter and 65 cents in the fourth quarter.
Despite optimistic comments from Chairman and Chief Executive Reuben Mark about the company’s position heading into 2005, shareholders were clearly disappointed.
“This is not a happy thing to do,” Mark told analysts during a conference call Monday. However, he said he hoped shareholders would understand that it was necessary to react to increased competition in parts of the world. “We are fighting the appropriate battles and … we are winning.”
Mark said.
However, Colgate was unable to offset the higher levels of marketing spending with internal cost savings because it was fighting significant headwinds from increases in raw material and packaging costs, he said.
“That means a short-term disappointment, but it is my impression that the business is extremely solid,” Mark said.
Colgate is in the midst of its 2005 budgeting process, and Mark said he expects “solid volume growth” next year.
According to Mark, the company increased its marketing spending from last year in both absolute terms and as a percentage of its sales.
Increases were made worldwide, but Colgate experienced especially heightened competition in Russia, China, India, the United States, Hong Kong, Mexico and Brazil.
There were signs Colgate was benefiting from the investment in marketing. In the United States, the company said its market share of toothpaste hit an all-time high.
Colgate expects worldwide volume for the third quarter will rise more than 7 percent, with dollar sales up about the same rate.
AP-ES-09-20-04 1047EDT