* Earnings of $1.41/share top Wall Street view of $1.40
* Sales of $4.29 billion vs Street view $4.31 billion
* Venezuela crimps volume, gross margin in Latin America
By Jessica Wohl
Jan 31 Colgate-Palmolive Co said on
Thursday a key measure of sales growth slowed for the second
quarter in a row as the company faced increased pressures in
Venezuela, including a labor slowdown at its factory there which
has since been taken care of.
Shares of the toothpaste maker fell as much as 3.7 percent,
even as fourth-quarter profit rose slightly more than expected.
The stock is up 6 percent so far this month after rising 13.2
percent in 2012, and some analysts suggested investors use the
weakness as a buying opportunity.
The company's results in Latin America were disappointing,
due largely to economic and labor problems in Venezuela, which
accounts for about 5 percent of total sales.
Colgate also faces tougher competition in Latin America from
Procter & Gamble Co, particularly in toothpaste and
toothbrushes, though Colgate said it is still well ahead of its
rival in countries such as Brazil and Mexico.
Organic sales, which strip out the effects of foreign
exchange fluctuations, acquisitions and divestitures, rose 4
percent in the quarter. Organic sales rose 5 percent in the
third quarter and 8 percent in the second quarter.
Excluding Venezuela, organic sales growth would have been
almost 1.5 percentage points higher in the latest quarter,
Colgate still executes "very well on a number of fronts,
though this seems to be reflected in the shares," said
Oppenheimer analyst Joseph Altobello.
He kept a "perform" rating on the stock, adding that
investors should "act opportunistically on pullbacks."
Colgate shares were down 2.6 percent at $107.92 after
falling as low as $106.74.
Meanwhile, Energizer Holdings Inc, which competes
with P&G and is also cutting jobs, topped expectations even as
sales declined. Its shares fell 1.4 percent to $87.05,
recovering from a steeper drop earlier in the day.
Colgate's sales rose 1.5 percent as volume fell 1.5 percent
and prices increased 5 percent in Latin America - Colgate's
biggest market with 29 percent of overall sales.
Organic sales in Latin America rose 4 percent, considerably
less than the 9 percent rise posted in the third quarter and
14.5 percent in the fourth quarter of 2011.
"What was striking to us in the quarter was the significant
toll that the tough Venezuelan operating environment had on the
firm's results," said Morningstar analyst Erin Lash.
An increasingly difficult economic and labor environment in
Venezuela hurt both volume and gross profit, Colgate said. The
company dealt with a labor slowdown at its Venezuelan factory
during the quarter and believes a number of other companies
faced labor issues there as well.
Venezuelan business leaders have complained that the
uncertainty over President Hugo Chavez's prolonged absence,
saying policy decisions have led to growing economic imbalances.
A devaluation of the bolivar currency would make Venezuelan
exports more competitive by lowering local production costs and
spur domestic industries by making imports less competitive.
Operations in Venezuela are basically back to historical
levels and sales have bounced back to levels seen consistent
with Colgate's plans, Chief Executive Officer Ian Cook said on a
Colgate, which has said it will cut about 6 percent of its
workforce in a restructuring announced in October, spent more on
advertising for its toothpaste and other products.
It earned $598 million, or $1.26 per share, in the fourth
quarter, up slightly from $590 million, or $1.21 per share, in
the quarter a year earlier.
Excluding after tax charges from the restructuring and costs
from the sale of land in Mexico, Colgate earned $1.41 per share,
topping analysts' average estimate of $1.40, according to
Thomson Reuters I/B/E/S.
Sales rose 2.5 percent to $4.29 billion, missing analysts'
target of $4.31 billion. The volume of goods sold increased 1.5
percent and prices rose 2.5 percent.
Colgate expects 2013 earnings to grow at a double-digit
clip, excluding factors such as restructuring charges and
potential currency devaluations or macroeconomic changes.
It also still expects organic sales to rise about 6 percent
to 7 percent this year.
The 2012 restructuring plan, including a 6 percent reduction
in the workforce by the end of 2016, is on track, Colgate said.
It plans to take $775 million to $875 million in aftertax
restructuring charges and expects to save $275 million to $325
million aftertax annually by the fourth year of the plan.