* Second-quarter earnings fall, sales rise
* Earnings, excluding items, in line with estimates
* Shares up 1.6 percent
By Jessica Wohl
July 25 Colgate-Palmolive Co cut its 2013
profit forecast due to the stronger dollar as it posted a lower
second-quarter net profit on Thursday, citing restructuring and
The toothpaste maker's earnings, excluding items, were in
line with Wall Street's expectations, despite slightly
weaker-than-anticipated sales growth.
Still, New York-based Colgate said its sales and margins
should keep rising this year as it promotes new products such as
Colgate Sensitive SmartFoam with Whitening toothpaste.
Its shares were up 1.6 percent at $59.47.
A strong dollar represents a double whammy for U.S.-based
companies like Colgate. The company generates most of its sales
outside the United States. So when those overseas revenues are
brought home and translated into dollars, the U.S. currency's
strength reduces their bookable value and results in lower
The higher dollar also increases production costs versus
foreign rivals, making U.S. products less competitive in
Colgate's rivals such as Procter & Gamble Co also
have vast international businesses, including in Europe where
economic pressure persists. On Monday, Kimberly-Clark Corp
said the stronger U.S. dollar may hurt its results more
than it previously expected.
Also on Thursday, Europe's Unilever posted
weaker-than-anticipated quarterly sales growth, and said growth
in emerging markets was slowing.
Colgate's organic sales, which strip out the effects of
foreign exchange fluctuations, acquisitions and divestitures,
rose 5.5 percent, with the biggest gains in North America, Asia
and Africa, and a jump at its Hill's pet food business as it
brought out new pet foods.
In Latin America, its biggest market by far, Colgate
continued to be hurt by the impact of February's devaluation of
the Venezuelan bolivar. That contributed to a 1.5 percent net
sales decrease in Latin America and a lower operating profit
Organic sales in Latin America, rose 7 percent, after rising
9 percent in the first quarter. That growth slowed less than
feared, said JP Morgan analyst John Faucher.
For U.S. companies that do business in Venezuela, the
devaluation meant their earnings in bolivars were worth less
when converted back to dollars.
The U.S. dollar strengthened against foreign currencies in
the last four to six weeks of the quarter, leading Colgate to
cut its 2013 earnings guidance by 1 percentage point. Colgate
now expects earnings per share to rise 4.5 percent to 5.5
percent for the year.
Venezuela accounts for about 5 percent of Colgate's total
sales. The company warned earlier this year that the devaluation
would trim earnings each quarter, as it translates its financial
statements at the newer exchange rate.
P&G, the world's largest household products maker, cited
volatility in Venezuela and elsewhere in April when it said that
its profit would fall more than Wall Street was anticipating. It
is due to post its quarterly results on Aug. 1.
Colgate's sales in Europe and the South Pacific fell 3
percent, due to factors such as lower prices and sales declines
in France and Greece.
Colgate expects limited growth in Europe for the
"foreseeable future," Chairman and Chief Executive Ian Cook said
on a conference call.
Second-quarter net income fell to $561 million, or 60 cents
per share, from $627 million, or 65 cents per share, a year
earlier. Excluding 10 cents per share in after-tax charges,
Colgate earned 70 cents per share, in line with analysts'
estimates, according to Thomson Reuters I/B/E/S.
Sales rose 1.9 percent to $4.35 billion, less than the $4.39
billion that analysts expected. Unfavorable foreign exchange
lowered sales by 3 percentage points. Pricing rose 1 percent.
Colgate still expects its gross profit margin to improve by
0.3 to 0.7 percentage points this year, Cook said on the call.