Church & Dwight Co. Inc. (CHD), a leading consumer products company, posted first-quarter 2011 earnings of $1.15 a share, beating the Zacks Consensus Estimate by a penny. The reported earnings were up 3.6% from $1.11 earned in the prior-year quarter.
Benefiting from the cost reduction programs, management reiterated its earnings guidance of $4.35 to $4.40 a share for fiscal 2011, reflecting an increase of 10% to 11% over 2010 results.
For second-quarter 2011, the company expects earnings per share of $1.11-$1.13, reflecting an increase of 8%-10%.
Church & Dwight’s top line inched up 1.2% to $642.3 million for the first quarter of fiscal 2011, reflecting a 3.2% increase in volume. Organic sales upped 1.1% during the quarter.
However, the reported revenue fell short of the Zacks Consensus Revenue Estimate of $649.0 million.
The company stood by its previous organic sales guidance expecting fresh product consignments, extensive distribution gains and price increases of its products. It expects a growth of 3-4% in organic sales for the second quarter and fiscal year 2011.
Segment & Margin Details
Consumer Domestic net sales increased 0.9% to $471.1 million. On an organic basis, sales inched up 0.7% during the quarter reflecting higher sales of Arm & Hammer products and Trojan condoms. This was, however, partially offset by lower sales of value toothpastes and Oxiclean laundry additive.
Consumer International sales jumped 6.8% during the quarter to $109.6 million. On an organic basis, sales rose 3.1% as U.S., France and Australiaexperienced higher sales in the quarter.
Specialty Products sales went down by 5.5% to $61.6 million. On an organic basis, sales increased 2.2%.
Gross margin decreased by 10 basis points to 44.9%, reflecting increased trade spending and commodity cost offset by better manufacturing facility and customer delivery arrangement.
The company continues to expect gross margin expansion of 50-100 basis points in fiscal 2011 through cost savings programs and price increases.
Stock Split & Dividend
Earlier, the company announced a two-for-one stock split of the company’s share in the form of stock dividend, to be paid on June 1, 2011to shareholders of record as on May 16, 2011. The split will lead to an increase in total shares outstanding to 143 million shares from approximately 71.5 million shares, currently.
Moreover, the company also declared its 441st regular consecutive quarterly dividend of 17 cents a share on a post-split basis. The announced quarterly dividend will be paid on June 1, 2011to shareholders of record as of May 16, 2011.
Long-term Growth Strategy
The company will reposition a part of its Green River, Wyoming operations to Victorville, California in the first half of 2012.
Exclusively, the cat litter manufacturing operations and the distribution center will be moved to the Californiasite, which has pending final local approvals. Moreover, the company also plans to produce liquid laundry detergent products from there.
The strategy is aimed toward expanding the gross margin in the long run as it would reduce convolution in its supply chain system and will help in trimming down the production and distribution costs while being closer to hauling centers and the company’s West Coast customers.
Further, it will help in escalating the liquid laundry and cat litter businesses of the company by providing efficient production and distribution facility.
The company will incur $30 million in capital expenditures and $8 million in transition expenses for opening of the Victorville site and the reduction in work force at the current site. For 2011, capital expenditures of the project are expected to be $11 million. Moreover, it will result in charges of approximately 4 cents per share in 2011 and approximately 3 cents per share in 2012.
Other Financial Details
Church & Dwight, which faces stiff competition from Clorox Corporation (CLX), ended the quarter with cash and cash equivalents of $159.1 million, long-term debt of $249.7 million and shareholders’ equity of $1,951.0 million.
Church & Dwight’s shares maintain a Zacks #3 Rank, which translates into a short-term Hold rating.
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