Church & Dwight Co. Inc. (CHD), a leading consumer products company, posted second-quarter 2011 earnings of 57 cents a share, beating the Zacks Consensus Estimate by a penny. The reported earnings were up 11.8% from 51 cents earned in the prior-year quarter.
Benefiting from cost reduction programs, management reiterated its earnings guidance of $2.17 to $2.20 a share for fiscal 2011, reflecting an increase of 10% to 11% over 2010 results.
Church & Dwight’s top line increased 5.3% to $674.9 million for the second quarter of fiscal 2011, reflecting an increase of 3.3% in volume. Organic sales upped 3.3% during the quarter. The reported revenue also came ahead of the Zacks Consensus Revenue Estimate of $667 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 fiscal year 2011.
Segment & Margin Details
Consumer Domestic net sales inched up 3.6% to $482.3 million. On an organic basis, sales crept up 2.1% during the quarter reflecting higher sales of ARM & HAMMER Liquid and Powder Laundry Detergents, ARM & HAMMER Cat Litter, XTRA Liquid Laundry Detergent and NAIR depilatories. This was, however, partially offset by sluggish sales of value toothpastes, TROJAN condoms and OXICLEAN laundry additive.
Consumer International sales jumped 12.4% during the quarter to $126 million. On an organic basis, sales rose 3.1% as U.S and Australia experienced higher sales in the quarter.
Specialty Products sales increased 5.3% to $66.6 million. On an organic basis, sales increased 13.3%, reflecting sales growth in animal nutrition business.
Gross margin shrinked 90 basis points to 44.5%, reflecting increased trade spending and commodity cost offset by better manufacturing facility and customer delivery arrangement.
Due to increased trade promotion spending and product mix, the company lowered its gross margin forecast. The company now expects gross margin to expand by 0-50 basis points in fiscal 2011. Earlier, the company forecasted an expansion of 50-100 basis points in gross margin.
Share Buyback & Dividend
Church & Dwight announced a share repurchase program, which authorizes the company to buy back up to $300 million shares of its common stocks through open market or private transactions.
Moreover, the company also declared its 442nd regular consecutive quarterly dividend of 17 cents a share on a post-split basis. The announced quarterly dividend will be paid on September 1, 2011to shareholders of record as of August 15, 2011.
Growth Strategy
Church & Dwight in a move to enhance its gross margin and generate long-term growth opportunities announced the acquisition of the BATISTE brand of dry shampoo from Vivalis in the UK. The company completed the buyout on June 28, 2011.
The brand is the best seller in the Dry Shampoo category in the UK and generates approximately $20 million sales annually. Moreover, the company added that the move is expected to be accretive to the earnings in 2012.
Other Financial Details
Church & Dwight, which faces stiff competition from Clorox Corporation (CLX), ended the quarter with cash and cash equivalents of $163.4 million, long-term debt of $249.7 million and shareholders’ equity of $2,037.9 million.
Church & Dwight’s shares maintain a Zacks #3 Rank, which translates into a short-term Hold rating.
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