Church & Dwight Co. Inc. (CHD), a leading consumer products company, recently posted better-than-expected first-quarter 2012 results. The quarterly earnings of 66 cents a share surpassed the Zacks Consensus Estimate of 61 cents and jumped 13.8% from 58 cents earned in the prior-year quarter.
The company’s top line increased 7.5% to $690.6 million for the reported quarter, reflecting an 8.4% rise in organic sales. The increase in organic sales represents a 10.5% growth in volume, partially offset by 2.1% negative effect through pricing and product mix. The reported revenue also came ahead of the Zacks Consensus Revenue Estimate of $672 million.
Segment & Margin Details
Consumer Domestic net sales increased 8.4% to $510.6 million, driven by increases in household products, which marked a rise of 14.4% in revenue to $347.6 million, partially offset by 2.6% decrease in personal care products to $163 million.
On an organic basis, sales grew 10.1% during the quarter, reflecting higher sales of ARM & HAMMER liquid laundry detergents. Moreover, higher sales of XTRA liquid laundry detergent, ARM & HAMMER cat litter, and ARM & HAMMER CRYSTAL BURST power pack laundry detergent also boosted sales. This was, however, partially offset by sluggish sales of ARM & HAMMER SPINBRUSH battery-operated toothbrushes, ORAJEL oral analgesic products and TROJAN condoms.
Increases in organic growth represent a 13.4% improvement in volume, while product mix and pricing unfavorably impacted sales by 3.3%.
Consumer International sales increased 10.7% during the quarter to $121.4 million. On an organic basis, sales rose 7.2% as Australia, Franceand Canadaexperienced higher sales along with a rise in exports.
Specialty Products sales decreased 4.9% to $58.6 million. Moreover, on an organic basis, sales dropped 2.5%, reflecting volume declines.
Gross profit increased 5% to $302.5 million compared with $288.1 million in the prior- year quarter. However, gross margin contracted 110 basis points to 43.8%, reflecting adverse product mix and increased commodity cost, partly offset by operating efficiency and cost reductions.
Operating income increased 8.8% to 142.7 million. Moreover, operating margin expanded 30 basis points to 20.7% during the quarter, reflecting a 40 basis points decline in SG&A as a percentage of net sales.
Other Financial Details
Church & Dwight, which faces stiff competition from Clorox Corporation (CLX), ended the quarter with cash and cash equivalents of $232.4 million, long-term debt of $249.8 million and shareholders’ equity of $2,030.2 million.
During the quarter, the company bought back 1.9 million shares aggregating $90 million. Additionally, the company repurchased shares worth $110 million in April 2012.
Moreover, the company generated free cash flow of $99 million during the quarter and incurred $15.1 million in capital expenditures.
The company expects innovative new product launches to boost organic sales, which is expected to be at the higher end of the projected growth rate of 3% to 4% in fiscal 2012.
Church & Dwight forecasts cost savings programs to offset the increases in commodity prices and expects gross margin to increase at the lower end of its targeted 25-50 basis points rise in fiscal 2012.
Benefiting from solid organic sales, management stood by its earlier forecast and expects earnings to be in the range of $2.41 to $2.43 per share in fiscal 2012, reflecting an increase of 9%-10%, excluding charges of 9 cents related to deferred tax valuation in 2011.
Church & Dwight maintains a Zacks #2 Rank, which translates into a short-term ‘Buy’ rating.Read the Full Research Report on CHD
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