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.
Guidance
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.
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