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Colgate, Avon post 2Q gains
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July 21, 1999: 3:03 p.m. ET
Earnings up, but currency exchange puts curbs on sales increases
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NEW YORK (CNNfn) - Two global consumer products companies reported second-quarter earnings that exceeded or met Wall Street forecasts Wednesday and handily topped the year-ago period.
Proving that the extra stripe in a toothpaste really does make a difference to the bottom line, Colgate-Palmolive (CL) posted a 12 percent increase in net income thanks to strong unit volume growth resulting from increased demand for new products.
The company, which makes a variety of personal and household products such as Colgate toothpastes, Speed Stick deodorant and Ajax cleansers, reported second-quarter net income of $228.1 million, or 36 cents a diluted share, versus $203.5 million, or 31 cents a share, a year ago.
The analysts' consensus estimate was 34 cents, according to research tracking firm First Call.
Sales for the quarter rose to $2.29 billion from $2.26 billion.
New York-based Colgate noted that sales increases would have been greater were it not for unfavorable currency exchanges in some of its overseas businesses.
Unit volume growth was particularly strong in North America, where it was up 5 percent, and in the United States Colgate captured greater market share in most of its product categories. Colgate Total Fresh Stripe Gel, for instance, boosted market share for the country's best-selling toothpaste, Colgate Total.
For the first half, Colgate's net income climbed to $437 million, or 68 cents a diluted share, from $399.5 million, or 61 cents a share, a year earlier.
Sales rose to $4.46 billion from $4.42 billion.
Noting the company's continued efforts to trim costs and build market share, Chairman and CEO Reuben Mark said, "These strong second-quarter results give us great encouragement that our momentum will continue in the second half of this year and the year 2000."
Colgate-Palmolive shares had slipped 7/8 to 50-15/16 by early afternoon.
Avon's 2Q net jumps 9%
Unfavorable exchange rates also reduced the percentage sales increases for Avon Products (AVP) sales.
But the world's largest direct seller of beauty products turned in a strong second-quarter performance, helped by gross and operating margin increases in every region it does business.
The company's bottom line was buoyed by its three largest markets -- the United States, Brazil and Mexico -- and strong performances in Asia Pacific, where operating profit more than doubled from last year, when the region's economies were depressed.
For the quarter ended June 30, 1999, Avon earned $121.4 million, or 46 cents a share, compared with $111.4 million, or 42 cents a share, in the year-ago period.
The per-share results were in line with First Call's consensus estimate.
Net sales for the quarter totaled $1.26 billion, a 1 percent increase over the $1.25 billion reported last year. Excluding the effects of currency exchange, however, sales were up 9 percent for the quarter, aided by a 16 percent jump in sales in the Pacific region.
For the first half, however, Avon's net income fell 10 percent to $72.5 million, or 27 cents a diluted share. The unfavorable comparison is due to one-time charges taken in previous quarters in relation to re-engineering efforts, the company said. In the first quarter of 1999, Avon took a charge of 46 cents per share, and in the first quarter of 1998, it took a charge of 32 cents a share.
Before one-time charges, however, earnings per share rose 18 percent.
"So, we are on track for the year," Avon Chairman and CEO Charles R. Perrin said. "We are confident we can achieve our target of 16-18 percent earnings per share growth before one-time charges … even as we increase spending on strategic initiatives to accelerate sales growth."
Despite meeting analysts' expectations, Avon shares were down 1-7/8 at 51-1/8 by mid-afternoon. 
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Colgate-Palmolive
Avon
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