On Tuesday, leading consumer products company,
Church & Dwight Co. Inc
) posted better-than-expected second-quarter 2012 results. The
company's quarterly earnings of 56 cents a share came a penny ahead
of the Zacks Consensus Estimate and increased 5.7% from 53 cents
(adjusted for a one-time tax benefit) earned in the prior-year
quarter. However, including one time items, earnings inched
The company's top line increased 3.2% to $696.4 million for the
reported quarter, reflecting a 3.7% rise in organic sales. The
increase in organic sales represents a 6.3% growth in volume,
partially offset by a negative effect of 2.6% through pricing and
product mix. However, the reported revenue missed the Zacks
Consensus Revenue Estimate of $702 million.
Segment & Margin Details
's net sales increased 5.0% to $506.5 million, driven by increases
in household products, which marked an increase of 10.5% in revenue
to $346.2 million, partially offset by 5.1% fall in personal care
products to $160.3 million.
On an organic basis, sales also grew 5.0% 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 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 an 8.6% improvement in
volume, while product mix and pricing unfavorably impacted sales by
's sales decreased 3.7% year over year to $121.3 million. On an
organic basis, sales fell 2.7% attributable to poor sales in
Europe, primarily in UK and France. The fall in organic revenue was
contributed by a 2.4% dip in volume coupled with a decrease of 0.3%
in unfavorable product mix and pricing.
sales increased 3.0% year over year to $68.6 million. Moreover, on
an organic basis, sales jumped 6.3%, reflecting 5.6% expansion in
volume coupled with increase of 0.7% due to favorable product
pricing. The positive impact on pricing was a result of recovery of
input costs through customers.
Gross profit increased 4.9% to $303.0 million compared with
$300.0 million in the prior- year quarter. However, gross margin
contracted 100 basis points to 43.5%, reflecting adverse product
mix mainly due to a rise in sales of lower margin consumer domestic
household products, coupled with a decline in high margin products.
Even though the commodity costs were higher in the quarter, the
increase was more than offset by operating efficiency and cost
Operating income increased 3.9% year over year to 122.4 million
in the quarter under review. Moreover, operating margin expanded 10
basis points to 17.6% during the quarter, reflecting an 80
basis-point decline in SG&A as a percentage of net sales.
Other Financial Details
Church & Dwight, which faces stiff competition from
), ended the quarter with cash and cash equivalents of $184.2
million, long-term debt of $249.8 million and shareholders' equity
of $3,116.3 million.
During the quarter, the company bought back 2.2 million shares
amounting $110 million, bringing the total to 4.1 million shares
worth of $200 million for the first six months of 2012. The company
does not expect any further share repurchases for the rest of the
Moreover, the company generated operating cash flow of $189.2
million, reflecting an increase of 10.2% year over year during the
six-month period ended on June 30, 2012, and incurred $40.0 million
in capital expenditures.
Despite continued macro-economic headwinds, Church & Dwight
retained its fiscal 2012 outlook.
The company expects innovative new product launches to continue
boosting organic sales in the third quarter, and anticipates
organic growth to be at the higher end of the projected rate of 3%
- 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 anticipates
earnings per share to be 58 cents in the third quarter, reflecting
an increase of 7.4% from the prior-year quarter earnings of 54
cents. Moreover, Church & Dwight stood by its earlier forecast
and expects earnings to be in the range of $2.41 - $2.43 per share
in fiscal 2012, indicating an increase of 9% - 10%, excluding
charges of 9 cents related to deferred tax valuation in 2011.
Church & Dwight maintains a Zacks #3 Rank, which translates
into a short-term Hold rating and correlates with our long-term
CHURCH & DWIGHT (CHD): Free Stock Analysis
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