Church & Dwight (CHD, Financial), a consumer products company most well known for their Arm & Hammer brand, held a conference call with investors on Thursday to discuss Q2 2011 results. Here are some of the highlights from the 10-Q and the Q&A:
Net sales in the second quarter were roughly $675 million, a 5.3% increase from the same period last year. Organic sales, which exclude the impact of currency and discontinued/acquired businesses, were 3.3% higher from Q2 2010, meeting management’s expectation of 3-4% and improving from weak Q1 2011 results of 1% organic sales growth.
Consumer Domestic sales were $482.3 million, a $16.8 million increase or 3.6% above the prior year second quarter sales. All of the growth came from the Household Products portion piece of Consumer Domestics, which increased sales 5.6% in the quarter to $313 million; this was in contrast to Personal Care Products, which was flat year over year at $169 million in quarterly revenue.Organic sales for the Consumer Domestic segment were 2.1% higher that Q2 2010, with 2.4% coming from volume growth, partially offset by 0.3% negative price/mix in the quarter.
Consumer International sales were $126.0 million, a $13.9 million increase or 12.4% above the prior year second quarter sales; when we back out the 9.2% favorable currency effect, organic sales increased by 3.1%.
Specialty Products sales were $66.6 million, a $3.3 million increase (5.3%) above the prior year figure. Organic sales were 13.3%, due to the impact of a discontinued product line, which negatively impacted the YOY comparison by 10% (partially offset by positive currency impact).
As we have continuously seen with CPG companies, commodity cost inflation took its toll (CHD expects a $20 million increase in commodity costs for the full year), along with increased promotion/competitive pricing; gross margin was 90 basis points lower in the quarter (dropped to 44.5% of sales). As such, the company has planned to increase prices in certain product lines (condoms and detergent, for example) to mitigate the rising cost of inputs such as resins and latex; this is on top of price increases that were taken in both of those segments in May and July of this year.
The company paid a dividend of $0.17 in the quarter, a significant increase from the $0.07 payout in the same period last year. In addition, the Company’s Board of Directors authorized an open-ended repurchase program for up to $300 million of the Company’s common stock, which was surprising considering they have not repurchased shares since 2000; management was clear this would not affect their ability to participate in future acquisitions, saying “this is just an opportunity to buy back some shares because we have so much damn cash.”
Net income for the quarter was $82.6 million or $0.57 per share, compared to Q2 2010 reported net income of $74.3 million or $0.51 per share (equal to a 12% increase in EPS, impressive considering that it was off an 18% increase in 2010). Management maintained their guidance for the year, with an EPS range of $2.17-$2.20, a 10-11% increase over 2010 (excludes a one-time pension item in 2010 for comparability). Currently, they have 10-15% of their commodity costs for next year hedged, and plan on making decisions for the majority of their long term contracts in the next three months.
Net sales in the second quarter were roughly $675 million, a 5.3% increase from the same period last year. Organic sales, which exclude the impact of currency and discontinued/acquired businesses, were 3.3% higher from Q2 2010, meeting management’s expectation of 3-4% and improving from weak Q1 2011 results of 1% organic sales growth.
Consumer Domestic sales were $482.3 million, a $16.8 million increase or 3.6% above the prior year second quarter sales. All of the growth came from the Household Products portion piece of Consumer Domestics, which increased sales 5.6% in the quarter to $313 million; this was in contrast to Personal Care Products, which was flat year over year at $169 million in quarterly revenue.Organic sales for the Consumer Domestic segment were 2.1% higher that Q2 2010, with 2.4% coming from volume growth, partially offset by 0.3% negative price/mix in the quarter.
Consumer International sales were $126.0 million, a $13.9 million increase or 12.4% above the prior year second quarter sales; when we back out the 9.2% favorable currency effect, organic sales increased by 3.1%.
Specialty Products sales were $66.6 million, a $3.3 million increase (5.3%) above the prior year figure. Organic sales were 13.3%, due to the impact of a discontinued product line, which negatively impacted the YOY comparison by 10% (partially offset by positive currency impact).
As we have continuously seen with CPG companies, commodity cost inflation took its toll (CHD expects a $20 million increase in commodity costs for the full year), along with increased promotion/competitive pricing; gross margin was 90 basis points lower in the quarter (dropped to 44.5% of sales). As such, the company has planned to increase prices in certain product lines (condoms and detergent, for example) to mitigate the rising cost of inputs such as resins and latex; this is on top of price increases that were taken in both of those segments in May and July of this year.
The company paid a dividend of $0.17 in the quarter, a significant increase from the $0.07 payout in the same period last year. In addition, the Company’s Board of Directors authorized an open-ended repurchase program for up to $300 million of the Company’s common stock, which was surprising considering they have not repurchased shares since 2000; management was clear this would not affect their ability to participate in future acquisitions, saying “this is just an opportunity to buy back some shares because we have so much damn cash.”
Net income for the quarter was $82.6 million or $0.57 per share, compared to Q2 2010 reported net income of $74.3 million or $0.51 per share (equal to a 12% increase in EPS, impressive considering that it was off an 18% increase in 2010). Management maintained their guidance for the year, with an EPS range of $2.17-$2.20, a 10-11% increase over 2010 (excludes a one-time pension item in 2010 for comparability). Currently, they have 10-15% of their commodity costs for next year hedged, and plan on making decisions for the majority of their long term contracts in the next three months.
