Church & Dwight Co., Inc. (NYSE:CHD) today reported net income for the quarter ended June 30, 2012 of $79.3 million or $0.56 per share, compared to the reported net income of $82.6 million or $0.57 per share for the same period in 2011. The results exceed management’s previously announced earnings per share forecast of $0.54 per share for the quarter. Earnings per share decreased 1.8% on a reported basis, but increased 5.7% excluding a second quarter 2011 $6 million ($0.04 per share) tax benefit as a result of New Jersey corporate tax reform.
Second Quarter Review
Reported net sales for the second quarter increased 3.2% to $696.4 million. Organic sales increased 3.7% driven by 6.3% volume growth offset by 2.6% unfavorable product mix and pricing. Organic sales exclude the impact of a 2011 brand acquisition and foreign exchange rate changes.
James R. Craigie, Chairman and Chief Executive Officer, commented, “We are very pleased with our second quarter business results in what continues to be a difficult economic environment. The organic sales increase of 3.7% reflects strong volume growth. Despite continuing weak category consumption in the U.S., we increased market share on five of our eight power brands in the quarter.”Consumer Domestic net sales were $506.5 million, a $24.2 million or 5.0% increase over the prior year second quarter sales. Second quarter organic sales increased by 5.0%, primarily due to higher sales of ARM & HAMMER liquid laundry detergent. Other products that contributed to volume growth were XTRA liquid laundry detergent, ARM & HAMMER cat litter, KABOOM cleaners, and the recently introduced ARM & HAMMER CRYSTAL BURST unit dose laundry detergent. These increases were partially offset by lower sales of ARM & HAMMER SPINBRUSH battery-operated toothbrushes, ANSWER diagnostic kits and ORAJEL oral analgesic products. Volume growth contributed 8.6% to sales, partially offset by the 3.6% unfavorable product mix and pricing. Consumer International net sales were $121.3 million, a $4.7 million or 3.7% decrease from the prior year second quarter sales. Organic sales decreased by 2.7%, primarily due to weaker sales in Europe. Volume accounted for 2.4% of the decrease, with 0.3% of the decrease resulting from unfavorable product mix and pricing. Organic sales exclude a 5.9% benefit from an acquisition and a negative impact of 6.9% from foreign exchange rate changes. Specialty Products net sales were $68.6 million, a $2.0 million or 3.0% increase over the prior year second quarter sales. Organic sales increased by 6.3%. Higher volumes contributed 5.6% and favorable pricing contributed 0.7%. The favorable pricing is primarily due to a pass-through of raw material increases to customers. Organic sales exclude a negative impact of 3.3% from unfavorable foreign exchange rate changes. Gross margin contracted to 43.5% in the second quarter compared to 44.5% in the prior year second quarter. The decrease is primarily due to unfavorable product mix. The unfavorable product mix reflects a 10.5% increase in net sales of lower margin consumer domestic household products compared to a 5.1% decline in net sales of higher margin consumer domestic personal care products. Gross margin was also affected by start-up and unabsorbed costs related to the Company’s new Victorville, California manufacturing and distribution facility, which did not begin shipments until late in the second quarter of 2012. Although commodity costs were higher in the quarter, the increases were largely offset by the effect of productivity programs. Gross margin is expected to improve in the second half of 2012 due to initiatives that have already been implemented including a cat litter price increase, new product launches in the personal care business, in-house production of unit dose detergent, ramp-up of the new Victorville, California facility and the reduction in retailer slotting costs. As a result, the Company expects full year gross margin to increase by an amount at the lower end of its 25-50 basis point annual target.
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