Colgate, Unilever shares decline on profit warnings

Tue, Sep 21, 2004, 01:00

Colgate-Palmolive and Unilever, two of the world's largest consumer products manufacturers, both issued profit warnings yesterday, highlighting the intense competition in an industry trying to please price-conscious retailers and consumers.

Colgate shares fell more than 10 per cent after it warned third- and fourth-quarter earnings would be lower than expected as increased marketing spending outweighed growth in volumes and market share.

Higher raw-material costs also offset the company's expense savings programme, Colgate said.

Unilever, the maker of Dove soap and Knorr soup, saw its shares fall 5 per cent after it said that it would not report the double-digit growth it had promised in underlying earnings per share this year. It now expects only low single-digit growth.

The Anglo-Dutch company also pledged to increase its budget for marketing its brands.

Unilever said poor summer weather in northern Europe had held back sales of ice cream and "ready-to-drink" tea.

The market for toiletries and cleaning products had also become tougher in western Europe, with many consumers reluctant to pay extra for branded goods, the firm said.

Sales of its leading brands are expected to fall in the third quarter.

Colgate said it expected earnings of 57-59 cents a share for the third and fourth quarters. Analysts had expected earnings of 67 cents a share for the third quarter, and 68 cents a share for the fourth quarter, according to Thomson First Call.

Colgate said third-quarter worldwide volume should be up more than 7 per cent. Its shares were down 10.6 per cent at $48.57 in early afternoon trade.

Unilever's profit warning was a blow for Mr Niall FitzGerald, the company's co-chairman, who steps down at the end of this month after 37 years with the group.

Mr Patrick Cescau, his successor, said he did not see a need for radical structural change, such as splitting the company into a standalone food business and another business selling toiletries.