Colgate-Palmolive: Business cost reductions, price increases offsetting high raw material prices Consumer products giant Colgate-Palmolive reported surprisingly robust earnings this week.

The company reported net sales in its latest fiscal quarter jumped 11 percent compared to the same period the year prior to $4.38 billion. What's more, the firm said net income climbed 4 percent to $643 million, representing a slight uptick from the $619 million is reported in 2010.

Investors were expecting weaker results from Colgate, with many contending high raw material costs would prevent officials from implementing business cost reductions. Colgate executives acknowledged increased business costs and depressed earnings, but they said they had taken steps to prevent them from significantly impacting overall performance.

Colgate's gross profit margin in the quarter was 56.2 percent, declining from the same period a year earlier. Strategic sourcing and other cost reduction plans helped to ameliorate profit growth, and the company moved to offset some of the higher costs onto consumers, raising prices for a number of products.

Moreover, Colgate reported robust sales in emerging markets, The Associated Press reports. What surprised analysts, however, was the strength of sales in developed markets, where sales had slowed in the wake of the recession. Experts said the uptick in sales could indicate consumers are beginning to spend again, reversing a retrenchment in spending.

In the Europe and South Pacific region, which accounts for more than a fifth of total company sales, Colgate officials said revenue jumped by 18.5 percent. In Latin America, revenue climbed by 16 percent.

"We are pleased with our strong top and bottom line growth this quarter with worldwide net sales, operating profit, net income and diluted earnings per share all increasing versus year ago, despite very sharp increases in material costs, an intense competitive environment and challenging macroeconomic conditions worldwide," Colgate president and chief executive Ian Cook said in a statement.

Still, Cook acknowledged higher costs were affecting earnings, prompting the company to project its annual gross profit margin would decline.

"Reflecting the significantly higher cost environment, we currently expect gross profit margin for the year to decline between 150 and 170 basis points versus 2010," he added. "We continue to be sharply focused on our aggressive funding-the-growth initiatives and anticipate that the benefits from those programs, combined with our strategic worldwide pricing efforts, will help offset the impact of the strengthening dollar and enable us to achieve our profit target."

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