The Gillette Company reported record earnings per share for the third quarter and 9 months ended Sept. 30, 2003. The personal care products company said its success for the period was driven by the strength of core franchises, particularly in Blades and Razors and Duracell, several new product successes, ongoing cost-saving initiatives, and manufacturing efficiencies. Net sales, profit from operations, and net income all scored double-digit percentage gains, the company reported.
Net sales for the quarter increased to U.S. $2.41 billion, a gain of 11 percent from $2.17 billion a year ago. This, according to Gillette, a strong increase in advertising fueled the growth of both established and new products. Favorable foreign exchange, chiefly in Europe, also contributed 5 percentage points of the increase, it said.
Profit from operations for the quarter rose to $604 million, up 16 percent from $522 million the year before, reflecting the strong sales growth and significant cost-reduction activities, due importantly to purchasing and manufacturing efficiencies, Gillette reported.
Net income for the third quarter climbed 18 percent to $416 million from $354 million last year. Diluted net income per common share reached a record high of $0.41, an increase of 24 percent from $0.33 a year ago.
For the 9 months ended Sept. 30, 2003, sales grew 12 percent to $6.63 billion, compared with $5.92 billion in 2002. Favorable foreign exchange, primarily in Europe, contributed 5 percentage points of the net sales gain, the company said.
Profit from operations for the first 9 months increased 15 percent to $1.49 billion, compared with $1.30 billion the year before. Net income was $1.02 billion, 17 percent above $870 million in the prior year. Diluted net income per common share of $0.99 rose 21 percent from $0.82 a year ago.
"Gillette met the challenges of increased competition in each of our core categories with strong marketing initiatives that drove very solid sales growth and record earnings per share," said James M. Kilts, chairman and CEO.
Results by business segment are as follows:
Blades and Razors sales of $1.03 billion for the third quarter rose 17 percent, and profit of $413 million was up 10 percent, compared with a year ago. The company said the quarter's improved profit reflected strong sales growth from the continuing trade-up to premium products, supported by a double-digit percentage increase in advertising and display to counter the intensified competition that is anticipated for the fourth quarter in North America and Europe. For the 9 months, sales of $2.93 billion climbed 15 percent, and profit of $1.12 billion was up 13 percent.
Duracell sales of $514 million for the quarter rose 7 percent, while profit of $106 million grew 35 percent. Gillette said the higher sales were due importantly to a surge in battery demand in the U.S., as consumers stocked their pantries in response to electrical power interruptions, and to a lesser extent to the integration of the newly acquired Nanfu battery business in China. Duracell's solid top-line results in the third quarter, together with purchasing savings and manufacturing efficiencies, contributed to strong profit growth and improved margin in the quarter, the company said. For the 9 months, sales of $1.33 billion climbed 7 percent, and profit of $199 million increased 62 percent.
Oral Care sales of $328 million for the quarter rose 3 percent, and profit of $64 million grew 6 percent, compared with a year ago. While sales growth was restrained by softness in the rechargeable toothbrush segment, chiefly in Europe, there were gains in the AMEE (Africa/Middle East/Eastern Europe) and Latin America regions, where the manual toothbrush business achieved solid growth and battery-powered toothbrushes were successfully launched, Gillette said. In the U.S., the company reported that Oral-B CrossAction Power battery toothbrush doubled Oral-B's share of the battery market from a year ago, to 30.7 percent. The quarter's improved operating profit stemmed from strong sales of new products, partially offset by increased marketing support and the impact of currency on European-based production costs, it said. For the 9 months, sales of $939 million grew 9 percent, and profit of $166 million was up 2 percent versus the prior year, which was said to reflect greater European export costs, a double-digit percentage increase in marketing and higher warranty-related expense.
Braun sales of $293 million for the quarter were 11 percent above those of the year before, while profit declined 5 percent to $22 million. Driving the sales growth was strong demand for men's electric shavers in the U.S. and Japan and the favorable impact of exchange, given Braun's significant presence in Europe, Gillette said. Although sales mix continued to improve, a double-digit percentage increase in marketing to launch new products and the impact of currency on European-based manufacturing costs reduced operating profit in the quarter, the company said. For the 9 months, sales of $792 million increased 16 percent, and profit was down 9 percent to $43 million, due primarily to greater European export costs and higher warranty-related expense.
Personal Care sales of $236 million for the quarter were 10 percent higher than in the previous year, and profit of $26 million climbed 54 percent. This segment includes such products as antiperspirants and deodorants. For the 9 months, sales of $639 million grew 7 percent, and profit of $50 million was 50 percent higher than a year ago.
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