Posted on: Wednesday, December 8, 2004
Colgate-Palmolive plans restructuring cutbacks
By Anne D'Innocenzio
Associated Press
NEW YORK — Colgate-Palmolive Co., the consumer products giant behind such brands as Ajax detergent and Irish Spring soap, plans to cut its worldwide workforce by about 12 percent, or about 4,400 jobs, and close one-third of its factories as part of a four-year plan aimed at boosting its sales and profits. Its stock climbed nearly 8 percent yesterday.
The moves announced yesterday come as the consumer products industry has been grappling with higher costs in raw materials, gas and packaging, all of which have put more pressure on profits.
Colgate-Palmolive also faces increasing competition from larger rival Procter & Gamble Co., which has taken big bites of the market with an increased focus on skin-care and beauty products as well as pet-care products.
In September, Colgate-Palmolive issued a rare warning that its profits would fall short of expectations as it faces tougher competition and increased expenses heading into the last quarter of the year.
New York-based Colgate said it will reduce its global workforce from its current level of 37,000 and close a third of its 78 factories worldwide during the course of the four-year restructuring. The savings from those closures are to be invested in sales and marketing initiatives.
During a conference call with investors, chairman and CEO Reuben Mark said that the job cuts will come mostly from manufacturing, and said that factories — both general plants and special-purpose plants — are being closed worldwide. He added that notifications were being issued yesterday, but didn't identify the facilities.
The news sent Colgate's stock up $3.78 to close at $50.07 yesterday on the New York Stock Exchange.
Burt Flickinger III, managing partner at Strategic Resource Group, a New York-based industry consulting group, said the new plan is a "strong initiative but it is too little, too late."
"Colgate has been milking its worldwide brands for far too long, for both its sales and marketing," he added. "As Colgate's brands have been undermarketed, it is much easier for retailers' private label and other rival brands to undercut Colgate."
Colgate said the plan will result in charges against earnings of between $550 million and $650 million after taxes over the four years, but will generate savings in the range of $250 million to $300 million annually by the fourth year of the program.
In 2005, the charges are expected to amount to $200 million and the savings to $45 million.
Colgate hopes to improve its financial performance by reducing the number of manufacturing centers with which it does business and globally managing all purchasing, from office supplies to media outlets for advertising.
It plans to accelerate marketing innovations and new products especially in markets that it feels have high potential, such as Eastern Europe, Russia, China and parts of Latin America and Asia.
The New-York based consumer products maker reported in October its profit fell 10 percent in the third quarter to $329 million, or 58 cents per share, from $365.4 million, or 63 cents last year. Sales rose to $2.7 billion from $2.52 billion a year ago.
Colgate-Palmolive sells products in more than 200 countries. Its brands include Colgate toothpaste, Palmolive dishwashing liquid, Softsoap and Hill's Science Diet pet foods.
