Church & Dwight 2Q net income grows 28 percent, but margins suffer, promotional costs rise

Church & Dwight 2Q net income up, margins hurt

PRINCETON, N.J. — Church & Dwight Co. Inc. said Thursday its second-quarter net income rose 28 percent, but cautioned that its margins were hurt by heightened competition and increasing spending on promotions.

The maker of Arm & Hammer, Nair, Orajel, and Kaboom bathroom cleaner said it is seeing prices weaken more than it expected, which will hurt sales this year but it maintained its previously announced guidance.

Shares of Church & Dwight fell $2.71, or 4.1 percent, to $62.82 in midday trading Thursday.

The Princeton, N.J., company said its net income rose to $74.3 million, or $1.03 per share, in the quarter that ended July 2, up from $58.2 million, or 81 cents per share, a year ago.

Revenue rose to $640.9 million in the quarter, which was six days longer than last year’s second quarter when revenue was $623.1 million.

Analysts polled by Thomson Reuters expected, on average, earnings of 95 cents per share on $650.6 million in revenue. The earnings estimates typically exclude one-time items.

Chairman and CEO James R. Craigie said shoppers like the company’s value offerings in the weak economy and new products are helping performance. But competition is growing and trade spending on promotions was increased to keep up with rivals.

He said the company’s aggressive trade spending will hurt this year’s organic sales by 1 percent, so the company now expects organic sales growth of 3 percent to 4 percent this year. Organic sales growth typically measures changes in sales from existing businesses while excluding sales from newly acquired or sold operations.

The company has cut marketing from last year’s spending to spend more on trade. But it maintained its earnings per share estimate of $3.93 to $4 in 2010.

He said the company expects earnings per share to be balanced the rest of the year, and added marketing spending in the second half should be higher than the first.

Analysts expect the company to earn $3.98 per share on revenue of $2.62 billion for the year, according to Thomson.

The company also announced that its board had approved a dividend increase to 17 cents a share from 14 cents, payable next month.