CHICAGO (Reuters) - Clorox Co <CLX.N> on Monday posted lower quarterly profit, hurt by rising costs for raw materials used in products such as its Glad plastic storage bags, but a lower tax rate helped it beat analysts' estimates.
By Brad Dorfman
CHICAGO (Reuters) - Clorox Co <CLX.N> on Monday posted lower quarterly profit, hurt by rising costs for raw materials used in products such as its Glad plastic storage bags, but a lower tax rate helped it beat analysts' estimates.
The company also lowered its fiscal year 2008 earnings forecast range due to its decision to exit the private-label food storage bags business and the November acquisition of personal care products maker Burt's Bees.
Clorox has been overhauling its supply chain and taking other steps to reduce costs, while also raising prices to try to offset soaring commodity costs.
!ADVERTISEMENT!In the past year, the company's stock has fallen 7.4 percent, compared with a rise of 2 percent for larger household products company Procter & Gamble Co <PG.N>.
The maker of Clorox bleach said profit was $92 million in the fiscal second quarter ended December 31, compared with $96 million, a year earlier. Earnings per share, however, rose to 65 cents a share from 62 cents a share, helped by a lower outstanding share count.
Analysts on average forecast 54 cents a share, according to Reuters Estimates.
"It would seem that most of the favorability versus estimates was driven by timing issues in advertising and restructuring costs, and a lower tax rate," Goldman Sachs analyst Amy Chasen said in a research note.
Like many consumer products companies, Clorox has been hit by higher prices for commodities like resin, used in plastic bags, and soybean oil, used in its salad dressings.
Clorox on Monday announced a plan to increase prices by 7 percent on average on Glad trash bags and GladWare containers this month to help offset rising costs.
The price increases came sooner than expected and were consistent with competitor moves, according to Morgan Stanley analyst William Pecoriello.
"The fiscal year '08 guidance implies the benefit of this pricing will largely offset increased commodity pressure," Pecoriello said.
But with the U.S. economy slowing, analysts have also worried that Clorox will lose customers to lower-priced private-label manufacturers, especially in categories such as bleach.
"How do you convince consumers to keep buying the branded trash bags?" Morningstar analyst Lauren DeSanto said.
Still, sales rose 8 percent to $1.19 billion. Of that increase, the Burt's Bees acquisition, bleach businesses acquired in fiscal year 2007 and the weaker dollar each added 1.5 percentage points.
Volume, a measure that factors out currency and price fluctuations, rose 4 percent, excluding acquisitions, the company said.
The tax rate in the quarter was 28.4 percent, down from 33.1 percent a year ago, largely due to the completion of federal tax audits, the company said.
For the year, Clorox expects earnings of $3.20 to $3.35 a share, including one-time items. The company's previous forecast was $3.33 to $3.50.
"It appears that on an operating basis (excluding restructuring and Burt's Bees dilution, second half EPS would be coming down by 7 cents," Chasen said.
Clorox shares were down $1.15 at $61.94 in late morning on Monday on the New York Stock Exchange.
(Reporting by Brad Dorfman; Editing by Derek Caney and Gunna Dickson)
