Church & Dwight Sales Rise 5.3% in 2Q

“We are pleased with our solid second quarter business results in what continues to be a difficult economic environment,” noted James R. Craigie, chairman and CEO. “The organic sales increase of 3.3% met the company’s expectations of 3-4% organic sales growth for the quarter. While category consumption continues to be weak in the U.S., we increased share on five of our eight power brands in the quarter.”

Consumer Domestic sales were $482.3 million, a 3.6% gain over the prior year’s second quarter sales. Second quarter organic sales increased by 2.1%, largely driven by higher sales of Arm & Hammer Liquid and Powder Laundry Detergents, Xtra Liquid Laundry Detergent, Arm & Hammer Cat Litter and Nair depilatories. These increases were partially offset by lower sales of Trojan condoms, value toothpastes and Oxiclean laundry additive, the company said. Volume growth contributed approximately 2.4% to net sales, offset by 0.3% negative effect of price and product mix in the quarter.

Consumer International sales were $126.0 million, up 12.4% above the prior year second quarter sales. Organic sales, which exclude a 9.2% favorable effect of foreign exchange rate changes, increased by 3.1%, primarily reflecting increased sales in Australia and U.S. exports.

Specialty Products sales were $66.6 million, 5.3% above the prior year second quarter sales. Organic sales which exclude a 2.0% favorable effect of foreign exchange rate changes and a 10.0% impact of a foreign subsidiary’s discontinued product line, increased by 13.3%, primarily due to growth in our animal nutrition business.

Gross margin contracted to 44.5% in the second quarter compared to 45.4% in the same quarter last year, reflecting higher commodity costs, unfavorable product mix and higher trade promotion spending partially offset by the benefits of cost reduction programs. Mid-year price increases for detergent and condoms are expected to mitigate a portion of the significant increases in the cost of resins, surfactants and latex.

Marketing expense was $87.5 million in the second quarter, up 5.7% in comparison with the prior year second quarter. Marketing expense was up 220 basis points versus the first quarter to support the launch of new products across every one of our power brands. Marketing expense as a percentage of net sales was 13.0% in the quarter, an increase of 10 basis points over the prior year second quarter.

Operating income decreased 1.8% to $117.8 million in the second quarter compared to $120.0 million in the prior year second quarter. Operating margin contracted 120 basis points to 17.5%.

With respect to 2011, Craigie said, “Volume growth projections continue to be strong despite the weak economy and aggressive competitive trade spending in our categories. For the first half of the year, we have gained share on five of eight of our power brands. We expect to maintain or improve this market share growth during the balance of the year due to two key factors: excellent customer response to our new products which are capturing solid distribution gains across many of our key brands, and our commitment to increasing marketing spending for the year in support of our power brands, which will continue in the second half of 2011.

This quarter the company is rolling out Arm & Hammer Toothtunes, a toothbrush that plays music through an innovative patented technology that allows consumers to listen to two minutes of music while brushing their teeth. It will feature Kid’s Pop, Top 40 and Classic Rock song categories.