Clorox 4Q net income dips on increasing costs

August 3, 2011 - 6:00 PM
Earns Clorox

In this Aug. 1, 2011 photo, a detail of a label on a bottle of Clorox bleach is displayed in a supermarket, in Walpole, Mass. Consumer products maker Clorox Co. says its fiscal fourth-quarter net income dipped 1 percent as rising commodity costs took a toll. (AP Photo/Steven Senne)

NEW YORK (AP) — Prices on Clorox products from bleach to salad dressing are about to go up, the company said Wednesday, explaining that's how it plans to cope with the double challenge of nervous consumers and rising prices for raw materials.

Clorox Co. was reporting quarterly results it characterized as encouraging — a 4 percent increase in revenue but a 1 percent drop in net income, both better than analysts expected for the period that ended June 30.

Executives declined to tackle the lingering question at the top of investors' minds: Carl Icahn's takeover bid.

The billionaire investor has offered twice since mid-July to buy the company, first at $76.50 per share and then at $80 per share. The company — whose shares fell $1.41, or 2 percent, on Wednesday to close at $68.88 — rejected him both times.

CEO Don Knauss would only reiterate during a conference call to discuss the earnings report that Icahn's bids were not credible and undervalued the company.

CFO Dan Heinrich did not address Sanford C. Bernstein analyst Ali Dibadj's request to name the company's value, saying instead that Clorox can "generate shareholder value over time" because of its name recognition, investment in new products and success cutting costs.

Icahn has urged Clorox to try selling itself to a rival, such as Procter & Gamble Co. or Kimberly-Clark Corp. P&G, which makes many competing products, actually owned Clorox for a decade starting in 1957 but sold it after regulators raised questions about a possible monopoly.

A P&G spokesman declined to comment, saying it doesn't address rumors or speculation. The CEO of Kimberly-Clark said on a call with analysts last week that its business plan "doesn't call for big, transformational" mergers and acquisitions.

The price increases Clorox outlined, which take effect this month, include 5 percent on Clorox toilet bowl cleaner and 7 percent on Hidden Valley Ranch salad dressing. Heinrich said the company also will raise prices worldwide this year, which he acknowledged might lead some shoppers to buy less.

"It's not going to be easy, especially in the first half (of the fiscal year)," Heinrich said. "But we've been through these cycles before and we're confident in our ability to successfully manage through these kinds of challenges."

The company said its fourth-quarter net income fell to $169 million because it spent more on ads to entice customers to keep buying and to promote new products and because it invested in "infrastructure improvements."

It said it earned $1.29 per share, compared with an average forecast from analysts for adjusted earnings of $1.19 per share, according to FactSet. The company cited its higher revenue and lower taxes. But buying back shares also helped by increasing the ratio of profit to shares.

Clorox's revenue rose to $1.48 billion, compared with an average analyst forecast for $1.47 billion. It credited price hikes and rising sales of new products like an "on-the-go" Brita water filter bottle or Burt's Bees lip balm and other personal care products.

The company said its international revenue grew 9 percent in the quarter. But rising revenue abroad doesn't help Clorox as much as some consumer product makers because about 80 percent of Clorox's revenue comes from the U.S., a larger share than for many major competitors.

Overseas revenue can be a boon in a down economy because it translates into more U.S. dollars when the dollar weakens than it does when the dollar is stronger.

For the fiscal year, Clorox reported net income of $557 million, down more than 7 percent. Annual revenue was flat at $5.23 billion.

Clorox expects to earn $4 to $4.10 per share in the fiscal year that began July 1, with revenue up 1 percent to 3 percent. That's in line with what it predicted three months ago.

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AP Business Writer Michelle Chapman in New York contributed.