Colgate announces major global restructuring

Related tags Investment Market Colgate-palmolive

Toothpaste maker Colgate-Palmolive says it is axing more than 4,000
of its global work force and closing a third of its 78 factories in
a restructuring plan that aims to save the company up to $300
million a year. Simon Pitman reports.

Recent financial results have revealed that the company is suffering from rising raw material costs and intense competition from rivals such as Unilever and P&G. On top of that, it has also been battling a downturn in consumer spending in the massive US market, exacerbated by fierce discounting from major retailers such as Wal-Mart.

The group issued a profit warning back in September, its first in almost a decade, when it realised how the market conditions had affected its performance.

The restructuring will occur over a four year period, which, the company says, aims at ensuring continued worldwide growth. The three point plan aims to further profits, accelerate product launches and maximise the effectiveness of advertising.

Colgate-Palmolive​ said that the implementation of the programme over the four year period could cost as much as $650 million after tax, with annual savings increasing at a steady rate during that period.

Reuben Mark, chairman and CEO said, "We have already indicated that our EPS growth in 2005 should be in the 6-10 per cent range. With the benefit of this programme on both top and bottom lines, earnings per share, excluding restructuring charges, are expected to increase at low double-digit rates in 2006 and beyond."

Mark added that he expected the 100 point restructuring programme to be fully operation by the fourth quarter of 2005.

The programe places an emphasis on emerging markets such as Eastern Europe, Russia, China and certain Latin American and Asian markets. It also means that the finished products for the 223 markets the company is currently present in will be sourced from fewer, but more sophisticated, global manufacturing facilities.

The company is yet to announce which specific manufacturing facilities will be closed down.

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