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Consumer goods, food makers' results mixed

P&G sees profit as rival, Kraft falter

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Associated Press / May 1, 2008

CINCINNATI - Makers of household consumer and food products reported mixed results amid the slumping economy yesterday as they raised prices on everything from hot dogs to toothpaste to try to offset soaring energy and ingredient costs.

Procter & Gamble Co., the maker of Pampers diapers and Gillette razors, said that higher retail prices, cost controls, and strong growth in emerging markets helped lift its fiscal third-quarter profit 8 percent. P&G also raised its full-year outlook, sending its shares up 3 percent.

A.G. Lafley, the company's chairman and chief executive, said P&G remains optimistic about sustaining growth because of daily uses for its many household brands such as Charmin toilet paper, Crest toothpaste, and Tide detergent.

But rival Colgate-Palmolive Co., whose products include its namesake toothpaste and dish soap, said first-quarter earnings fell 4 percent as the company took restructuring charges and a higher provision for income taxes. Colgate said rising materials costs were offset by raising prices, but that margins would be pressured as the cost of raw materials kept rising.

Analysts questioned Colgate-Palmolive executives on whether they had been slow to lift prices and anticipate the impact of rising costs for agricultural commodities. The company, whose shares slid $4.88 to $70.90, will raise Colgate toothpaste prices by 9 percent this summer.

Colgate reported solid growth in Latin American markets, and said its toothpaste business was strong in China, India, and Russia.

On the kitchen table side of household businesses, Kellogg Co. saw its first-quarter profit dip 2 percent, despite recent price increases by the maker of cereal, Pop-Tarts toaster pastries, and Eggo frozen waffles.

Kellogg raised wholesale prices an average of 3.2 percent across much of its product portfolio, said spokeswoman Kris Charles. Prices went up for snacks at the end of December and for cereal and frozen products in late January.

At Kraft Foods Inc., the nation's largest food and beverage maker, first-quarter earnings dropped 13 percent - also amid higher costs for ingredients. The maker of Oscar Mayer hot dogs, Maxwell House coffee, and Oreo cookies benefited from nearly across-the-board price increases.

Kraft's profit decline also came because earnings in the same period last year were boosted by a one-time benefit related to the company's spinoff from the Altria Group Inc.

P&G raised prices by 6 percent or more earlier this year on products including Iams dog food, Cascade dishwasher detergent, and Zest bar soap. The company said yesterday it expects costs to keep climbing, has increased spending on marketing, and has more price hikes coming this summer - from 4.5 percent on Tampax feminine products to 11 percent for Oral-B power toothbrushes.

The company cited continued double-digit volume growth in developing markets and growth among key brands such as Pampers, Gillette Fusion razors, and Head & Shoulders shampoo.

P&G shares rose $1.20 to $67.10. Kellogg was down 73 cents to $51.25, while Kraft was up 83 cents to $31.60.

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