05.11.03

5.11.2003: Meldung: The Gillette Comp.: Third-Quarter and Nine-Month Results

Gillette Reports Record Third-Quarter and Nine-Month Results
Tuesday November 4, 7:32 am ET

BOSTON-- Nov. 4, 2003--The Gillette Company today reported record earnings per share for the third quarter and nine months, driven by the strength of core franchises, particularly in Blades and Razors and Duracell, several new product successes, ongoing cost-saving initiatives and manufacturing efficiencies. Net sales, profit from operations and net income all scored double-digit percentage gains. Net sales for the quarter ended September 30, 2003, increased to $2.41 billion, a gain of 11 percent from $2.17 billion a year ago, as a strong increase in advertising fueled the growth of both established and new products. Favorable foreign exchange, chiefly in Europe, also contributed 5 percentage points of the increase.

Profit from operations for the quarter rose to $604 million, up 16 percent from $522 million the year before, reflecting the strong sales growth and significant cost-reduction activities, due importantly to purchasing and manufacturing efficiencies.
Net income for the third quarter climbed 18 percent to $416 million from $354 million last year, driven by the Company"s strong operating results and a lower tax rate.
Diluted net income per common share reached a record high of 41 cents, an increase of 24 percent from 33 cents a year ago.

For the nine months ended September 30, 2003, sales grew 12 percent to $6.63 billion, compared with $5.92 billion in 2002. Favorable foreign exchange, primarily in Europe, contributed 5 percentage points of the net sales gain.

Profit from operations for the first nine months increased 15 percent to $1.49 billion, compared with $1.30 billion the year before. Net income was $1.02 billion, 17 percent above $870 million in the prior year. Diluted net income per common share of 99 cents, also a record, rose 21 percent from 82 cents a year ago.

"Gillette met the challenges of increased competition in each of our core categories with strong marketing initiatives that drove very solid sales growth and record earnings per share," said James M. Kilts, chairman and chief executive officer.
"Year-to-date, we have increased our global value share for shaving systems by 1 point and the blade share of our Mach3 franchise by 3 points. Our disposable razors also are growing strongly for the first time in four years. Despite new competitive entries, we expect our stepped-up marketing investments to result in very good growth for the year in our premium Mach3 and Venus brands."

He noted that Oral-B remains the global leader in brushing, with strong share gains this year for its battery-powered CrossAction brushes. Duracell continued its turnaround with strong earnings gains, an increase in its North American value share and broader international presence through the acquisition of Nanfu, one of China"s leading battery companies.

Mr. Kilts said Gillette also is studying the possible realignment of its European blade and razor manufacturing facilities and distribution network to streamline and strengthen its operations.
"Our third quarter was favorably impacted by pipeline shipments of Mach3 Turbo Champion razors for early fourth-quarter consumer promotions as well as the build-up of pantry supplies of batteries due to the North American blackout and hurricane. The draw-down of these razors and batteries is anticipated to slow the pace of sales growth during the fourth quarter. However, we expect to achieve top-tier earnings growth for the year, setting the stage for continued strong performance in 2004," he said.

Results by business segment follow.
Blades and Razors sales of $1.03 billion for the third quarter rose 17 percent, and profit of $413 million was up 10 percent, compared with a year ago. The Mach3 franchise continued to generate substantial worldwide sales gains, paced by the success of Mach3Turbo in Europe and strong retail demand for the new Mach3Turbo Champion. During the third quarter, global value share for Mach3 blades grew 2.4 percentage points to 27 percent. The Gillette for Women Venus franchise also posted a strong performance, with global consumer blade sales climbing 15 percent in constant dollars. In the increasingly competitive U.S. market, Venus consumer blade sales rose 9 percent. Another strong performer was the Sensor3 disposable razor, which achieved a 7.8 percent value share and boosted Gillette"s share of the U.S. disposable razor market by 1.8 percentage points to 47.4 percent. The quarter"s improved profit reflected strong sales growth from the continuing trade-up to premium products, supported by a double-digit percentage increase in advertising and display to counter the intensified competition that is anticipated for the fourth quarter in North America and Europe. For the nine months, sales of $2.93 billion climbed 15 percent, and profit of $1.12 billion was up 13 percent.

Duracell sales of $514 million for the quarter rose 7 percent, while profit of $106 million grew 35 percent. Tempering the quarter"s sales growth were the effects of Duracell"s exit from its zinc carbon battery businesses in South Africa and India and the impact of lower prices in North America from Duracell"s price-deal realignment initiative. The higher sales were due importantly to a surge in battery demand in the U.S., as consumers stocked their pantries in response to electrical power interruptions, and to a lesser extent to the integration of the newly acquired Nanfu battery business in China. Duracell"s solid top-line results in the third quarter, together with purchasing savings and manufacturing efficiencies, contributed to strong profit growth and improved margin in the quarter. For the nine months, sales of $1.33 billion climbed 7 percent, and profit of $199 million increased 62 percent.

Oral Care sales of $328 million for the quarter rose 3 percent, and profit of $64 million grew 6 percent, compared with a year ago. While sales growth was restrained by softness in the rechargeable toothbrush segment, chiefly in Europe, there were gains in the AMEE (Africa/Middle East/Eastern Europe) and Latin America regions, where the manual toothbrush business achieved solid growth and battery-powered toothbrushes were successfully launched. In the U.S., the Oral-B CrossAction Power battery toothbrush doubled Oral-B"s share of the battery market from a year ago, to 30.7 percent. The quarter"s improved operating profit stemmed from strong sales of new products, partially offset by increased marketing support and the impact of currency on European-based production costs. For the nine months, sales of $939 million grew 9 percent, and profit of $166 million was up 2 percent versus the prior year, reflecting greater European export costs, a double-digit percentage increase in marketing and higher warranty-related expense.
Braun sales of $293 million for the quarter were 11 percent above those of the year before, while profit declined 5 percent to $22 million. Driving the sales growth was strong demand for men"s electric shavers in the U.S. and Japan and the favorable impact of exchange, given Braun"s significant presence in Europe. In the U.S., the launch of FreeGlider and Flex XP2 increased Braun"s market share by 1.8 percentage points to 21.3 percent. The new top-of-the-line Activator shaver gained the number two share position in Japan after only four weeks on the market. Although sales mix continued to improve, a double-digit percentage increase in marketing to launch new products and the impact of currency on European-based manufacturing costs reduced operating profit in the quarter. For the nine months, sales of $792 million increased 16 percent, and profit was down 9 percent to $43 million, due primarily to greater European export costs and higher warranty-related expense.

Personal Care sales of $236 million for the quarter were 10 percent higher than in the previous year, and profit of $26 million climbed 54 percent. Growth was driven primarily by shave preparations. Antiperspirants and deodorants also contributed to the higher sales, as PowerStripe technology was extended throughout the product line and the restaging of the Right Guard brand gained strength in Europe. Significant cost savings, combined with higher sales, fueled an increase in both operating profit and margin. For the nine months, sales of $639 million grew 7 percent, and profit of $50 million was 50 percent higher than a year ago.

The effective tax rate for the third quarter and nine months was 30 percent, down 1 percentage point from 2002.
The Company"s strong operating performance led to $617 million in free cash flow(1) in the quarter, and $1.51 billion year-to-date, up significantly from $1.17 billion during the first nine months of the prior year.

(1) Free cash flow, defined as cash flow from operations less capital investments, is analyzed by the Company as a measure of its liquidity, as well as its ability to fund future growth and to provide a return to shareholders. Free cash flow is not a measure of the residual cash flow that is available for discretionary expenditures since the Company has certain non-discretionary obligations such as debt service that are not deducted from the measure.


Contact:
The Gillette Company
Christopher M. Jakubik, (617) 421-7968
Vice President, Corporate Investor Relations
or
Eric A. Kraus, (617) 421-7194
Vice President, Corporate Communications




Source: The Gillette Company
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