Colgate axes 4,400 jobs to fight rivals

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The Independent Online

Colgate-Palmolive, the world's largest toothpaste maker, will cut about 4,440 jobs, or 12 per cent of its workforce, and close one-third of its factories worldwide to fight increased competition from rivals.

Colgate-Palmolive, the world's largest toothpaste maker, will cut about 4,440 jobs, or 12 per cent of its workforce, and close one-third of its factories worldwide to fight increased competition from rivals.

The company, which employs about 37,000 people and operates 78 plants, said it expects after-tax restructuring charges of $550m (£283m) to $650m over the four-year programme. It would not say where the redundancies or factory closures would come. Most of Colgate's workers are located outside the United States.

Colgate, which makes Palmolive soap and Ajax cleaning products along with the toothpaste brand which is sold across the world, has suffered from fierce competition, particularly from Procter & Gamble.

The two have been battling for the No 1 spot in the US toothpaste market since last year, when Procter & Gamble's Crest briefly became the nation's most widely used brand. Colgate has since regained the lead, on the back of increased advertising and discount offers.

The drive helped the company post a 4 per cent increase in third-quarter sales in North America after four consecutive quarterly declines in the region. Colgate said yesterday it would meet analysts' estimates for fourth-quarter earnings, excluding the costs of the restructuring.

Colgate's shares rose as Wall Street welcomed news of the cost-cutting, which comes after the company revealed last month its first drop in quarterly profits in eight years.

The consumer products sector as a whole has also been under pressure in recent months because of the rising cost of raw materials, gas, oil and packaging. However, analysts also believe Colgate has been outmanoeuvred by Procter & Gamble, which has been quicker to introduce new types of toothpaste and tooth whiteners, which are popular in the US.

Moving production into fewer factories will help cut costs at Colgate by about $250m to $300m annually in four years. The company said it would increase investment in research and development, mainly in oral care and its Hill's pet business.

Other steps to boost profits include a focus on improving marketing, especially in areas where it sees high potential, such as Eastern Europe, Russia, China and parts of Latin America and Asia.

Reuben Mark, the chief executive, said: "Colgate has steadily increased its gross margin through a myriad of savings programmes." The restructuring "allows us to raise our internal goals for annual gross margin growth above the 50 to 100 basis point goal we have had for many years," he added.

Colgate shares closed up $3.78, or 8.2 per cent, at $50.07.

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