UPDATE 2-Chattem posts strong Q1 as former J&J brands fuel sales

martedì 8 aprile 2008 18:16

(Recasts, adds conference call details, analyst comment, updates share movement)

By Dhanya Skariachan

BANGALORE, April 8 (Reuters) - Consumer-goods maker Chattem Inc CHTT.O reported a 9 percent rise in first-quarter profit as the brands it bought from Johnson & Johnson (JNJ.N: Quotazione) continued to propel margins despite a weak retail environment, sending its shares up as much as 7 percent.

The company, which makes and sells over-the-counter drugs, toiletries, cosmetics and dietary supplements, also reaffirmed its fiscal 2008 profit outlook, citing continued growth of its key brands and the success of the new products it launched under existing labels.

Chattem has posted strong results each quarter since it shook hands with Johnson & Johnson in late 2006 to buy five of the pharmaceutical giant's brands.

The acquired labels are sleep-aid Unisom, anti-itch medication Cortizone, anti-cavity mouthwash ACT, anti-diarrhea product Kaopectate and diaper rash product Balmex.

"Gross margins improved significantly as a result of the manufacturing integration of certain of the brands acquired from Johnson & Johnson," Chattem's Chief Executive Zan Guerry said in a statement.

Chattem's gross margin of 71.2 percent was the highest the company has seen since 2005 and was the direct result of bringing the manufacturing functions in-house for Cortizone and Balmex along with the packaging function for Unisom, SunTrust Robinson Humphrey analyst William Chappell said in an e-mail to Reuters.

Chappell has a "buy" rating on the stock.   Continua...