001059 Dial Profit Plunges Before Charge

Chicago - Consumer products and canned meats maker Dial Corp. said on that third-quarter earnings, hurt by lower sales and higher raw material costs, plunged 86% even before a restructuring charge.

Profit before the charge was $4.4 million, or 5 cents a share, down from $30.8 million, or 31 cents, a year ago, the maker of Dial soap, Armour canned meats and other products said. Sales fell 6% to $411.1 million.

Analysts on average had expected Scottsdale, Arizona-based Dial, whose management is trying to decide whether to put the company up for sale, to post earnings of 3 cents a share in the quarter. Dial had previously warned that earnings would drop to 3 to 5 cents a share before one-time items, down from earlier analysts' consensus estimates of 14 cents a share.

Including a $48.7 million charge in the third quarter for severance and restructuring of its specialty personal care business and a joint venture with Germany's Henkel KGaA, the company reported a loss of $26.2 million, or 29 cents a diluted share. A $4.6 million pretax gain in the third quarter from changes to certain benefit plans partially offset the charge.

"I think the jury's still out," John Hughes, branded consumer products analyst at Dain Rauscher Wessels, said about investor reaction to the earnings report. "We want to measure this management team."

Herbert Baum, chairman and chief executive officer, also reiterated Tuesday that the company was comfortable with analysts' estimates predicting, on average, earnings of 50 cents a share in 2000, before one-time items

But he hedged that forecast in a conference call with analyst, saying it was "not a slam dunk."

Baum also said he would travel to Germany next week to discuss the future of the joint venture with Henkel. The joint venture lost Dial $2.1 million in the quarter, he said.

Dial announced last week that it would take charges in the third and fourth quarter. It also said it cut its dividend in half to strengthen its balance sheet and repay debt. Additional charges are expected in the fourth quarter, with the total expected to reach $60 million to $70 million.

Baum took the helm in August, after the company had issued its third earnings warning for the year. The company has been plagued by acquisitions that have not performed well and by the practice of previous management to sell products at discounts to retailers at the end of quarters to meet sales goals, a process known as trade loading. Under Baum, the company has been trying to end that practice.

Baum has also said that management will decide by the middle of 2001 whether to keep the company independent, sell it, sell parts of it, or form new business alliances.

"We've had a number of inquiries regarding segments of our business," Baum said.

Gross margin in the third quarter fell to 47.8%, before the charge, from 49.7% in a year ago. Margin was hit by higher petroleum costs, lower sales and costs resulting from the consolidation of specialty personal care distribution and warehouse facilities.

Total debt at the end of the third quarter was $636.5 million, down $20.5 million from the balance at the end of the second quarter, the company said.

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