(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) 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.
The acquired brands grew by about 37 percent in the January-February period, Chattem's Chief Operating Officer Robert Bosworth said in a conference call with analysts.
The company, based in Chattanooga, Tennessee, posted net profit of $14.9 million, or 75 cents a share, for the first quarter, compared with $13.7 million, or 71 cents a share, a year earlier.
Excluding items, Chattem earned $1.01 a share. Total revenue jumped 20 percent to $120.8 million.
Analysts on average had expected earnings of 95 cents a share, before items, on revenue of $116.6 million, according to Reuters Estimates.
In the quarter, Chattem saw stellar sales growth of about 86 percent in its oral care segment, which includes products such as anti-cavity mouthwash ACT. Revenue from its international segment grew 52 percent.
The quarterly revenue was also helped by one additional month of the J&J acquired brands compared with the year-ago period.
Chattem has not been generally impacted by recessionary pressures as its key products, such as topical pain reliever Icy Hot and anti-itch medication Cortizone, are not discretionary purchases and not very big-dollar items, the company said.
For fiscal 2008, Chattem expects earnings at the upper end of a range of $4.00 to $4.20 a share.
The company's shares, which touched a high of $72.494 earlier, pared some gains to trade up 4 percent at $70.46 in noon trade on Nasdaq.
About 833,462 Chattem shares changed hands in intraday trading Tuesday, more than 1.4 times the 50-day moving average volume of the stock. (Editing by Amitha Rajan, Deepak Kannan)