02.24.11
Procter & Gamble will raise some prices as it absorbs higher commodity costs and its sales goal may be under pressure if business does not improve in the U.S. and other developed markets, Chief Financial Officer Jon Moeller said.
Moeller, speaking at the annual Consumer Analyst Group of New York conference on Thursday, said the maker of Tide laundry detergent and Pampers diapers would announce specific details of the price increases over the next month or so.
P&G now sees more than $1 billion in increased commodity costs this year, as prices for diesel and other necessities climb, he said. As recently as late January, he expected about $1 billion in such costs. Meanwhile, underlying growth rates in developed markets, which account for the bulk of P&G’s sales, have been essentially flat, Moeller said. If that sluggishness persists, it could be more difficult for P&G to meet the high end of its 4-6% sales growth target this fiscal year, he said.
“It’s going to be another low quality March quarter,” UBS analyst Nik Modi said, referring to P&G’s current fiscal third quarter, which ends next month. The company’s fiscal year ends in June.
The price increase announcement comes as P&G and other consumer products makers deal with higher costs for aluminum, cotton and a wide variety of goods used in product manufacturing. P&G did not divulge many details of its pricing strategy, other than to say the company was feeling the effects of rising costs, for example, from diesel and that some price increases would come during the current fiscal year.
With the industry’s largest player now ready to charge more for its goods, other companies are likely to follow. Analysts said they were eager to hear about the rest of the industry's plans during other presentations. P&G was the first household products maker to speak at CAGNY after two days of food and beverage company presentations. Moeller also said P&G’s business fundamentals are very strong, although the company is feeling some impact from the events in Egypt and the broader Middle East.