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PGs Q2 Results Are Less Than Stellar

March 2, 2012

P&G’s Q2 Results Are Less Than Stellar

• Procter & Gamble Co.’s net income fell 49% in its fiscal second quarter, hobbled by higher materials costs and a writedown in the value of some of its businesses. P&G also lowered its earnings predictions for the year.

Moreover, P&G said it will start rolling back some prices to counter moves by rivals. The company wouldn’t offer specifics, but did reference a rollback on its Cascade brand in North America as an example.

Net income fell to $1.69 billion from $3.33 billion. Still, adjusted earnings per share of $1.10 beat analysts’ estimates of $1.07. Western Europe, where concerns about a debt crisis are crimping the economy, accounts for about half the sales for both units.

Revenue grew 4% to $22.1 billion, helped by higher prices. That was roughly in line with the expectations of analysts. P&G cautioned that sales volume slowed in the US, even as it grew in developing countries. That is similar to trends that many companies are noticing as US customers keep a tight rein on spending. Executives also said commodity costs won’t decline; only stabilize.

Like other US companies that do business in foreign markets, P&G isn’t getting the same benefits from foreign currency exchanges that it enjoyed last year. Executives said that was the main reason for its decision to downgrade its earnings estimate for the fiscal year, to $4 to $4.10 per share from $4.15 to $4.33.

In recent quarters, P&G’s strategy has been to sell to both high- and low-income consumers, betting that better-off customers will pay more for premium products like Tide Pods, a single-dose laundry detergent, while lower-income customers will spend on cheaper, more basic brands.

And in a favorable light, P&G delivered 4% sales growth to $22.1 billion for the October–December quarter. This was driven by higher volume and pricing actions, partially offset by geographic and product mix, according to the company that continued to deliver broad-based organic sales growth, with all six business segments up versus the prior year.

“We continue to make progress against our key business priorities in a difficult macroeconomic environment,” said Bob McDonald, chairman, president and CEO. “We delivered solid top-line growth and continued to accelerate productivity improvements to drive down costs. With the easing of commodity cost comparisons over the next two quarters, continued solid top-line growth and cost savings progress, we expect operating profit growth to accelerate in the second half of the fiscal year.”

Beauty net sales increased 1% to $5.4 billion. Grooming net sales increased 1% to $2.2 billion. Health care net sales and organic sales increased 1% to $3.2 billion. Fabric care and home care net sales rose 5% to $6.6 billion.

Colgate’s Sales Rise 7.5% in 2011

• Colgate-Palmolive Company’s 2011 sales rose 7.5% to $16.7 billion. Global unit volume grew 3.5%, pricing increased 1.0% and foreign exchange was positive 3.0%. Excluding divested businesses, global unit volume grew 4.0%. The Sanex acquisition contributed 1.0% to full year sales and volume growth. Organic sales grew 4.0%.

Net income and diluted earnings per share for full year 2011 were $2.4 billion and $4.94, respectively. Net sales in the fourth quarter rose 5.0% to $4.1 billion. Global unit volume grew 4.0%, pricing increased 3.0% and foreign exchange was negative 2.0%. Excluding divested businesses, global unit volume grew 4.5%. The Sanex acquisition contributed 1.5% to sales and volume growth. Organic sales (net sales excluding foreign exchange, acquisitions and divestments) grew 6.0%.

Net income and diluted earnings per share in fourth quarter 2011 were $590 million and $1.21, respectively. Net income in the quarter included $44 million of aftertax charges ($0.09 per diluted share) resulting from the previously disclosed implementation of various business realignment and other cost-saving initiatives, the sale of land in Mexico and a previously disclosed competition law matter in France related to a divested detergent business.

Beiersdorf Ekes OutSmall Gain in 2011

• Beiersdorf Group’s sales for fiscal year 2011 showed nominal sales growth of 1.1% to $7.3 billion.
The consumer business segment’s sales increased 1.1% to $6.1 billion.

According to the company, which ranked No. 7 in Happi’s International Top 30 in the August 2011 issue with annual sales of $7 billion, performance in the global consumer markets differed substantially. Business in the UK and Russia was extremely positive, while sales in other European countries did not match prior-year levels due to the streamlining of the product range, among other things. The segment’s growth in Latin America was particularly strong. In the Africa/Asia/Australia region, sales were up only slightly on the previous year, due to the impact of the reorganization of business structures in China.

“We realigned and strengthened our consumer business in 2011 by comprehensively streamlining our product assortment and thanks to the global marketing measures relating to the 100th anniversary of our Nivea brand. Parallel to this, we saw excellent sales growth at Tesa. Toward the end of the fiscal year, we took a second step in the form of fundamental decisions on the regional realignment of our consumer business that will improve our future profitability considerably. Optimally aligning our structures with the regions and markets will significantly increase our competitiveness in the future,” said Thomas-B. Quaas, chairman of the executive board of Beiersdorf AG.

Burberry Boosts Sales at Inter Parfums

• Inter Parfums, Inc. reported that net sales for the fourth quarter of 2011 were approximately $189.1 million, a 68% increase from last year. At comparable foreign currency exchange rates, fourth quarter net sales were up 61%.

Discussing European-based operations Jean Madar, chairman and CEO of Inter Parfums, noted, “In local currency, Burberry fragrance sales were up 96% in the final quarter of 2011 and 20% for the full year 2011 due in great part to solid performances by the brand’s historic lines and the highly successful global rollout of Burberry Body. Other factors contributing to the sales increase include the continued strong momentum of the Jimmy Choo and Montblanc fragrance launches. In addition, the 2011 sales increase reflects the commencement in January 2011 of European-based product distribution in the U.S. by Interparfums Luxury Brands, a subsidiary of Interparfums, S.A.”

The company was very pleased by the continued sales strength in 2011 for our European-based products in certain markets. Sales in local currency in Asia rose 37%, the Middle East by 20%, Eastern Europe by 17% and South America by 48% as compared to 2010. Even in its largest, most established markets there was significant year-over-year growth as sales in Western Europe rose 10% in local currency, while North America posted an 87% increase, which includes the positive effect of taking over European-based product distribution in the US.

With respect to Burberry, Madar stated that, “Discussions which started in December 2011 with Burberry regarding the establishment of a new operational structure for the fragrance and beauty business are continuing.”

On the subject of US-based operations, Madar pointed out, “While there were no major launches in the final quarter of the year, sales were ahead of last year due to the continued rollout and reorders of Betsey Johnson Too Too, and the continued strong performance of our specialty retail products in international markets.”

Solazyme Maintains For Fiscal 2011

• Solazyme, Inc. posted financial results for the fourth quarter and fiscal year ended Dec. 31, 2011. Total revenue for the fiscal year stayed almost flat at $39.0 million, compared with $38.0 million in the prior year.

Total revenue for the fourth quarter fell 6% to $14.9 million. The fourth quarter of 2010 included a $15 million license payment from Roquette, compared with a $5 million license payment received in the comparable quarter in 2011.

Sales Rise 6% at K-C in 2011

• Kimberly-Clark Corporation (K-C) reported year-end 2011 results and provided its 2012 outlook. Full-year 2011 sales jumped 6% to $20.8 billion. Full year operating profit fell 12% to $2.4 billion. For 2012, net sales are expected to increase about 1%.

Fourth quarter 2011 net sales rose 2% to $5.2 billion. Operating profit fell 13% to $611 million. Sales in North America decreased about 5%.

Fourth quarter personal care sales increased 2% to $2.2 billion. Operating profit decreased 19% to $341 million in the segment.

Chairman and CEO Thomas J. Falk said, “We delivered solid improvements in organic sales, adjusted operating profit margin and adjusted earnings per share in the fourth quarter despite a continued challenging environment. Reflecting on the full year, bottom-line results were somewhat below our original goal for the year, mostly due to higher-than-expected cost inflation and soft demand in portions of the developed markets. Nonetheless, we introduced successful product innovations, executed targeted growth initiatives and improved our market position in several businesses. In addition, we delivered benefits from revenue realization strategies and cost saving programs, made progress with pulp and tissue restructuring actions and allocated approximately $2.3 billion to dividends and share repurchases. I am optimistic that we will build further on these accomplishments going forward.”

In 2012, Falk said economic conditions will remain difficult in the “near term, particularly in developed markets. K-C expects a much more benign commodity cost environment, foreign currency exchange rates to remain volatile and should be a headwind this year.

“Nonetheless, we plan to deliver improved growth in adjusted earnings per share in 2012 compared to our 2011 performance while we further improve our company for the long term,” said Falk. “We will bring a healthy pipeline of innovation to market, invest behind our brands and growth initiatives and continue to achieve strong levels of cost savings. We will also continue to allocate capital in shareholder-friendly ways, with plans for at least $2 billion of dividends and share repurchases. All-in-all, we remain focused on executing our Global Business Plan in order to improve shareholder value.”

Regis Sees Some Challenges in Q2

• Regis Corporation reported consolidated revenues decreased 2% in the second fiscal quarter of 2012 to $563 million, compared to $574 million a year ago. Second quarter total same-store sales decreased 3%, said the company.

“While overall second quarter same-store sales results were lower than expected, service customer visitation trends improved slightly by 10 basis points over the preceding quarter. The Regis management team remains focused on developing and implementing important programs to grow revenues by driving customer traffic and increasing retention. We continue to work hard to ensure Regis grows profitably and operates efficiently in order to enhance shareholder value,” said Randy L. Pearce, company president.