04.24.15
Maybe he shoulda stayed retired. Two years after returning to Procter & Gamble, CEO AG Lafley is taking heat from the investment community...even if he's not taking their questions. Lafley was absent from the company's Q3 earnings call, but that didn't stop Wall Street watchers from questioning the divestment strategy he put in place and the direction that the company is headed. In Lafley's absence, CFO Jon Moeller was left to deal with the analysts.
For example, Olivia Tong, an analyst with Bank of America Merrill Lynch, asked Moeller whether “getting out of the slower-growing categories and the portfolio shift is going to be enough.”
P&G has divested, discontinued or planned the consolidated of 40 brands so far, including Duracell batteries, which is a major brand, Moeller said. P&G has exited or is in the process of getting rid of pet care, several fragrance brands, Zest and Camay soap, and others. Most recently, there's reports that P&G could be selling some of its leading beauty brands soon.
“We’ll eliminate 60% of the brands and the complexity they create while retaining about 85% of sales and 95% of the before-tax profit,” Moeller said. “That’s a good trade. The new company will consist of about 65 leading brands.”
Lauren Lieberman of Barclays Capital in New York asked Moeller whether P&G’s plan to divest some businesses might be disrupting the workplace because employees wonder what brands might be sold and when.
“One thing P&G committed to nearly two years ago was we will improve execution, and that doesn’t feel like it’s happening,” she said.
Moeller said P&G feels good about the progress it’s making “but there are just big chunks moving in and out as we make these very big transformational moves, which can clutter things up a little bit,” he said.
When an analyst complained that P&G too often uses Forex as a scapegoat, Moeller insisted, "if it weren’t for foreign exchange, “we would be having a very different discussion right now.”
The foreign exchange hurt was $530 million for the quarter, said Moeller, who cited weakening currencies in Brazil, Turkey and Ukraine.
One way P&G plans to counter foreign exchange is by building at least 18 new plants or other facilities in developing markets, Moeller said. That should also drive savings in manufacturing, transportation and customs expenses, he said.
“Excluding (foreign exchange), we grew 14 percent on the bottom line, and this year we will grow double digits,” Moeller said. “I think it’s pretty clear that the operating improvements we’re making, productivity and otherwise, are coming through.”
The change P&G is in the middle of executing “is probably the biggest transformation this company has gone through across the totality of portfolio, supply chain, organization, structure and design,” Moeller said. “It is hard to see all that come together at this point, but … we’re very happy with the progress.”
For example, Olivia Tong, an analyst with Bank of America Merrill Lynch, asked Moeller whether “getting out of the slower-growing categories and the portfolio shift is going to be enough.”
P&G has divested, discontinued or planned the consolidated of 40 brands so far, including Duracell batteries, which is a major brand, Moeller said. P&G has exited or is in the process of getting rid of pet care, several fragrance brands, Zest and Camay soap, and others. Most recently, there's reports that P&G could be selling some of its leading beauty brands soon.
“We’ll eliminate 60% of the brands and the complexity they create while retaining about 85% of sales and 95% of the before-tax profit,” Moeller said. “That’s a good trade. The new company will consist of about 65 leading brands.”
Lauren Lieberman of Barclays Capital in New York asked Moeller whether P&G’s plan to divest some businesses might be disrupting the workplace because employees wonder what brands might be sold and when.
“One thing P&G committed to nearly two years ago was we will improve execution, and that doesn’t feel like it’s happening,” she said.
Moeller said P&G feels good about the progress it’s making “but there are just big chunks moving in and out as we make these very big transformational moves, which can clutter things up a little bit,” he said.
When an analyst complained that P&G too often uses Forex as a scapegoat, Moeller insisted, "if it weren’t for foreign exchange, “we would be having a very different discussion right now.”
The foreign exchange hurt was $530 million for the quarter, said Moeller, who cited weakening currencies in Brazil, Turkey and Ukraine.
One way P&G plans to counter foreign exchange is by building at least 18 new plants or other facilities in developing markets, Moeller said. That should also drive savings in manufacturing, transportation and customs expenses, he said.
“Excluding (foreign exchange), we grew 14 percent on the bottom line, and this year we will grow double digits,” Moeller said. “I think it’s pretty clear that the operating improvements we’re making, productivity and otherwise, are coming through.”
The change P&G is in the middle of executing “is probably the biggest transformation this company has gone through across the totality of portfolio, supply chain, organization, structure and design,” Moeller said. “It is hard to see all that come together at this point, but … we’re very happy with the progress.”