P&G Delivers Second Quarter Expectations

The Procter & Gamble Company reported net earnings of $1.19 billion or $0.84 per share for the quarter ended December 31, 2000. Results included a $120 million after-tax charge related to the Organization 2005 restructuring program. Core net earnings, which exclude the Organization 2005 charges, were $1.31 billion for the quarter. Core net earnings per share were $0.93, a 6% increase versus the prior year.

Net sales were $10.18 billion for the quarter. This is equal to year-ago record levels, after adjusting for a 4% unfavorable currency impact, primarily the euro. Unit volume was down 2% against an all-time record quarter last year, when new brand introductions, strong initiative activity and marketing support, and geographic expansions of established brands fueled growth.

Business segment after-tax earnings were up 2% as pricing and tax savings offset the impact of foreign exchange and increased product costs, driven by higher commodity-based prices. Divestiture gains, primarily from the sale of Clearasil, were an important factor in delivering the 6% earnings per share growth.

“We delivered the earnings per share results we said we would — for the second quarter in a row. Still, we can and must do better. Our goal is to get back to consistent annual double-digit EPS growth,” said P&G Chief Executive A.G. Lafley. “Our choices to focus on big brands and leading customers, tighter cost and cash management and better consumer value are providing a solid foundation for further progress.”

For the first six months, reported net earnings were $2.35 billion, or $1.66 per share. Results included a charge of $205 million after-tax related to the Organization 2005 program. Excluding Organization 2005 charges, core net earnings were $2.55 billion, while core net earnings per share grew 3% to $1.81. Worldwide sales were down 2% to $20.15 billion, including a 4% effect due to unfavorable exchange rates, on flat unit volume.

By business segment, beauty care also delivered earnings growth, as the segment continues to focus on premium products. Net earnings grew 5% to $286 million. The business supported continued investment in business-building initiatives by managing costs, primarily lower taxes. Share progress on key brands was not directly reflected in top-line results due to trade inventory adjustments, primarily related to the Pantene relaunch. Net sales were $1.86 billion, down two % driven entirely by a 5% negative impact of currency. Excluding exchange, the net sales growth in the face of a 2% decline in unit volume reflects the benefit of pricing as the business extends its hair and skin care product lines. Notable progress was achieved in the hair care business in Latin America, and earnings progress in China following challenges in the prior year.

The company’s largest segment, fabric and home care, began to show signs of share improvement, despite a continued difficult competitive environment. Net earnings were $390 million, down 4% against particularly strong growth in the prior year. Net sales were $2.93 billion, with a 4% volume decline exacerbated by a 5% unfavorable exchange impact. The unit volume trend reflects the strength of the year-ago base period, which included the initial shipments of Swiffer, Febreze and Dryel, as well as the impact of inventory builds in advance of last quarter’s North America laundry price increase. Recent pricing actions in Western Europe and laundry product improvements in North America are designed to improve the value equation with consumers to support achievement of our future growth objectives.