Recession Dents P&G’s Results

The recession did some damage to Procter & Gamble in its recently concluded fiscal year. Unit volume declined 3% as the global economic downturn, credit crisis and price increases contributed to market size declines and trade inventory reductions. Organic volume, which excludes the impact of acquisitions and divestitures, was down 2% for the fiscal year. As a result, net sales fell 3% to $79.0 billion for fiscal 2009.

The company said organic sales increased 2% primarily due to price increases taken across all segments which added 5% to net sales. Product mix reduced net sales by 1%. Unit volume declined 3% as the global economic downturn, credit crisis and price increases contributed to market size declines and trade inventory reductions. Organic volume, which excludes the impact of acquisitions and divestitures, fell 2% for the fiscal year.

Segment Results

Beauty net salesfell 4% to $18.8 billion in fiscal 2009 behind unfavorable foreign exchange impacts of4%. Organic sales increased 1% behind price increases of 2%, partially offset by an organic volume decline of 1%. Unit volume declined 2% . Retail hair care volume grew low single digits behind Pantene, Head & Shoulders and Rejoice. Prestige fragrances volume declined high single digits and professional hair care volume declined mid-single digits mainly due to market contractions and trade inventory reductions during the fiscal year. Volume in skin care declined mid-single digits primarily due to increased competitive promotional activity affecting Olay and the divestiture of Noxzema. Personal cleansing volume was down high single digits behind trade inventory reductions, market contractions and divestiture activity. Net earnings fell 7% to $2.5 billion.

Grooming net sales fell 9% $7.5 billion. Organic sales fell 2% due to a sharp decline of the Braun business. Unfavorable foreign exchange reduced net sales by 6%. Unit volume declined 6% too.

Fabric care and home care net sales fell 2% to $23.2 billion. Organic sales increased 3% as positive pricing impacts of 6% more than offset a 3% decline in unit volume. Unfavorable foreign exchange reduced net sales by 5%. Volume in fabric care declined low single digits due to trade inventory reductions and market share declines following price increases. Lower shipments of Tide and Ariel were partially offset by growth of Gain and Downy. Home Care volume was down low single digits due mainly to market contractions and trade inventory reductions.

Health care net sales were down 7% to $13.6 billion and organic sales were down 1%. Unit volume declined 4% including a -1% impact from the divestitures of Thermacare and other minor brands. Declines were partially offset by positive pricing impacts of 4%. Personal health care volume was down double digits due to the loss of marketplace exclusivity of Prilosec OTC in North America, the impact of a particularly mild cold and flu season on Vicks and the divestiture of Thermacare. Pharmaceuticals volume decreased high single digits mainly due to minor brand divestitures and increased competition in the osteoporosis category. Volume in oral care and in feminine care declined low single digits behind trade inventory reductions and market contractions in the North America and the Central & Eastern Europe, Middle East and Africa regions. Net earnings declined 3% to $2.4 billion.

Snacks and pet care net sales decreased 3% to $3.1 billion for fiscal 2009. Pet care executed double-digit price increases resulting in a mid-single digit decline in unit volume. Net earnings were down 10% for the fiscal year to $234 million behind lower net sales.

Baby care and family care net sales increased 1%to $14.1 billion on 1% volume growth. Organic sales grew 7% behind price increases to help recover higher commodity and energy costs of 5% and organic volume growth of 2%. Baby care volume increased low single digits due to growth of Pampers primarily in developing regions and double-digit growth of Luvs in North America. Family care volume was down low single digits due to the Western European Tissue divestiture. Net earnings were up 2% to $1.8 billion driven by sales growth and manufacturing cost savings.

For fiscal year 2010, P&G confirmed previous guidance for organic sales growth of 1-3% Foreign exchange is expected to reduce net sales by 0-1%, which is modest improvement versus previous guidance of a 2-3%negative impact. P&G reiterated its earnings per share guidance of $3.65 to $3.80 from continuing operations and plans to re-invest the benefit of improved foreign exchange into long-term growth.