01.27.12
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. Including one-time charges, net income was 57 cents per share.
The bulk of the one-time charges stemmed from the company's decision to write down the value of the appliances unit, where the biggest seller is electric shavers, and the salon professional unit.
The company noted that those items tend to be discretionary purchases, and it can be hard to persuade shoppers to buy things they don't absolutely need in a weak economy. 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 polled by FactSet.
But P&G cautioned that sales volume slowed in the U.S., even as it grew in developing countries. That is similar to trends that many companies are noticing as U.S. customers keep a tight rein on spending. Executives also said that they didn't expect commodity costs to come down, but only to stabilize. Costs for many materials skyrocketed last year.
Like other U.S. companies that do business in foreign markets, P&G isn't getting the same benefits from foreign currency exchanges that it enjoyed last year. When the dollar is weak, as it was for most of last year, revenue raised overseas translates into more dollars when converted at headquarters. 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 has taken a strategy of selling 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.
Procter & Gamble (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 Chairman of the Board, President and Chief Executive Officer Bob McDonald. “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. Volume grew high single digits in developing markets and decreased mid-single digits in developed regions. Volume in hair care increased mid-single digits behind high-single-digit growth in developing regions due to product innovation activity and distribution expansions in Asia, while developed regions decreased mid-single digits. Volume in skin care, personal care and Cosmetics decreased low single digits due to the Zest and Infasil divestitures, Olay share loss in developed markets and the volume impact of price increases due to consumer value differences relative to competitive products in North America. Volume in salon professional declined high single digits due to market contraction in Europe, distribution share losses and non-strategic brand discontinuations. Volume in prestige products decreased low single digits driven by minor brand divestitures and a strong initiative base in the prior year, offset by current year market growth and initiatives for SK-II.
Grooming net sales increased 1% to $2.2 billion. Shave care volume grew low single digits due to high single-digit growth in developing regions behind product and commercial innovation, Fusion ProGlide geographic expansion and market growth, partially offset by a mid-single-digit decrease in developed regions due to market contraction and competitive activity.
Health care net sales and organic sales increased 1% to $3.2 billion. Oral care volume decreased low single digits due to a strong initiative base period in North America and current competitive activity.
Fabric care and home care net sales rose 5% to $6.6 billion. Fabric care volume was in line with the prior year as a mid-single digit increase in developing regions, driven by new innovation and market growth, was offset by a mid-single digit decrease in developed regions due to competitive activity and the impact of price increases taken in the previous quarters. Home care volume increased low single digits driven by initiative activity and distribution expansion in developing regions. Batteries volume decreased low single digits due to market contraction and distribution losses in developed markets, partially offset by market growth and distribution expansion in developing regions.
Baby care and family care net sales increased 6% to $4.2 billion. Unit volume was in line with the prior year period.
Procter & Gamble (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 Chairman of the Board, President and Chief Executive Officer Bob McDonald. “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. Volume grew high single digits in developing markets and decreased mid-single digits in developed regions. Volume in hair care increased mid-single digits behind high-single-digit growth in developing regions due to product innovation activity and distribution expansions in Asia, while developed regions decreased mid-single digits. Volume in skin care, personal care and Cosmetics decreased low single digits due to the Zest and Infasil divestitures, Olay share loss in developed markets and the volume impact of price increases due to consumer value differences relative to competitive products in North America. Volume in salon professional declined high single digits due to market contraction in Europe, distribution share losses and non-strategic brand discontinuations. Volume in prestige products decreased low single digits driven by minor brand divestitures and a strong initiative base in the prior year, offset by current year market growth and initiatives for SK-II.
Grooming net sales increased 1% to $2.2 billion. Shave care volume grew low single digits due to high single-digit growth in developing regions behind product and commercial innovation, Fusion ProGlide geographic expansion and market growth, partially offset by a mid-single-digit decrease in developed regions due to market contraction and competitive activity.
Health care net sales and organic sales increased 1% to $3.2 billion. Oral care volume decreased low single digits due to a strong initiative base period in North America and current competitive activity.
Fabric care and home care net sales rose 5% to $6.6 billion. Fabric care volume was in line with the prior year as a mid-single digit increase in developing regions, driven by new innovation and market growth, was offset by a mid-single digit decrease in developed regions due to competitive activity and the impact of price increases taken in the previous quarters. Home care volume increased low single digits driven by initiative activity and distribution expansion in developing regions. Batteries volume decreased low single digits due to market contraction and distribution losses in developed markets, partially offset by market growth and distribution expansion in developing regions.
Baby care and family care net sales increased 6% to $4.2 billion. Unit volume was in line with the prior year period.