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P&G profit dips, but sales rise outside US

January 27, 2014

Procter & Gamble (P&G), the largest consumer goods maker, posted second-quarter profit that was in line with analysts' estimates as sales of products such as Pampers nappies rose in emerging markets. Net income for the quarter to December last year fell 16 percent to $3.43 billion (R38bn), or $1.18 a share, from $4.06bn , or $1.39 , a year earlier, P&G said on Friday. Excluding some items, profit was $1.21 a share, exceeding the $1.20 average of 20 analysts' estimates. Chief executive Alan Lafley has said developing markets with climbing household incomes would be "significant" drivers of growth. Sales in such countries, which P&G did not name, rose 8 percent in the quarter, excluding the effects of acquisitions, divestitures and foreign currency exchange rate fluctuations. Those gains have helped overcome weakness in the US, where it is trying to recapture market share in key categories such as detergents. "Some of those investments are paying off for them in emerging markets," Jack Russo , an analyst at Edward Jones, said. He recommends buying the shares. Sales rose 0.5 percent to about $22.3bn . Growth in developing regions helped boost sales in the fabric and home-care business, as well as the baby-, feminine- and family-care unit, P&G said, reiterating its annual forecast for a 5 percent to 7 percent rise in adjusted earnings and a 3 percent to 4 percent organic sales gain. The shares rose 1.2 percent to $79.18 at Friday's close in New York . P&G rose 20 percent last year, compared with a 30 percent increase for the Standard & Poor's 500 index. Currency fluctuations cut earnings in the quarter by 11c a share, P&G said. Currencies also reduced sales growth by 3 percentage points, while the mix of products sold reduced growth by 1 percentage point. P&G said it expected currency fluctuation impacts to ease this year. Yet markets are experiencing the worst sell-off in emerging market currencies in five years, driven by political and financial instability and the fallout from the US Federal Reserve's tapering of monetary stimulus. "You're finding that there are more and more emerging market currencies that are under pressure," Ali Dibadj , an analyst at Sanford C Bernstein, said. "If there are many countries that go through this you will see numbers come down for a lot of these companies and the expectations proving to be too optimistic." While P&G had a smaller percentage of sales from emerging markets than some competitors, "the impact on the bottom line could be bigger than others" because less of its production was done locally, Dibadj said. Last year, 39 percent of P&G's sales came from developing markets compared with Colgate-Palmolive , which saw about half of its sales come from emerging markets. He added that China , Russia and Mexico had been particularly important for P&G's growth. Globally, lower-margin businesses such as fabric care had grown faster than more profitable categories such as beauty and grooming, John Faucher , an analyst at JPMorgan Chase , said. Net sales fell 2 percent in beauty and increased 1 percent in fabric care. Health-care sales rose 4 percent. Kimberly-Clark , the maker of Kleenex tissue and Huggies nappies, said on Friday fourth-quarter net income more than doubled to $539 million , or $1.40 a share, from $267m , or 68c a share, a year ago. - Bloomberg The Mercury


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Source: Mercury, The (South Africa)


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