The Economy

P&G’s Profit Rises On Higher Prices

But the consumer products giant also expects negative foreign exchange effects to continue to eat into total sales numbers.
Katie Kuehner-HebertJanuary 26, 2016

Procter & Gamble on Tuesday posted a better-than-expected profit for its fiscal second quarter due to higher prices and continued cost-cutting.

In addition, organic sales, which exclude the impact of foreign exchange and acquisitions and divestitures, increased 2% from a year ago, the company said.

“We are encouraged by our return to organic sales growth in the quarter,” P&G’s president and chief executive David Taylor said in a press release. “With the top-line improvement and continued cost reduction, we delivered solid core operating income and [earnings-per-share] growth in the face of significant macroeconomic and geopolitical headwinds.”

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However, P&G’s second-quarter total sales, including foreign currency impacts, fell 8.5%, to $16.92 billion, slightly below analysts’ average estimate of $16.94 billion, according to Thomson Reuters I/B/E/S.

“P&G is focusing on core brands such as Gillette, Pampers, and Tide to revive sluggish growth, which analysts have blamed on the company’s slow reaction to trends in important markets such as China,” Reuters wrote.

Net earnings attributable to the company rose 35%, to $3.21 billion, or $1.12 per share. Excluding items, P&G earned $1.04 per share, beating estimates by 6 cents.

P&G’s chief financial officer Jon Moeller said on the earnings conference call that the company now expects to reduce non-manufacturing costs by 25% to 30% by the end of 2016, a year ahead of schedule.

The company repurchased $2 billion of common stock during the second quarter and returned $1.9 billion of cash to shareholders as dividends.

P&G said it is maintaining its outlook for organic sales growth of in-line to up low-single digits versus fiscal 2015. The company expects all-in sales to be down high-single digits in fiscal 2016, now including a negative seven percentage point foreign exchange impact and “a two to three percentage point drag from the combined impacts of the Venezuela deconsolidation and minor brand divestitures.”

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