P&G Profit Rises 7.6% as Home Care Sales Gain

Procter & Gamble Co., the world’s largest consumer-products maker, said fiscal first-quarter profit rose 7.6 percent as sales of home-care goods and baby products gained.

Net income increased to $3.03 billion, or $1.04 a share, from $2.81 billion, or 96 cents, a year earlier, Cincinnati-based P&G said today in a statement. Excluding some items, profit was $1.05 a share, matching the average of 20 analysts’ estimates compiled by Bloomberg.

Chief Executive Officer A.G. Lafley is working to reduce costs and introduce new products after returning in May to revive growth at the maker of Tide detergent, Crest toothpaste and Pampers diapers. While he’s still struggling to accelerate sales gains in beauty products, price cuts and increasing spending on marketing have helped P&G regain ground from Unilever in other categories.

“Market share is in the right direction,” Ali Dibadj, an analyst at Sanford C. Bernstein & Co. in New York, said today in a telephone call. “There was nothing alarming or exciting about the results. It’s still a show-me.”

Sales rose 2.2 percent to $21.2 billion. Analysts estimated $21.1 billion, on average.

The company repeated its forecast that earnings excluding some restructuring charges will increase 5 percent to 7 percent this year.

P&G fell 0.8 percent to $80 at the close in New York. The shares have gained 18 percent this year, compared with a 23 percent increase for the Standard & Poor’s 500 Index.

Home-Care Sales

Sales excluding the effects of currency fluctuations as well as acquisitions and divestitures in P&G’s fabric and home-care unit, which includes the Tide and Cascade brands, rose 6 percent. The segment produced almost one-third of the company’s sales last year. Sales of baby, feminine and home care products also rose 6 percent on that basis, which P&G calls organic sales.

Such sales of beauty products grew 1 percent, a gain Dibadj said was disappointing.

Foreign-currency exchange rate fluctuations reduced earnings by 9 cents a share during the quarter.

P&G’s earnings call lasted only 50 minutes, and Lafley didn’t participate. He will now speak only during annual earnings calls and at major investor presentations as part of P&G’s emphasis on productivity and annual results instead of quarterly figures, the company said earlier this week.

Lafley Return

“It was a very efficient call,” said Dibadj, who has an outperform rating on the shares, the equivalent of a buy.

Lafley, 66, replaced Bob McDonald after P&G lost customers in key categories such as detergents and beauty. His first tenure, from 2000 to 2009, included the $57 billion acquisition of Gillette Co. and prominent new product introductions such as the Swiffer cleaner.

Yet P&G is now seeing the benefit of strategies McDonald implemented, including a focus on the U.S. and a $10 billion cost-cutting program that’s freeing up more funds for marketing and research, Michael Steib, an analyst at Credit Suisse Group AG in New York, said in a telephone interview Oct. 23. P&G’s challenge under Lafley will be expanding its lineup of lower-priced products such as its Gillette Mach3 razors, he said.

“The consumer is wanting to shop for value products, and that’s unlikely to change anytime soon,” Steib said. He rates the shares neutral, the equivalent of a hold.

Global Growth

P&G and other consumer-products makers are coping with cautious consumers worldwide. The International Monetary Fund cut its forecast for global growth for this year and next on Oct. 8, citing weakness in emerging markets.

“You’ve got a lot of companies who are now fighting over slightly slower growth,” John Faucher, an analyst at JPMorgan Chase & Co., said in an Oct. 21 telephone interview. Faucher, based in New York, rates P&G shares overweight, the equivalent of a buy.

In the U.S., leading retailers including Wal-Mart Stores Inc. and Target Corp. have cut inventory levels as shoppers restrain spending. Consumer confidence fell to an eight-month low in the week ended Oct. 20 as concern mounted that continued budget disputes and this month’s government shutdown will hurt the U.S. economy, according to the Bloomberg Consumer Comfort Index released last week.

Industry Results

Other consumer-products companies have posted mixed results this week.

Unilever, the world’s second-largest consumer-products maker, yesterday reported the slowest quarterly sales growth in four years amid waning demand in emerging markets and increased competition in the U.S. and Europe. So-called underlying sales at the Dove soap and Breyers ice cream maker rose 3.2 percent in the third quarter, compared with 5 percent growth in the first half of the year. The median estimate of 14 analysts surveyed by Bloomberg was 3.3 percent.

Chief Executive Officer Paul Polman said Unilever came under “enormous competitive attacks” in categories like shampoos.

Revenue also trailed analysts’ estimates at Colgate-Palmolive Co., hurt by foreign currency fluctuations. Third-quarter sales rose 1.5 percent to $4.4 billion, trailing analysts’ $4.46 billion the average estimate. The New York-based maker of Hill’s pet food posted adjusted profit of 73 cents a share, matching analysts’ estimates. Colgate maintained its forecast for per-share earnings growth of 4.5 percent to 5.5 percent this year.

Kimberly-Clark Corp. posted profit that topped analysts’ estimates on strong international growth. Third-quarter profit excluding some items was $1.44 a share, the Dallas-based maker of Huggies diapers and Kleenex tissues said Oct. 22. Analysts estimated $1.40, on average.

(Corrects chief executive officer’s comments in 21st paragraph of story published Oct. 25.)
Before it's here, it's on the Bloomberg Terminal.