P&G’s Lafley Makes Progress on Cost Cuts as Sales Falter

Procter & Gamble Co. Chief Executive Officer A.G. Lafley is making progress on trimming costs from the world’s largest consumer-products company. Reviving sales growth has been harder.

The maker of Tide detergent and Pampers diapers today posted third-quarter profit that topped analysts’ estimates, helped by a 5.1 percent drop in selling, general and administrative costs. Yet sales fell 0.2 percent, missing expectations because of declines in its beauty and grooming businesses as well as a strong dollar that reduced the value of its revenue abroad.

Since returning to P&G last year, Lafley has sought to increase productivity by reducing expenses while at the same time creating new products that will boost revenue and win market share. He’s also re-evaluating P&G’s portfolio of businesses and earlier this month agreed to sell most of its pet-food operations.

“We’re operating in a slow-growth, highly competitive environment, which places even greater importance on strong innovation and productivity improvement,” Lafley said today in a statement.

Net income in the three months ended March 31 climbed 1.7 percent to $2.61 billion, or 90 cents a share, from $2.57 billion, or 88 cents, a year earlier, Cincinnati-based P&G said in the statement. Excluding certain items, profit was $1.04 a share. Analysts estimated $1.02, the average of 24 projections compiled by Bloomberg.

P&G fell 0.3 percent to $80.36 at the close in New York. The shares have slid 1.3 percent this year, while the Standard & Poor’s 500 Index advanced 1.5 percent.

Sales Fall

Sales fell 0.2 percent to $20.6 billion. Analysts estimated $20.7 billion, on average. Net sales were down in the company’s beauty, grooming, health care and baby, feminine and family-care business units.

Revenue in its home-care unit rose 2 percent in the quarter, driven by a 6 percent increase in sales volume. Selling, general and administrative costs fell 5.1 percent in the quarter.

The company reiterated its forecast for profit growth, excluding certain items, of much as 5 percent in fiscal 2014.

Lafley, who first led the company from 2000 to 2009, replaced Bob McDonald last year after P&G lost market share in some important categories and trailed competitors in sales growth.

Earlier this month, P&G agreed to sell the Iams, Eukanuba and Natura pet-food lines in some markets to Mars Inc. for about $2.9 billion. The sale, which would include the brands’ businesses mainly in Europe, may help P&G as the stronger dollar weighs on international revenue.

Sales growth for the year will be hurt by foreign-currency exchange by as much as 3 percent, P&G said today.

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