Photographer: Luke Sharrett/Bloomberg

P&G Fourth-Quarter Profit Tops Estimates, Aided by Cost Cuts

  • Health-care division’s strength helps revenue top projections
  • CEO Taylor has embarked on $10 billion productivity initiative

Procter & Gamble Co. posted fourth-quarter profit that topped analysts’ estimates, and its new leader told investors that the world’s largest consumer-products company would work to restart sales growth as well.

Profit was 79 cents a share, excluding some items, in the period ended June 30, Cincinnati-based P&G said in a statement Tuesday. Analysts estimated 74 cents, on average. While revenue fell 2.7 percent to $16.1 billion, that topped analysts’ $15.8 billion average projection.

David Taylor, less than a year into his tenure as chief executive officer, is steering a smaller, lower-cost version of the consumer-products giant than existed just a few years ago. While the company has struggled to boost revenue consistently, Taylor’s predecessor, A.G. Lafley, slimmed down P&G by cutting expenses and selling off underperforming divisions. Taylor has followed Lafley’s productivity initiatives with his own $10 billion cost-cutting program, which he says will make P&G a nimbler competitor.

“While Taylor is a 35-year veteran, he saw the stumbles the company succumbed to,” said Erin Lash, an analyst at Morningstar Inc. That included high employee turnover and minor incremental product changes that didn’t justify premium prices, she said.

The shares rose 0.4 percent to $86.79 at 3:05 p.m. in New York. P&G had gained 8.8 percent this year through Monday, beating the 6.2 percent advance for the Standard & Poor’s 500 Index. 

Changing Culture

Taylor, making his earnings conference-call debut, laid out ways P&G is trying to change an entrenched and often sluggish culture. That includes shifting its salespeople to specializing in particular categories and hiring more experienced employees to “drive more mastery and depth.” P&G, long known for promoting from within, is also stepping up its outside hiring, he said. He’ll also work to better align compensation with performance and make P&G’s often premium-priced products more distinctive.  

“Each of these changes may seem small and obvious,” Taylor told listeners on the call. “But collectively, they’re big and important changes for our organization and culture.”

P&G is also adapting how it does business in China, adding more high-end products and designing specific items for the market, Taylor said in a separate interview. 

“You’ve got some of the most discerning consumers, and fastest-growing premium and super-premium segments in China,” he said.

Health Care

Sales in the health-care division, which sells Vicks NyQuil cold medicine and Oral-B electric toothbrushes, rose about 6 percent to $1.8 billion last quarter. Net revenue also gained in the grooming unit, which makes Gillette razors and shaving gels, but declined in the company’s other divisions.

P&G forecast that revenue in the current fiscal year will rise about 1 percent. That would equate to sales of almost $66 billion, roughly matching analysts’ average estimate. Core earnings per share -- which excludes restructuring charges and other items -- will increase by a mid-single-digit percentage rate from last year’s $3.67 a share, P&G said. Analysts project profit by that measure will increase to $3.97, which would be a roughly 8 percent gain.

When he took over in November, Taylor inherited a company that had shed dozens of slower-selling product lines, along with its pet-food and battery businesses. The smaller portfolio will allow P&G to focus on its main brands and invest savings from the cost-cutting programs into research and development, as well as marketing, Taylor has said.

But the past need to tighten its belt won’t stop P&G from buying businesses that can help strengthen its core categories, Taylor said. When asked whether P&G is open to acquisitions, he replied that the answer is “clearly yes.”

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