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P&G gets thumbs up from financial market

By Simon Pitman , 20-Nov-2012

Procter & Gamble may have turned a corner in the past few months, and with margins showing improvement for the first time in many quarters, financial analysts are starting to give the business a more positive outlook.

Analysts at financial researcher Seeking Alpha yesterday said that it had revised upwards its forecast for the company on the back of its latest quarterly results, where higher market share and lower margins has led the company to beat albeit low market expectations.

The company has been losing market share to competitors such as Colgate Palmolive and Kimberly-Clark, business that have weathered the economic downtown better, but since implementing a restructuring program that also entails focusing on its strongest brands, P&G is now starting to see clear returns.

Key divisions will see market share bumped up

“We believe this will positively impact market shares for key divisions in the short-term,” Seeking Alpha said in a statement.

The restructuring and focus on core brands also means the company is moving away from premium priced products towards a more competitive pricing structure, something that is gaining favor with many consumers in developed markets where spending power has been compromised.

However, the researcher also believes that the company’s margins will be negatively impacted in the short-term by its focus on mid- to low-priced product segments.

McDonald stresses productivity

Having posted better than expected financial results for its latest quarter, P&G CEO Bob McDonald has unveiled further details on how a focus on improving productivity will help the recovery of the business.

“We faced one of the worst economies that we've had since the Great Depression,” said McDonald in an interview that was published in the online version of Fortune Magazine.

“We had $3.5 billion of incremental commodity costs that affected our profitability. Our plan is a reaction to the situation.”

In the interview, McDonald expanded by detailing the fact that he wants to establish a productivity council that will be headed up by an existing company executive in an effort to create a culture of productivity at the company.

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