P&G reports big rise in profits

By Simon Pitman

- Last updated on GMT

Related tags: Cent, Revenue, United states dollar, Gillette

Not only has the acquisition of Gillette helped global giant
Procter & Gamble to boost its sales, subsequent synergies and
consolidation have helped the company achieve strong profit growth.

For its second quarter, ending 31st December, the company reported that net profits increased an impressive 12 per cent to reach $2.86bn, as revenue growth outpaced cost increases.

This result came off the back of sales of $19.73bn for the period, up 7.6 per cent, and attributed to strong volume growth and the positive effects of a weaker US dollar.

The figure was at the upper end of the company's expectations, which had been set at sales growth of between 5 - 8 per cent, following the release of its results for the first quarter, back in October of last year.

Organic sales, a figure that does not take into account additional growth through acquisitions, divestures and currency fluctuations, showed that sales had still climbed a healthy 5 per cent.

"This was another solid quarter of broad-based sales and earnings growth during a period of heavy Gillette integration activity,"​ said chief executive A G Lafley.

Indeed Lafley added that the results have been so encouraging, the company has upgraded its outlook for the rest of the year.

"The results this quarter and a positive outlook for sales and margin improvement give us confidence to raise our top and bottom line guidance for the fiscal year,"​ he added.

This meant that the company raised it organic sales growth outlook for 2007 to 5 - 6 per cent, total sales growth to 10 -12 per cent and forcasted earning for the year are now set at 13 - 15 per cent growth compared to 2006.

In the same quarter two years ago, which was before P&G merged with Gillette to become the biggest consumer goods company in the world, net sales were up 9 per cent to reach $14.45bn, whereas net profits increased 12 per cent to reach $2.04bn.

These figures represent the huge impact that the Gillette merger has had on the company's results during this time, and the fact that the strong growth has been maintained.

Looking at the current quarters result's by business segment, sales for the beauty and health business, its biggest division, grew by 8 per cent to reach $5.88bn during the period. The company said that this figure was achieved despite the negative effects of the SK-II skincare recall in Asia.

Baby care and family care sales were up 5 per cent to reach $3.12bn, while Gillette sales, headed by razors and blades, increased by 11 per cent to reach $1.28bn.

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