P&G's beauty division lags behind in Q1

By Guy Montague-Jones

- Last updated on GMT

Related tags Percent Procter & gamble

Proctor and Gamble reported on target sales growth for the first
quarter but beauty lagged behind other divisions after a health
scare hit the sales of a key skin care product in Asia.

The world's largest personal care company posted net sales of $20.20bn for the three months ending September 30, up 8 percent on the same period last year. Accounting for the favorable foreign exchange rate, organic sales increased 5 percent, which fall within the company's 4 to 6 percent target range. Operating profit rose 9 percent to $4.42bn, boosted by sales growth and a 0.3 percent improvement in operating margin achieved in the face of higher commodity costs. Meanwhile, net profit increased 14 percent to $3.08bn, aided by a one-off tax benefit caused a change in the German statutory tax rate. Beauty sales grew by 6 percent to $4.6bn over the quarter, although favorable foreign exchange rates had a three percent impact on the sales figure. SK-II dragged beauty sales down 1 percent after fears that the skin care brand contained toxic amounts of heavy metals hit sales in China and even led to the product line being temporarily removed from the shelves last year. P&G remains committed to SK-11 and last week named Cate Blanchett as the new face of the skin care brand in the US. On the positive side, Prestige Fragrances delivered double-digit growth and the luxury brands Dolce & Gabbana, Hugo Boss and Lacoste put in strong sales performances for P&G. Olay also grew solidly on the back of the launch of Olay Definity. Oral care, which fits into the health and well-being division, posted high-single figure growth following the successful launch of Crest Pro Health toothpaste in North America. P&G is aiming for organic sales growth of 4 to 6 percent for the rest of the fiscal year and has increased its total sales forecast by 1 percent because of an improved foreign exchange outlook. The global giant also expects operating margins to improve slightly despite higher envisaged commodity and energy costs. Earlier in the week P&G announced its long-term environmental plans, which included the intention to reduce carbon dioxide emissions by 10 percent by 2012. In addition, the company plans to generate at least $20bn in sales of products with reduced environmental impact over the next five years.

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