P&G CEO claims company can ride the economic downturn

By Simon Pitman

- Last updated on GMT

Related tags Economics Profit

A.G. Lafley, CEO of the world’s largest personal care player Procter & Gamble has reassured investors that the company is in a strong position to weather the current economic storm.

Speaking to shareholders at its annual meeting today, Lafley underlined the fact that the company will continue to focus on its core fundamentals in an effort to drive long-term growth still further.

“While the economic environment remains volatile and uncertain, I am confident that P&G can and will continue to prosper over the long term,”​ said Lafley.

Unbroken track record

The company has an unbroken track record on sales growth, having practically doubled its sales for each of the past three decades, rising from $10bn in 1980 to $80bn in 2008, while profits have risen from $640m to $12bn during the same period.

However, with the economic outlook looking unsure and retail markets in Europe and the US continuing to sour, margins are being increasingly pressurized, meaning the company is coming under new challenges as it attempts to maintain that kind of growth.

Throughout 2007 and into the beginning of this year, P&G has been able to cope with rising costs by passing them on to the consumer and raising the price of its products.

'Sticks to fundamentals'

“The reason P&G has grown so consistently for so long is that we’re a company that sticks to the fundamentals,”​ Lafley said at the meeting.

“We manage cash and costs with unrelenting discipline. And we invest in innovation as the primary driver of profitable organic sales growth.”

The company’s most recent quarterly results, ending June 30, back up Lafley’s claims, showing that rising costs have not had any significant impact on its performance yet.

Sales continue to rise

Net sales held up despite prices rises and tougher market conditions, growing 10 percent to $21.27bn in the three months ending June 30.

Helped by the strong sales growth and cost savings from the integration of the Gillette brand, operating profit rose 13 percent to $3.84bn.

But as the price of oil and other commodities start to fall, the recent turmoil in the financial markets means that the fallout from this crisis is likely to present new challenges to overcome.

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