P&G Q4 sales rise but profits tumble on increased costs

By Simon Pitman

- Last updated on GMT

The world’s biggest personal care maker announced a five percent increase in global sales but a 12 percent dip in profits that reflected increased marketing costs.

The company was hard hit during the global economic slow down and resulting lower consumer spend, but has edged its way out of declining sales through heavy promotion and advertising, as well as discounting.

The company said that sales for the quarter ending in June were up from $18.08bn to $18.92bn, while full year sales were up 3 percent to $78.93bn.

However, the sales gains were eaten away by the fact that costs of making P&G products rose significantly, particularly in the latest quarter, a fact that reflects the increased advertising and marketing spend the company has invested in to promote their products in the tough retail environment.

Product costs rise during Q2

The costs for products sold rose by 4 percent during the quarter to $9.56bn, a figure that contrasts significantly with a 2 percent dip for the full year figure, to $37.92bn.

The big increases in costs during the fourth quarter were reflected in a big fall in net earnings from $2.47bn to $2.18bn, while for the full year earnings fell by 5 percent to $12.73bn.

Analysts had generally predicted sales for the quarter in excess of $19bn, while the net earnings missed the mark too, causing share prices on the NYSE to dip by $2.36 to $59.70 at 10.04am EBT today.

Organic sales growth races ahead

Referring to the full financial year, CEO Bob McDonald said that the results had beaten the company's original expectations, which he attributed largely to continued gains in market share and unit volume

During the quarter, organic sales volumes grew at the fastest pace in 22 quarters, thanks to mid-single digit growth in all regions and all segments.

On a segment basis, the biggest gains were seen in the grooming category. Here sales for the fourth quarter increased by 14 percent to $1.92bn, while for the full year the figure was up just 3 percent to $7.63bn.

New launches boost grooming sales

The big rise in the grooming sales for the quarter were largely attributed to the launches of both the Gillette Fusion ProGlide together with the Gucci Pour Homme fragrance.

Elsewhere sales in the mainstay beauty category increased by 6 percent during the quarter to $4.73bn and by 3 percent for the full year to $19.49bn.

Looking ahead to the fiscal year 2011, the company said it is expecting a net sales increase of between 2 and 4 percent, attributable to strong organic sales growth, but counterbalanced by unfavorable currency translations.

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