Emerging markets help to boost P&G Q1 sales but costs hit profits

By Simon Pitman

- Last updated on GMT

Related tags Developed country Revenue Emerging markets

Procter & Gamble’s focus on the emerging markets is paying off as net sales for the first quarter show a strong increase, but net earnings take a tumble on rising costs.

The falling sales meant the company was careful not to celebrate, warning the second quarter was likely to prove more challenging given the continuing economic uncertainty and the fact costs are likely to increase further.

Net sales during the quarter rose by 2 percent to $20.1bn on the back of sales volume growth in most business divisions and in all geographic regions, while organic sales grew by 4 percent.

“Our first quarter was a good start to the fiscal year. We maintained our top-line momentum and delivered profitable market share growth",​ said CEO Bob McDonald

He went on to state that the company is continuing to focus on its objectives to reach more consumers worldwide, but also stated the microeconomic environment remained ‘challenging’.

Net earnings for the period fell by 7 percent to $3.03bn, a figure that was largely impacted by rising costs during the quarter as well as the sale of one of its pharmaceutical businesses.

The fall in profits comes a day after Kimberly-Clark announced a 19 percent drop in its Q3 profits, which were blamed on rising material costs for its leading tissue and diaper brands. P&G also owns the Pampers brand.

P&G’s beauty sales were level with the quarter last year at $4.9bn. The company said the result was negatively impacted by currency translation and volume reductions in developed countries.

Overall volume sales were up by 4 percent, positively impacted by double digit gains in developing markets, which counterbalanced the poorer performance in other markets, underlined by the challenging nature of the US market.

Underling the price sensitivity of consumers, particularly in the developed markets, the company said that its Prestige Product and Salon Professional category was marked by declining sales.

Grooming net sales increased 2 percent to $1.9bn during the quarter, on a five percent volume increase that was driven by double digit growth in developing markets and low single digit growth in developed regions.

Looking ahead to the full financial year 2011, the company said it believes that net sales will grow at an estimated 3 to 5 percent. However, higher gains in organic sales are expected to be negated by unfavorable currency exchange.

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