P&G Q3 profits up but earnings outlook is lowered on rising costs

By Simon Pitman

- Last updated on GMT

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Procter & Gamble reports a double-digit increase in third quarter earnings, but reduces it upper end earnings outlook in the belief that manufacturing costs are set to rise further.

Net sales for the period increased by 5.0 percent to $20.2bn, which the company said was largely attributable to a 5.0 percent growth in sales volumes, derived from all six of the company’s business segments.

Organic sales were up 4 percent, reflecting a slight negative impact from acquisitions, divestures and foreign currency exchange. The company also pointed out that negative geographic and product mix impacted the results by approximately 2 percent.

Market share was up in all geographic regions, while 18 of its 24 major brands and 14 of the top 17 countries reported flat or higher market share.

Beauty division hit by lower net profit

On a divisional basis, the results showed that beauty sales increased by 5 percent to $4.9bn and 5.0 percent in volume growth, The volume growth was driven by developing and new markets, which returned double digit increases, while developed markets remained flat.

However, profitability for this division declined significantly, falling 3 percent to $547m, on the back of a lower operating margin that was mainly impacted by increased marketing expenses.

For the grooming division, net sales increased by 8 percent to $1.9bn on the back of a 2 percent increase in volumes. This result was largely driven by higher selling prices and less promotional activity in the Latin American markets, while currency exchange had a positive effect of 1 percent.

Net earnings for the division increased by 1 percent to $379m, driven by both the increased sales and operating margins, but partially offset by a higher tax rate.

Baby care and family care storm ahead

Baby care and family care sales grew by 5.0 percent to $4.0bn, on a 7 percent increase in volumes, a result that was largely driven by double-digit volume growth in developing markets.

Net earnings for the division increased by 5.0 percent to $528m, a figure that was driven by growth in sales, but slightly offset by a reduced operating margin caused by higher commodity costs.

Looking ahead to the rest of the financial year, the company has slightly lowered it upper end forecast for earnings per share as well as organic sales, stating that rising commodity prices are likely to be challenging to the performance.

Analysts are currently predicting that full year sales will be in the region of $82bn.

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