P&G results hit by weak US markets, forecast reduced on strong dollar

By Simon Pitman

- Last updated on GMT

Related tags: Percent, Generally accepted accounting principles, Us

Although Procter & Gamble’s second quarter results were buoyed by a strong performance in the developing markets, slower consumer spend in the US market holds back growth.

The results for the quarter showed that sales were up 4 percent to $22.13bn, from $21.35bn in the corresponding quarter last year, while sales for the first two quarters were up 6 percent to $44.05bn.

The slower rate of growth underlines the fact that sales took quite a beating in the US market, where the company recently raised retail prices in a bid to make up for increased commodity prices.

Retail price hikes not matched by competition

P&G said that one of the main reasons for the declining sales growth was the fact that many of its competitors in leading markets had not increased their retail prices, making some P&G product lines not very competitive with an increasingly budget conscious consumer.

The company is now starting to backtrack on some of the price rises, mainly introduced to its detergent products lines in August of last year in an effort to make its products competitive once again.

Net earnings took a big tumble, falling 49 percent to $1.71bn, compared to $3.36bn in the corresponding quarter last year. For the full six months, this figure fell by 26 percent to $4.77bn.

Strengthening US dollar eats into profits

The company’s profitability has been particularly hard hit by the growing strength of the US dollar against foreign currencies, trimming back some of the gains it has been making in the faster-growing developing markets.

Both sales and net profits were hit hard in the company’s mainstay beauty division, with sales increasing by just 1 percent to $5.35bn, while net earnings fell by 9 percent to $1.01bn.

Grooming sales during the quarter were also only up 1 percent to $2.20bn, while net earnings saw a healthier performance, growing by 4 percent to reach $692m.

Baby and family care sales remain strong

The strongest performance was seen in the company’s baby care and family care division, where net sales increased 6 percent during the quarter to $4.16bn, while net profit was up 2 percent to $816m.

At the beginning of the fiscal 2012 in July last year, the company anticipated that a weaker dollar would add 2 to 3 percent to sales during the financial year, but instead it is now expected to impact net sales during the year, to the tune of approximately 1 percent.

Otherwise the company is sticking to forecasts that net sales will increase by 3 to 4 percent in fiscal 2012, while organic sales should increase by 4 to 5 percent.

Related topics: Business & Financial

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