P&G stakeholder points to a bright future

By Simon Pitman

- Last updated on GMT

Related tags New york times Investment Revenue

P&G stakeholder points to a bright future
Activist investor William Ackman says he believes Procter & Gamble’s fortunes will rebound significantly in the space of the next, but criticized the company’s CEO, Robert McDonald.

Ackman, who is head of Pershing Square Captial Management, a company that is estimated to have a $2 billion stake in P&G, made the comments at the Ira Sohn Investment Conference, held in New York City, yesterday.

Ackman’s stake in P&G is one of the biggest holdings in his hedge fund, and although it is still a relatively small investment in a business that is estimated to have a price tag in excess of $70 billion, the fact that he has a reputation for tough, straight talk, means that the investment world listens when he speaks.

Thumbs up for P&G's exposure to emerging markets

In the presentation, Ackman spoke of the fact that P&G has significant exposure in the fast growing emerging market, a factor that makes it ‘the biggest emerging market company in the world,’ The New York Times quoted him as saying.

Accordingly, he believes that this exposure will be the company’s saving grace in the future, as the company is set to benefit from a combination of a cost saving restructuring program, together with a continuation of increased revenues from emerging markets.

This combination is likely to secure a good standing with investors in the future, with Ackman predicting that P&G share prices could hit the $125 a share in the space of the next two years, a figure that compares favorably to today’s share price of $78.58.

Ackman suggests McDonald is over-stretched

Ackman also stood his ground by aiming criticism at McDonald, stating his belief that the CEO’s commitment to 21 other executive boards was likely to take up a lot of his valuable professional time.

However, according to the New York Times report, a representative for P&G later challenged this assertion, stating that the CEO serves on seven external organizations, six of which are linked to the business.

For its most recent first quarter, P&G posted improved results, with profits bouncing back as cost savings start to take effect.

Profits up, but beauty still suffering

The company said that net sales for the first quarter of the year were up 2 percent to $20.6bn, which represented an organic sales increase of 3 percent when taking in the negative impact of currency exchange rates.

Net income for the January-to-March quarter rose to $2.57bn, compared with net income of $2.41bn in the corresponding period last year.

However, the beauty segment is still struggling, with the company reporting that sales volumes for the quarter were down by 1 percent, while net sales were down by 2 percent and 1 percent in organic terms, in what was described as a period of ‘heavy competitive product and promotional activity’.

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