Tough times ahead for P&G as currency devaluation hits hard

By Andrew MCDOUGALL contact

- Last updated on GMT

Tough times ahead for P&G as currency devaluation hits hard

Related tags: Currency, United states dollar, Generally accepted accounting principles

Procter & Gamble saw its second quarter earnings take a hit with the strong dollar having a big impact, setting up a challenging year for the Ohio-based firm.

Reported net sales for the quarter were $20.2 bn, a decrease of 4%, including a negative five percentage point impact from foreign exchange.

P&G is by no means the only company to have placed blame on the strong dollar for weakening results, with the likes of Johnson & Johnson saying similar; and CFO Jon Moeller says that the currency impacts will make the outlook for the fiscal year challenging.

“We have and will continue to offset as much currency impact as we can through pricing and productivity cost savings,”​ he said in a conference call.

"This is the most significant fiscal year currency impact we have ever incurred."

Beauty down

The consumer goods giant did see organic sales increase 2%, with growth in four of five reporting segments, however the Beauty, Hair and Personal Care segment was the one to let the side down.

Organic sales decreased 1% driven primarily by declines in the Prestige and Skin and Personal Care categories, as demand for products such as Olay dropped.

The Grooming segment did see organic sales increase 2% thanks to higher pricing and innovation on Gillette grooming and innovation on Braun.

Tough outlook

Company CEO A. G. Lafley reiterated Moeller’s point that currency devaluations made the quarter challenging, saying they were ‘unprecedented.’

"Virtually every currency in the world devalued versus the US dollar, with the Russian Ruble leading the way,”​ he said.

"The outlook for the year will remain challenging. Foreign exchange will reduce fiscal 2015 sales by 5% and net earnings by 12%, or at least $1.4 billion after tax.”

The P&G boss says the company will continue to offset as much of the currency impact as possible through productivity driven cost savings, and is adjusting fiscal year earnings targets accordingly.

“We are mobilized to deliver another fiscal year of modest organic sales growth, and to continue to grow market share on more category-leading brands. We are working to deliver core earnings per share as close as possible to those of last fiscal year,”​ he adds.

Related topics: Business & Financial

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