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P&G Q3 sales up but profits fall on lower pricing and currency exchange

By Simon Pitman , 27-Jan-2011
Last updated on 27-Jan-2011 at 17:13 GMT2011-01-27T17:13:04Z

Procter & Gamble announces steady gains for its third quarter sales ending in December, but profits are down on lower retail pricing and negative currency exchange rates.

The company said that net sales increased 2 percent to $21.3bn during the quarter, driven by a six percent increase in volumes, which was partially offset by the negative impact of currency exchange rates. Organic sales grew by 3 percent.

The growth in sales volumes reflected the fact that the company has been heavily discounting retail prices in an effort to remain competitive in the more depressed markets.

P&G said the combination of lower pricing and product mix impacted net sales for the quarter by approximately 2 percent.

Net profit impacted by pricing and currency exchange

This inevitably impacted net profit for the period, with the figure falling from $4.66bn to $3.33bn, a decrease of 28 percent.

Referring to the company’s market expansion during the quarter, which was mainly driven by sales gains in developing markets, P&G CEO Bob McDonald said:

“This is driving strong volume and sales growth ahead of market levels… we are on track to deliver seven to nine percent [EPS] growth for the years.”

Beauty sales increase by 1 percent

Sales for the company’s beauty segment increased by 1 percent to $5.3bn, representing organic growth of 3 percent, while volume growth of 5 percent were ‘entirely’ attributed to double-digit gains in the developing regions.

The company also said that lower pricing and unfavorable currency exchange negatively impacted the beauty division by approximately 1 percent.

Gains in the developing markets were increased by distribution expansion in Asia and Latin America, while category volume gains in retail hair care and female beauty also helped to drive net sales.

Grooming shows healthy volume gains

Grooming sales increased by 3 percent to $2.2bn, representing an organic sales increase of 6 percent, while sales volumes for the division were up by 5 percent. Volume increases were driven by the developing markets as well the men’s grooming category.

Foreign exchange rates negatively impacted the division by 3 percent, while this hit was counterbalanced to a degree by price increases adding1 percent to the net sales figure.

Looking ahead to the full year 2011, the company said it expects sales to grow by 3 to 5 percent, while organic sales should see increases of between 4 to 6 percent. Negative currency translations are forecast to impact sales by 1 to 2 percent.

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