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Procter & Gamble announces lower profits guidance

By Simon Pitman , 22-Jun-2012

Procter & Gamble has announced it is lowering its profit guidance on the back of a slowing global economy, negative currency translation and tough competition.

Company CEO Bob McDonald said that its fourth quarter ending in June would be lower on the back of sliding sales, during an investor conference in Paris where he also released preliminary guidance for the financial year 2013 on the back of the forecast for 2012.

The maker of the Gillette and Olay brands said it expects revenues for the quarter to fall by around 1 per cent to 2 per cent versus previous forecasts that sales would grow in the range of 1 per cent to 2 per cent.

Organic sales growth forecast to slip

On the back of this, organic sales are expected to be increase by 2 per cent to 3 per cent compared to earlier guidance that organic sales would growth by between  4 per cent and 5 per cent.

Likewise, increasing volatility on the global stock markets means that foreign exchange rates are likely to hold back revenue growth by 4 per cent, compared to previous estimates of 3 Per cent.

On the back of these results, adjusted earnings are expected in the range of 75 cents to 79 cents per share versus 79 cents to 85 cents earlier.

Slowing market growth worldwide

Globally the company has been witnessing slowing market growth in the developing markets in recent quarters, on the back of stalled sales in the developed markets, which the company has blamed on a lack of innovation.

As the largest consumer goods player in the world, and also one of the biggest cosmetic and personal care players, the company has been struggling under its sheer size recently, a factor that has hampered new product innovations.

However, in the investor conference McDonald stated his intention to turn this situation around and to start investing more heavily in innovation and new product launches in an effort to stay ahead of the competition.

Cost measures implemented by McDonald earlier this year are estimated to save the company an estimated $10 billion in the three financial years up to 2016, allowing it to invest more heavily in research and development.