P&G increase first quarter sales by 10 per cent

Related tags Cent United states dollar

P&G appears to be going from strength-to-strength, with the
announcment that it has increased its first quarterly sales by 10
per cent, exceeding market expectations. Analysts say that the
performance is proof of the company's success in combatting rising
commodity prices as well as pricing competition from rivals,
writes Simon Pitman.

"P&G's innovation leadershiop is delivering strong results across the company's balanced portfolio of businesses and geographies. This gives us confidence to increase the earnings outlook for the year,"​ said chairman and president A. G. Lafley. "We remain sharply focused on keeping P&G's businesses healthy, and growing, as we continue the integration planning process with Gillete."

The company reported that in the period January to March 2005 unit volumes increased 6 per cent, while organic volumes grew 7 per cent. Off the back of this the company added that growth had been experienced on a global basis with all of its units reporting increases of mid-single figures or greater. Further to this unit growth in developing countries continues to hit the mid-teens.

Net sales increased to $14.29 billion, with favourable foreign exchange adding a further 3 per cent to the 10 per cent growth, on the back of the strenghtening sterling, euro and Canadian dollar. Pricing added a further one per cent to growth.Net earnings increased by 13 per cent, to reach $1.72 billion, with earnings per share rising by 15 per cent to reach $0.63.

P&G said that its profits were impacted by continued marketing investments in a number of its major brands, including Olay, Pantene Color Expressions, Pampers Kandoo and Rejoice.

On a segment basis the strongest sales gains were found in the health care segment, which was up 16 per cent on a year ago to reach $4.876 billion, as well as baby care and family care which was up 13 per cent.However, on a regional basis, the company said it had noticed a slow down in the pace of growth in Europe, P&G's largest single market. The company said that it did not expect things to rebound in Europe for some time due to the economic situation.

"We know we're not going to grow at the same rate as other regions but we're hopeful that the economies will improve in a year or two,"​ Lafey said.

To counteract a slowing in the western European economies, the company says it intends to look to growth in the far East. At the end of last week it said that it would be developing a new low-cost diaper for the Chinese market in an effort to help fuel overall future sales growth.

However, the overall picture still looks healthy for P&G​. In view of the first quarter results, the company upped its earnings expectations, saying it thought June quarter sales would increase at high-single digit rates, with foreign exchange rates expecting to add two to three per cent of this growth.

Related topics Business & Financial