P&G sales and profits stand up well

By Guy Montague-Jones

- Last updated on GMT

Procter and Gamble successfully defended itself against rising costs and slackening demand in the fourth quarter by increasing prices and tightening control on expenditure.

Net sales held up despite prices rises and tougher market conditions growing 10 percent to $21.27bn in the three months ending June 30.

Sales and profits on the rise

Favorable exchange rates were responsible for a good slice of this growth. Excluding currency effects and the impact of acquisitions and divestures organic sales growth was 5 percent.

Helped by the strong sales growth and cost savings from the integration of the Gillette brand operating profit rose 13 percent to $3.84bn.

If costs remain on a high plane Procter and Gamble may have difficulty maintaining profit growth in future quarters. Now that Gillette is fully integrated, the company will not benefit from any additional cost synergies from the acquisition.

The company warned investors that commodity and energy costs are expected to be up $3bn for the fiscal year that started July 1.

Price increases are being put in place to maintain profits but P&G does not expect these to be sufficient to keep operating margins at the same levels.

Cosmetics sales robust but profits down

Looking specifically at beauty, sales were slightly above average for the group increasing 11 percent to $5.04bn for the quarter. Sales growth was driven primarily by skin care products.

Not being directly affected by the Gillette purchase, the beauty division saw earnings before income taxes drop 6 percent to $760m.

P&G rival Unilever also released its financial results for the quarter at the end of last week.

Whereas price increases contributed only 1 percent to P&G’s growth figures price hikes were largely responsible for the organic growth achieved by Unilever.

The Anglo-Dutch company posted a 6 per cent increase in sales at constant exchange rates but this growth was achieved thanks to 7.4 percent price increases rather than higher sales volumes.

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