P&G posts growth but underlying pressure in developed markets takes its toll
Net sales grew 10 percent to $20.9bn, whilst income for the consumer products giant grew 15 percent to $2.5bn in the fourth quarter.
However, the maker of Pantene shampoo products remained cautious in its outlook, suggesting that sales will be slower for this quarter as there is little growth expected in emerging markets.
"I don't think there's any question that consumers, particularly in developed markets, are under pressure," said CEO Bob McDonald in a conference call last week.
Plans to attract new customers
The company plans to combat this by offering lower pricing tiers to avoid consumers trading down, and ensuring there is a product at any price point.
The Cincinnati-based firm will also seek to attract new customers in emerging markets as this is where its biggest growth is, with the company claiming it now reaches over half the world’s population.
P&G saw particular growth in emerging markets with strong growth generated from skin care hair care and grooming products.
In India its Gillette razors performed particular well, as they sell at such a low cost. The plan for P&G here is to gradually build up these markets so that higher-priced Gillette products can then be sold.
Overall sales of Grooming products increased seven percent to $2.1bn aided by a boost in volume of sales in emerging markets, which cancelled out the decline that was seen in developed markets.
The emerging markets also drove volume growth in Beauty sales, once again covering for decline in developed regions, as the business segment also saw sales increase by seven percent, to $5.1bn.
The results mirror what was expected by analysts and the company itself, as fourth quarter figures underlined the contrast between emerging and developed markets.
The general consensus from market analysts was that P&G would be posting healthy sales gains on the back of strong sales growth in key developing markets, which is what has occurred.
Speaking to the media at a conference in Singapore on Wednesday, before the results were announced, CEO McDonald stressed particular concerns about the soft condition of the US market, while reiterating that sales in North America, Europe and Japan have been flat for the last two reported quarters.
For the third quarter results, which were announced in April, the company underlined the fact that sales growth was well ahead of the industry average, but also emphasized that rising costs were holding back profits.
Net sales for the third quarter increased by 5 percent to $20.2bn, which the company said was largely attributable to a 5 percent growth in sales volumes, derived from all six of the company’s business segments.