Venezuelan currency woes wipe $2bn off another weak quarter for P&G
Revenues from global sales fell by 9.2% to $17.79bn for the fourth quarter, ending June 30th, compared to $19.60bn in the corresponding period last year, a figure that included a 9% hit from negative currency exchange rates against a strong US dollar.
The figure disappointed the financial world, with analysts at Thomson Reuters on average forecasting revenues of $17.98bn for the three month period.
Profits hard hit
Net income for the first three months was down by approximately 80%, from $2.62bn in the corresponding period for last year, to $0.54bn for the current quarter.
But the quarter also saw the company forced to wipe $2.03bn off its books as it absorbed the costs associated with the Venezuelan currency revaluation.
Venezuela currency revaluation hits hard
The Venezuelan economy has been highly volatile for some years, with international companies being hard hit by a series of currency devaluations that have impacted businesses primarily trading in other currencies. The latest devaluation came in February of this year and was estimated to have wiped around $7bn from the top ten US companies doing business there.
Only yesterday, Revlon announced that its sales for the last quarter had been impacted significantly after it decided to exit the market and re-enter using a distributor model.
Net sales for the full 12 month financial year were down 5%, from $80.51bn to $76.28bn, marking the end of a tough financial year, but equally the dawning of a new era as P&G goes into the next financial year a leaner machine following the $12.5bn sale of a significant part of its beauty and fragrance brands to Coty.
Hit by the strength of the dollar, the company has turned to raising the price of its products in international market, where an estimated two thirds of its revenues are currently generated.
Unfortunately that strategy seems to have backfired, forcing many of its consumers to turn to less expensive alternatives.
Likewise, sales in both its grooming and personal care businesses appear to have been hardest hit over the past year, with net sales for the divisions both falling 7% during the financial year, against total FY 2014/2015 that dipped 5% to $76.28bn.
What the future holds
Looking ahead to next year the company was also cautious, with out-going CEO A.G. Laflely stating the company’s belief that sales will continue to slide in the low-to-mid single digits during the course of the year on concerns that the dollar will remain strong.
On Tuesday, the company announced that David Taylor will replace A.G. Lafley as CEO in November, as the company looks to the future with a leaner portfolio and expects to concentrate on its core brands as a means of recovery.