2nd UPDATE:P&G Cuts FY12 EPS View As Sales Slow In Developed Markets
27 April 2012 - 6:01PM
Dow Jones News
Procter & Gamble Co. (PG) cut its outlook for the fiscal
year on a recent slip in demand in developed markets and the need
to backtrack on price increases in a half-dozen business lines,
mostly in the U.S.
Price controls in Venezuela, which required price cuts of up to
25% on certain P&G products, also will weigh on results in what
is currently a billion-dollar market for the company.
For the year ahead, the company lowered its full-year profit
target to $3.82 to $3.88 a share. It had previously forecast
earnings of $3.93 to $4.03 a share.
The lowered view, with fiscal 2012 per-share earnings seen flat
to down 1%, once again disappointed investors, sending shares down
3.3% in recent trading to $64.69. It came after P&G reported a
16% drop in third-quarter earnings, when the company continued to
deal with high commodity costs and took charges related to
restructuring plans.
The outlook also raised questions as to whether P&G can
capably confront such challenges and fend off competitors while the
175-year-old company undergoes a $10 billion restructuring program
over the next four years. P&G executives said the company will
continue to add new products, especially in struggling areas like
the U.S. and its beauty care business, so sales don't suffer as
P&G cuts costs.
"I personally don't think this restructuring program will get in
the way of doing that," P&G Chief Executive Bob McDonald said
Friday on an earnings call. "If anything, I think it will enable
it."
P&G's is lowering prices and increasing promotions in
categories where competitors like toothpaste-maker
Colgate-Palmolive Co. (CL), Schick razor-owner Energizer Holdings
Inc. (ENR) and laundry competitors Unilever PLC (UL, ULVR.LN) and
Church & Dwight Co. (CHD) have dug in on their prices or
promoted aggressively.
P&G is giving back $200 million of the $3.5 billion in price
increases it has taken this year, a small piece of the pie. But the
swift reversals show P&G moved too high in some areas,
misjudging consumer and competitor response to its price increases
and jeopardizing market share in some key categories.
"We had to put in place some remedial activity to regain the
consumer value equation," McDonald said.
P&G executives said that the company is lowering prices in
the powdered laundry business in the U.S.; oral care, automatic
dishwashing detergent, and blades and razors in North America; and
laundry divisions in the U.K. and Mexico.
The weak performance in those areas made P&G lose share in a
majority of its markets. The company said it held or increased
share in 45% of the categories and countries in which it competes;
the figure would have been 55% if it just held share in the
categories where the prices are being lowered.
For the quarter ended March 31, P&G reported a profit of
$2.41 billion, or 82 cents a share, compared with a year-earlier
profit of $2.87 billion, or 96 cents a share. Stripping out items
like restructuring costs, P&G reported core earnings of 94
cents a share.
Net sales inched up 1.5% to $20.19 billion. Sales rose 3% on an
organic basis, which excludes currency translation, acquisitions
and divestitures. The company had forecast earnings of 89 cents to
95 cents a share on flat to 2% net sales growth.
For the year ahead, the company also lowered its full-year
profit target, calling for earnings of $3.82 to $3.88 a share. It
had previously forecast earnings of $3.93 to $4.03 a share.
-By Paul Ziobro, Dow Jones Newswires; 212-416-2194;
paul.ziobro@dowjones.com
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