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Abu Dhabi, UAEThursday 22 November 2018

Procter & Gamble posts biggest profit rise in five years

The manufacturer of brands such as Ariel, Olay and SK-II said its biggest growth market had been the US

Cincinnati-based Procter & Gamble has a number of detergent and cosmetics products under its product portfolio. AP Photo
Cincinnati-based Procter & Gamble has a number of detergent and cosmetics products under its product portfolio. AP Photo

Procter & Gamble posted the biggest increase in five years in a key sales measure last quarter, helped by gains in products such as skin cream and healthcare brands.

The surprise growth, including in the US, sent the shares up as much as 7 per cent on Friday, the most since 2008. Organic sales, which exclude items such as acquisitions and currency effects, rose 4 per cent, P&G said, more than double the gain projected by analysts.

In an environment where growth is hard to come by for big consumer products companies, the performance was unexpectedly strong. P&G said the US drove much of the gain. The Cincinnati-based maker of Bounty and Pampers said Olay – a long-struggling brand – and the new SK-II luxury skin cream, popular in Asia, were key drivers.

It was a “very solid quarter on which we need to build,” chief financial officer Jon Moeller said. The company said it gained market share in the first quarter which ended September 30, and that eight out of 10 global categories either increased or maintained market share.

The shares rose as high as $85.87 in New York trading. They had lost 13 per cent this year through Thursday’s close, compared with the 3.6 per cent gain in the S&P 500 Index.

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P&G, like many traditional consumer products companies, has been hurt by heightened competition, including from upstart businesses. Higher commodity costs and unfavourable foreign-exchange trends are still taking a toll on the company’s profitability. Gross margin fell to 49.2 per cent from 50.3 per cent a year earlier.

Despite the gains last quarter, the company maintained its full-year organic sales and profit forecasts. It said price increases that are going into effect may have an impact on volume and the company is more comfortable maintaining its outlook for now.

P&G also posted profit in the period that topped estimates. Excluding some items, earnings amounted to $1.12 a share, compared with projections for $1.08.

P&G’s results are a “positive read-through for beleaguered” household and personal-care companies, said Kevin Grundy, an analyst at Jefferies.