P&G profits rise despite hit from Middle East tensions and slowdown in China

P&G profits rise despite hit from Middle East tensions and slowdown in China

Procter & Gamble reported higher profits Friday, citing strong demand in the United States and many European markets that offset weakness elsewhere due to Middle East tensions and a lackluster performance in China.

P&G — the consumer products giant that makes Tide detergent, Bounty paper towel and Gillette razors, among many others — had flat volume in the just-completed quarter but a three percent rise in price that helped produce a slight increase in overall sales.

We delivered solid sales and strong earnings growth in the third quarter despite multiple headwinds, enabling us to raise our EPS growth guidance and maintain our top-line outlook for the fiscal year,” said Jon Moeller, Chairman of the Board, President and Chief Executive Officer.

In the beauty segment, organic sales increased three percent versus year ago. Skin and personal care organic sales declined low single digits due to lower sales of the super-premium SK-II brand, partially offset by volume growth from innovation in personal care. Hair care organic sales increased high single digits driven by increased pricing in Latin America, Europe and North America.

Price hikes

Chief Financial Officer Andre Schulten described consumption as “very strong” in the United States and in leading European markets. But he said sales in the Middle East were pressured by conflict in the region, while China sales were down 10 percent, excluding the effect of currency changes and acquisition.

Profits in the quarter rose 11 percent to $3.8 billion, while revenues increased one percent to $20.2 billion.

The rise is entirely due to price increases, while sales volumes remained stable. Prices were up 3% on average across all divisions, and even increased by 10% in the personal care division.

Despite price hikes over the last few years, “consumers are not trading down within the US,” he said, arguing that shoppers stick with known products because of reliability.

In China, Schulten noted “weak underlying market conditions” as well as lagging sales of SK-II premium skin care, which has been affected by anti-Japan sentiment. Schulten said the company has nevertheless seen some improvement in the world’s second biggest economy, but that it will take another quarter or two for sales to return to growth.

Volume trends in several markets including Egypt, Saudi Arabia and Turkey “have remained soft since the start of the heightened tensions in the Middle East,” Schulten said.

SOURCE

No votes yet.
Please wait...

Leave a Reply

Your email address will not be published. Required fields are marked *