NEW YORK, N.Y. – Procter & Gamble’s fiscal first-quarter net income rose 8 per cent as the world’s largest consumer products company sold more of its detergent and diapers globally and cut costs.
The results were in line with Wall Street expectations and the company reaffirmed its 2014 forecast.
The Cincinnati-based company, whose products range from Tide detergent to Crest toothpaste and Gillette razors, is in the midst of a turnaround plan that includes focusing on its most profitable core businesses and cutting costs to save $10 billion by fiscal 2016.
In the developed markets such as the U.S. and Europe, P&G has been trying to adjust its prices to stay competitive, cutting prices on some products and raising prices on others. P&G said it held or grew market share in two-thirds of its product categories globally, and two-thirds to 70 per cent of categories in North America.
But CFO Jon Moeller that there are some brands in its beauty segment that need to do better, specifically its Oil Of Olay skin care business, North American Pantene hair products and its Salon professional businesses.
“I will readily admit we have more work to do,” he said in a call with analysts.
P&G is also working on localizing its supply chains to save money.
“We’re continuing to work on North America and European supply chain redesign to lower-cost, reduce inventory and improve customer service,” Moeller said. “This work will require additional investment in both restructuring and capital, but should generate very attractive returns.”
Net income for the three months ended Sept. 30 after paying preferred dividends rose to $3.03 billion, or $1.04 per share. That compares with net income of $2.81 billion, or 96 cents per share, last year. Excluding one-time items net income was $1.05 per share, matching analyst expectations, according to FactSet.
Revenue rose 2 per cent to $21.2 billion from $20.74 billion. Analysts expected revenue of $21 billion.
Total volume rose 4 per cent as increases in beauty, fabric care and home care, and baby, feminine and family care categories was offset by declines in grooming and health care.
P&G reiterated its 2014 guidance of earnings excluding one-time items to rise 5 per cent to 7 per cent, implying results of $4.25 to $4.33 per share. It expects revenue to rise 1 per cent to 2 per cent, implying revenue of $85 billion to $85.85 billion. Analysts expect earnings of $4.29 per share on revenue of $85.71 billion.
Oppenheimer & Co. Joseph Altobello said that while he is “encouraged” by “healthy” growth in sales and volume, P&G’s turnaround will take time, and the future improvement is already reflected in the stock price. He kept his “Perform,” rating on the stock.
Shares fell 65 cents to $79.96 in morning trading. The stock has risen 19 per cent since the beginning of the year.