Sun, Jan 29, 2012 - Page 5 News List

P&G cuts profit forecast on exchange rates

Bloomberg and AP, New York

Procter & Gamble’s Tide detergent is seen on display at a Wal-Mart store in Chicago, Illinois, on Tuesday.

Photo: Reuters

Procter & Gamble Co (P&G), the world’s largest consumer-products company, reduced its full-year earnings forecast as the strength in the US dollar hurts sales generated abroad.

Adjusted earnings per share for this year will be as much as US$4.10, compared with a previous projection of a maximum of US$4.33, the Cincinnati-based company said on Friday in a statement. Analysts had projected US$4.17 a share, the average of 21 estimates compiled by Bloomberg.

P&G’s forecast follows rival Kimberly-Clark Corp, which also this week projected full-year earnings that trailed analysts’ estimates, citing a foreign currency “headwind” and difficult economic conditions.

Household-products makers are facing lower birthrates and US consumers pinched by a housing slump and unemployment that averaged 9 percent last year.

Strength in the US dollar will hurt the value of revenue generated overseas when it’s converted to US currency. The company said sales from developing markets are expected to make up more than a third of revenue this year.

The Dollar Index, which tracks the greenback against the currencies of six major US trading partners, has gained 6.3 percent since the end of August.

P&G shares fell 0.8 percent to US$64.30 at the close in New York on Friday. The shares rose 3.7 percent last year.

CEO Robert McDonald said in a media conference call on Friday that the company’s increased prices hurt its market share last quarter. P&G has been raising prices across all divisions and regions to help make up for higher costs for commodities, which McDonald said will have “easier” comparisons in the next two quarters.

Net income in the fiscal second quarter declined 49 percent to US$1.69 billion, or US$0.57 a share, from US$3.33 billion, or US$1.11 a share, a year earlier, the company said.

P&G incurred a non-cash expense of US$1.5 billion, or US$0.50 a share, to adjust the carrying value of goodwill in its Appliances and Salon business, according to the statement.

Adjusted earnings per share totaled US$1.10, the company said. Analysts projected $1.08 a share, excluding some costs, the average of 19 estimates compiled by Bloomberg. Sales rose 3.7 percent to $22.1 billion.

P&G said on Friday that its market value grew 9 percent in developing countries over the latest quarter, but just 2 percent in North America and 0.5 percent in Western Europe.

That news came as P&G reported a 49 percent drop in profit for the second fiscal quarter, hobbled by higher costs for materials and a big write-down on the value of two of its business units.

Developing markets like Africa and parts of Latin America and Asia now make up 37 percent of P&G’s sales, up from 27 percent five years ago.

That growth was buoyed by recent expansions, such as toothpaste offerings in Nigeria and fabric softener in Indonesia. In the same period, the share of sales that P&G makes in the US dropped to 37 percent from 43 percent.

“We are shifting the footprint of the company to take advantage of the growth where the growth occurs,” McDonald said.

He said that P&G had closed technical centers in Western Europe and North America, but recently broke ground on a new center in Singapore and doubled the size of another in Beijing. Of the about 19 plants the company had under construction in the last six months, only one was in the US.

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