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P&G says cost cuts, expansion to drive growth

P&G says cost cuts, expansion to drive growth
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First Published: Fri, Dec 17 2010. 02 38 PM IST
Updated: Fri, Dec 17 2010. 02 39 PM IST
New York: Procter & Gamble Co, the world’s largest consumer products maker, has “plenty of room to keep growing,” chief executive officer Bob McDonald said on Thursday.
The company stood by its forecast that organic sales, or sales from existing operations, will rise by 4 to 6% in fiscal 2011. It also maintained its forecast for earnings of $3.91 to $4.01 per share from continuing operations.
“This continues to be a difficult operating environment,” said chief financial officer Jon Moeller, citing rising commodity costs and a stronger dollar. “We’re seeing little to no category growth in developed markets, but we continue to deliver solid, broad-based market share growth.”
P&G executives told analysts that to drive growth, the company will introduce its products in more markets, integrate its global operations and continue its focus on product development.
By 2016, the company plans to introduce 250 products in countries where they have not been sold before, while also selling products at hundreds of new price points and through more distribution channels.
P&G, which makes Tide laundry detergent, Gillette razors and dozens of other well known brands, announced efforts to simplify its structure and cut costs, including reducing the number of global manufacturing platforms from 300 to 150 by 2014.
It also aims to reduce the number of global suppliers from 75,000 to less than 50,000 in 2012. Other cost-cutting efforts will focus on streamlining packaging, reducing the number of brands and product formulas it sells, and using technology, such as video communication instead of travel.
“Those billion-dollar brands are 90% of our sales, and almost an equal percent of our profit,” Moeller said. “So it behooves us both to make them more productive, to simplify the lineup, and to work on bigger brands.”
Developing markets account for 34% of P&G’s sales, up from 20% a decade ago. The company expects the figure to approach 50% by 2020.
McDonald said the company has outperformed its competitors for the last three or four quarters in Latin America, while seeing seeing double-digit growth in Asia.
The company’s forecast for fiscal 2011 earnings of $3.91 to $4.01 per share from continuing operations compares with an average Wall Street estimate of $3.98, according to Thomson Reuters I/B/E/S.
P&G shares were up 30 cents to $63.94 in afternoon trading on the New York Stock Exchange.
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First Published: Fri, Dec 17 2010. 02 38 PM IST