P&G Q3 profit down to 8.3% on strong dollar, slow consumer spending
Bengaluru: Procter & Gamble Co., maker of Tide detergent and Gillette razors, reported an 8.3% fall in third-quarter profit—hurt by a strong dollar and slowing economic growth that dampened consumer spending in several countries.
Economic and political uncertainties—from higher gas prices in the US and higher utility prices in Saudi Arabia to demonetization in India—triggered a sharp brake in consumer spending during the quarter, the company said on a post-earnings conference call.
Making matters worse, the US dollar rose about 3.6% in the March quarter, on an average, compared with a quarter earlier, spurred by investors betting on the so-called “Trump trade”.
A strong dollar makes US goods less competitive abroad, and foreign earnings less valuable when converted into dollars. P&G, which sells its brands in more than 180 countries, gets nearly half its revenue from Europe, China, Asia and the Middle East.
“We continue to deal with an unprecedented amount of geopolitical disruption and uncertainty, which is affecting market growth, currencies and commodities,” chief financial officer Joe Moeller said on the call. “We’re aggressively driving cost savings to mitigate these impacts.”
P&G has said it plans to save as much as $10 billion in costs over the next five years, and use a chunk of those savings to improve packaging, research and development, and sales coverage.
The consumer goods giant, whose iconic brands include Pampers, Head-and-Shoulders and Vicks, maintained expectations of a mid-single digit rise in full-year adjusted earnings per share growth, and a 2-3% increase in organic sales growth.
Net income attributable to the Cincinnati, Ohio-based company declined to $2.52 billion, or 93 cents per share, in the three months ended 31 March.
Adjusted earnings came in at 96 cents per share, beating Wall Street estimates by 2 cents.
Organic sales in P&G’s two largest businesses—fabric and home care, and baby, feminine and family care—rose 1%. Organic sales at its grooming business fell 6%.
Net sales fell about 1% to $15.61 billion—the thirteenth straight quarter of decline. Analysts had been looking for $15.73 billion, according to Thomson Reuters I/B/E/S.
P&G, which traces its roots to a family-run candle and soap business in 1837, has been selling off unprofitable brands and focusing on core brands such as Tide and Pampers to revive sluggish sales. It sold 41 of its brands, including Clairol and Wella, to Coty Inc. in a $12.5 billion deal in October. Reuters