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Business News » World News

P&G shares surge on strong results, higher product prices

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Updated: Fri, Oct 19, 2018
09:30 pm
Reuters
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Procter & Gamble Co reported better-than-expected quarterly profit and sales, and said it was raising prices on several products around the world, sending shares up on Friday by their most in a decade.

Organic sales jumped 4 percent, the best growth in five years, boosted by demand for beauty and grooming products. Organic sales exclude revenue from newly acquired units and the impact of currency fluctuations.

Shares in the world`s no.1 personal care goods company jumped 7.9 percent to $86.55, the biggest one-day gain since 2008.

The maker of Tide detergent and Oral-B toothpaste had told retailers during the quarter it planned to raise prices on "several products" in U.S. home care, oral care and personal care, Chief Financial Officer Jon Moeller said on a call to discuss earnings.

On Thursday, Nestle and Unilever, two of the world`s biggest consumer goods makers, both reported a pick-up in quarterly sales, also after raising product prices.

Beauty sales surged 5 percent in the quarter through September, driven by skin care brands SK-II and Olay, particularly in China, which makes up 8 percent of overall sales.

"There isn`t a piece of our beauty business that isn`t growing right now, most of it growing at very attractive rates," Moeller said, adding that skin and personal care sales jumped 22 percent in China during the quarter.

Volumes surged 5 percent in the grooming business, boosted by price cuts and new Gillette razor products.

Grooming is a category that is too competitive for P&G to raise prices. In order to regain market share lost to upstarts such as Harry`s and Dollar Shave Club, P&G cut prices of its grooming products by 3 percent in the prior quarter.

Sales in its fabric and home care division, the company`s biggest unit by sales, grew 2 percent.PRICE RESPITE

Despite the gains in profit and sales, the company will need to address threats to both from rising transportation and input costs and currency fluctuations, some analysts said.

"Given the headwinds they`re facing, it`s very important that P&G are able to pass prices on to retailers and consumers," Edward Jones analyst Brittany Weissman said.

"Some of the retailers have really dug their feet in the ground on pricing, and that`s been an ongoing dialogue...some of the price increases will have to come with new product innovation," Weissman said.

P&G said the foreign exchange impact of a strong dollar had hurt earnings by $400 million after tax. The company gets more than half its sales from outside North America.

"We will take pricing (into account) when the degree of cost impact warrants it and competitive realities allow it," Moeller said.

P&G`s crude oil costs surged 50 percent during the quarter, and trucking expenses are expected to rise by 25 percent this year, he added.

The company is raising prices in many developing markets, including Argentina, Turkey and Russia, to make up for foreign exchange headwinds, he added. The sturdy dollar makes the company`s products more expensive in overseas markets.

In July, P&G said it was rolling out an average 4-percent increase in Pampers diaper prices and an average 5-percent price rise for Bounty and Charmin toilet paper and Puffs tissue products in North America.

Net income attributable to the company rose to $3.20 billion, or $1.22 per share. Excluding items, the company earned $1.12 per share, beating Wall Street estimates of $1.09 per share, according to data from Refinitiv.

Net sales inched up unexpectedly to $16.69 billion from $16.65 billion. Analysts had forecast overall sales to fall to $16.46 billion.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)

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