Tags: P&G | Colgate Hurt by Sluggish US | UK Recoveries

P&G, Colgate Hurt by Sluggish US, UK Recoveries

Thursday, 27 Jan 2011 01:36 PM

Procter & Gamble Co. and smaller rival Colgate-Palmolive Co. posted lower quarterly net income, hurt by sluggish sales in markets like the United States and Western Europe, and their shares fell.

But Procter & Gamble also said it expects more confident shoppers to buy new, higher-priced products as the year progresses in markets like the United States.

"We believe that we're in the midst of a recovery," P&G Chief Executive Bob McDonald said about the United States.

Growth was pretty fast in the beginning of the quarter, then slowed in December as people spent their money on holiday-related items. The pace of recovery has been good in January, McDonald said.

Profits at both companies topped Wall Street's expectations, propped up, in part, by lower tax rates. Sales at both companies came in weaker than analysts expected.

Household product makers are banking on growth in developing markets such as India and China, as growth in developed markets such as the United States and Western Europe has stagnated.

The companies have used promotional pricing and coupons to woo shoppers who shunned pricier brands during the recession. Now that consumer confidence is rising, and employment trends are slightly more positive, they hope people will once again covet name-brand items.

High-end shoppers, at least, seem to be coming back. P&G was even caught off guard by the interest in some new premium products in the United States, straining its supply chain.

P&G did not have enough of its pricey Gillette Fusion ProGlide razors to meet demand, and had to pull back on some of its efforts to promote that product in stores, Chief Financial Officer Jon Moeller said.

P&G's sales growth came in at the low end of its forecast and below Wall Street's expectations. Still, the company said that it is gaining market share at home and abroad and maintained its sales and profit expectations for the year.

"I would call this a low-quality quarter," said Tim Hoyle, director of research at Haverford Investments, which has more than $6 billion in assets under management and owns P&G. "They're in a tough spot, really, to grow earnings anywhere close to what most investors would want to give them a premium valuation."

P&G shares were down 3.2 percent at $64.00 on Thursday, while Colgate's shares were down 2.5 percent at $78.04.

P&G and Colgate have introduced new goods, including high-end toothpastes from P&G's Crest and Colgate's namesake business. Both said their new oral care items are doing well.

The companies said they are trying to trim even more of their own costs to offset the impact of higher commodity prices.

P&G said it would raise U.S. prices on Duracell batteries in March and on some other goods in international markets. For now, Colgate is raising prices only in emerging markets.

P&G earned $3.33 billion, or $1.11 per share, in the fiscal second quarter that ended in December, down from $4.66 billion, or $1.49 per share, a year earlier. Much of the decline stemmed from a gain in the year-ago period from the sale of its pharmaceuticals business.

Excluding unusual items, earnings from continuing operations were $1.13 a share. Analysts' average forecast was $1.10, according to Thomson Reuters I/B/E/S.

P&G's sales climbed 2 percent to $21.3 billion, while analysts were looking for $21.58 billion. The volume of goods sold rose 6 percent.

Organic sales, which strip out the impact of acquisitions, divestitures and foreign exchange fluctuations, rose 3 percent, at the low end of P&G's 3 to 5 percent forecast.

Colgate earned $624 million, or $1.24 per share, in the fourth quarter, compared with $631 million or $1.21 per share a year earlier. Analysts had expected $1.23 per share.

Colgate's sales fell 2.5 percent to $3.98 billion. Analysts on average forecast $4.06 billion.

Colgate's organic sales rose 1 percent.

Tax rates at both companies were lower than a year earlier. P&G's fell sharply, to 17.9 percent from 29.8 percent, after it settled several routine tax audits, and because of the recent extension of U.S. tax law.

P&G stood by its fiscal 2011 forecasts, calling for earnings from continuing operations of $3.91 to $4.01 per share and organic sales growth of 4 percent to 6 percent.

Analysts on average expect a profit of $3.98 per share.

Colgate stood by its forecast for a mid-single-digit percentage rise in earnings per share for 2011.

© 2017 Thomson/Reuters. All rights reserved.

1Like our page
2Share
Companies
Procter Gamble Co. and smaller rival Colgate-Palmolive Co. posted lower quarterly net income, hurt by sluggish sales in markets like the United States and Western Europe, and their shares fell. But Procter Gamble also said it expects more confident shoppers to buy new,...
P&G,Colgate Hurt by Sluggish US,UK Recoveries
725
2011-36-27
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved