CINCINNATI Procter & Gamble released on Wednesday solid quarterly results driven in part by cost control and Gillette synergy benefits.
“This quarter is yet another demonstration of the power of P&G’s product category and geographic diversification and disciplined focus on cash and cost productivity,” stated A.G. Lafley, chairman and chief executive officer. “P&G delivered strong results in-line with long-term targets in a challenging economic and competitive environment with broad-based sales and share growth, earnings growth and overhead cost improvement.”
Net sales totaled $20.46 billion, up 9 percent compared with the year-ago period.
Net earnings totaled $2.7 billion, or 82 cents per share, compared with $2.5 billion, or 74 cents per share, in the year-ago period.
Operating profit was up 13 percent as a result of higher net sales and improved operating margin. Operating margin was up 60 basis points as a reduction in overhead spending as a percent of net sales more than offset higher commodity and energy costs.
SG&A expenses were 31.2 percent of net sales, an 80 basis point improvement versus the year-ago period because of lower overhead spending as a percent of net sales. Overhead spending improved as a result of increased productivity, Gillette synergies and scale leverage. Marketing spending was up 9 percent, in-line with net sales growth.
In beauty, net sales rose 9 percent to $4.7 billion. Volume was up mid-single digits in hair color behind the Nice ‘N Easy Perfect 10 launch and in cosmetics behind the CoverGirl Lash Blast mascara initiative. Retail hair care volume was up mid-single digits as high-teens growth on Head & Shoulders and double-digit growth on Rejoice were partially offset by a decline on Pantene in North America. Net earnings in beauty were down 2 percent to $589 million as the impact of higher net sales was more than offset by higher commodity costs and base period gains from minor Wella fragrance brand initiatives.
Grooming net sales rose 13 percent to $2 billion behind 6 percent volume growth and a 7 percent favorable foreign exchange impact. Price increases taken across premium shaving systems added 2 percent to net sales. Product mix had a negative 2 percent impact on net sales as favorable mix from growth on Fusion was more than offset by a negative mix impact from disproportionate growth in developing regions. Blades and razors volume was up high-single digits behind double-digit volune growth in developing regions on the successful expansion of Fusion and the launch of Venus Embrace in North America.
Fusion will deliver more than $1 billion in net sales this fiscal year, making it P&G’s 24th billion-dollar brand and the fastest ever to reach this milestone, including Mach3, according to P&G.
Net earnings in grooming were up 30 percent for the quarter to $403 million behind higher net sales, lower overhead spending and a more profitable product mix.