P&G posts 2Q results
CINCINNATI Procter & Gamble posted second-quarter earnings per share and organic sales in line with company expectations as it acknowledged that the environment will likely “remain difficult and highly volatile” in the near term.
“As expected, this was a particularly challenging quarter,” stated chairman and CEO A.G. Lafley. “Despite this, we grew organic sales 2% and delivered against our going in EPS guidance. We expect the environment will remain difficult and highly volatile—at least in the near term. We are focused on the fundamentals that are critical to success in our business. We will continue to build brands that deliver better value for consumers by leading innovation and managing cost and productivity programs with discipline. Our effort in these areas give me confidence that P&G will continue to grow profitability and generate attractive returns for shareholders over the long-term.”
Net sales declined 3% to $20.4 billion for the quarter driven by unfavorable foreign exchange and lower shipment volume. Organic sales, which exclude the impacts of acquisitions, divestitures and foreign exchange, were up 2% for the quarter.
Net earnings rose 53% to $5 billion and diluted net earnings per share rose 61% to $1.58. Net earnings from continuing operations slipped 7% to $3 billion due to lower net sales and operating margin.
In beauty, net sales slipped 4% to $4.9 billion for the quarter, as organic sales were in line with the previous year-end. According to P&G, net sales were down due to a 4% unfavorable foreign exchange impact and a 1% decline in volume, partially offset by a 1% positive pricing impact. Net earnings declined 10% during the quarter to $799 million primarily because of a reduction in net sales and lower operating margin from higher commodity costs.
In grooming, net sales declined 7% to $2 billion. Organic sales increased 1%. Volume declined 6% primarily due to a double-digit decline of Braun. Price increases taken across premium shaving systems added 4% to net sales.
Product mix contributed 1% to net sales behind continued growth of premium innovations such as Gillette Fusion. Unfavorable foreign exchange reduced net sales by 6%, and the net impact of acquisitions and divestitures reduced net sales by 2%. Net earnings decreased 3% to $416 million for the quarter primarily due to lower net sales, partially offset by higher operating margin from price increases and improved product mix.
For the 2009 fiscal year, the company expects organic sales to grow by 2% to 5%. Organic volume is expected to be flat to down 2%. Foreign exchange remains highly volatile and is expected to reduce sales by about 5%. The net impact of acquisitions and divestitures is estimated to be flat to negative 1%. Total sales growth is expected to be flat or negative 4%.