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Procter & Gamble (PG)
Proctor & Gamble Beats Expectations
In times of economic hardship, consumer- goods makers usually hold up better than other sectors. However, most consumer-goods makers have still been hurt as consumers cut back and cheaper store brands make inroads. The world's largest household-products maker, Proctor & Gamble, reported their earnings today in which sales fell 8%. Did other factors besides the global economic slowdown contribute to this drop? Were these earnings in line with expectations?
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Proctor & Gamble's earnings fell to $2.61 billion, or 84 cents per share, in the third quarter from $2.71 billion a year earlier. This beat expectations of the analysts polled by Reuters Estimates who had expected a profit of 80 cents a share. Net income fell 3.6% for its fiscal third quarter amid charges related to the sale of its Folgers coffee business and the effects of a stronger dollar. Earlier this year, P&G warned its sales growth was slowing and it lowered its June fiscal year financial targets. It now projects earnings of $4.20 to $4.25 a share on growth in organic sales, which excludes currency changes, acquisitions and divestitures, of 2% to 3%. Proctor & Gamble's shares are down 18% so far in 2009, compared with only a 6% decline in the Dow.
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Proctor & Gamble was hurt by both a strong dollar and falling sales. P&G said the appreciation of the U.S. dollar against other currencies translated to a 9% decline in sales. This can be contrasted with last summer when P&G posted huge profits that were partly helped by weakness in the dollar. In addition, Proctor & Gamble saw drops in its beauty, health, and household products divisions. Its brands include Head & Shoulders shampoo, Crest toothpaste, Tide detergent, Olay cosmetics and Pampers diapers. Beauty sales declined 9% to $4.3 billion while profits fell 14% to $504 million. Grooming revenue dropped 16% to $1.7 billion, pushing profits down 24%. P&G is aiming to revitalize its drooping beauty business, which accounts for about a third of its results, by creating upscale offerings. It also plans to make a play for a bigger presence in men's grooming products. Sales in health care slipped 12% to $3.2 billion and fabric and home care were down 6% to $5.4 billion. Baby and family care sales slipped by 2%, to $3.5 billion, with a 10% drop in profit.
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There are a few bright spots for Proctor & Gamble. This month the board decided to hike the company's quarterly dividend by 10% to 44 cents from 40 cents. It will be paid May 15. An increased dividend tends to a good indicator of a company's firm financial situation and prospects for growth. Proctor & Gamble rival, Colgate-Palmolive (CL: Charts, News, Offers), also reported its earnings today which it actually increased 9.8% to $536.5 million, but they were similarly hurt by weakness in consumer demand and a strong dollar. The profits from Proctor & Gamble's sale of coffee maker, Folgers, will be seen in next quarter's earnings report and will likely significantly boost figures. As of 11:52 AM, Proctor & Gamble is trading down 1.65% at $49.57.
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