P&G, which has been divesting tens of billions of dollars worth of brands, reported sales down 9 per cent to $17.8bn in the three months ended June, highlighting the challenges facing incoming chief executive David Taylor.
Net income for the maker of Tide laundry products and Pampers nappies shrank 80 per cent to $521m, or 22 cents a share, dragged down by restructuring costs, currency effects, and a $2bn charge to reflect the impact of Venezuela’s currency crisis.
The company said it had become impossible to convert the volatile Venezuelan bolívar or pay dividends in the country, forcing it to stop consolidating the results of its local operations under GAAP. It will instead report dividends from its Venezuelan subsidiaries as operating income once the cash has left the country.
P&G’s fourth quarter showed productivity improvements and a 22 per cent increase in earnings excluding restructuring costs and the impact of a stronger dollar. However, in a company conference call, analysts asked why there was still no real evidence of underlying earnings growth, whether there was a “Plan B”, and whether the company should be split up.
One highlighted the fact that fiscal 2015 organic sales growth, which strips out extraordinary items and forex effects, was 1 per cent higher, but for the 10 key business segments P&G is focusing on, that growth stood at only 2 per cent.
Chairman and chief executive AG Lafley and chief financial officer Jon Moeller batted off the frustrations, promising to deliver stronger growth in the coming year. They said that if parts of the strategy were not working then they would change them, but that the company still needed time for the turnround to take effect.
“Clearly we recognise the need to grow faster and think we’re making the right choices to do that,” Mr Lafley said. “The last thing I want to do is chase volume and share that has no value. We’ve been to that movie before. We’re picking our spots, and doing it with products that consumers prefer.”
The company’s outlook remains subdued for the current year, amid currency and macroeconomic headwinds in emerging markets and Europe. P&G’s shares dropped 3.9 per cent to $77.44 by close of trading in New York.
It expects revenue to fall by “low to-mid single digits” this year. An expected EPS increase of 53-63 per cent this year from $2.44 will come as it rebounds from the Venezuelan charge.
Even when extraordinary charges and currency movements are excluded, organic sales are expected to meet forecasts of “low-single digits”.
“We do well when we focus on following the shopper and consumer,” Mr Lafley said. “One of the big questions is how fast can we do this and my view is that we are much more interested in getting it right and making changes that sustain value creation.”
P&G, like many multinationals, is suffering in the emerging market slowdown. It faces particular pressure in Russia, where P&G has dominant market share, and where sales tumbled nearly 60 per cent in June.
Having sold nearly 100 brands, the company is promising to shift to growth mode in areas such as beauty and grooming, and nappies. As part of this transition, David Taylor will replace AG Lafley as chief executive in November.
For the full-year ended June 30, sales dropped 5 per cent to $76.3bn, while EPS dropped 21 per cent to $3.06.
Source : FT
