Procter & Gamble’s 2nd-qtr profit falls, but sales rise as consumers turn back to brands

P&G 2Q sales rise; consumers turn back to brands

CINCINNATI — The Procter & Gamble Co. sees budget-focused households responding to price cuts, promotions and new versions of its products, and the maker of Pampers diapers and Gillette shavers says its sales are growing at pre-recession rates.

P&G reported Thursday that sales rose 6 percent for its second quarter, a turnaround from sales slumps amid the recession. Its profit slid 7 percent on a lower gain from selling business lines.

P&G shares rose $1.49, or 2.5 percent, to $62.30 in morning trading, near their 52-week high of $63.48. They were as low as $49.93 last March.

The world’s largest consumer products maker said it earned $4.66 billion, or $1.49 per share, with sales of $21 billion. Earnings got a 47-cent boost from the sale of P&G’s prescription drug business.

Analysts expected $1.40 a share on $21.07 billion in sales.

P&G said organic sales — a key gauge that excludes acquisitions, currency fluctuations and other such effects — were up 5 percent. The company Thursday raised its full-year forecast by 1 percent to a range of 3 to 5 percent for that measure.

“After several years of relative underperformance, category softness and modest share losses, P&G is clearly fighting back,” Deutsche-Bank North America analyst Bill Schmitz Jr. said in a client note. He also pointed out that P&G expects organic sales to grow 4-6 percent in the current quarter, “reverting to the company’s long-term target we haven’t seen since before the crisis.”

Profit in the quarter fell from $5 billion a year ago, when earnings were boosted 63 cents a share by P&G’s sale of Folgers coffee. But P&G reported that net income from the businesses it has kept rose 12 percent, from $2.8 billion in last year’s second quarter to $3.1 billion.

P&G and other big-brand companies have been trying to counter shoppers trading down to store brands and household belt-tightening.

P&G is using pricing, promotions and innovation to revitalize sales, cutting prices on some products and introducing lower-tier versions of others, while rolling out premium products such as Tide anti-stain laundry additives. During the second quarter, P&G cut the price of Cheer detergent and began offering it as a bargain brand.

“It’s not one size fits all,” Jon Moeller, the chief financial officer, told analysts on a conference call. He said the new Tide Stain Release is off to a good start, and that such premium products as Gillette Fusion shavers and Olay Pro X skin care also had good sales.

P&G officials said growth was broad-based across its portfolio, with gains in sales and market share in both developed and emerging markets. Sales for products such as Pantene and Head & Shoulders shampoos and Crest toothpaste were particularly strong in China, a country P&G has targeted for big growth.

“That market share growth is generally coming from places where we are innovating, where we have the right consumer value, where we are doing a good job marketing,” CEO Bob McDonald said.

It was the second straight quarter with better-than-expected earnings under McDonald, who took over July 1 and added the chairman’s title Jan. 1.

P&G stuck to full-year earnings expectations of $4.02 to $4.12 a share. Analysts surveyed by Thomson Reuters expect, on average, $4.12 a share. For its third quarter, ending in March, P&G forecast earnings of 77 cents to 82 cents a share, compared with analysts’ expectations of 85 cents. Company spending on marketing and product development, rising raw materials costs and the currency devaluation in Venezuela are expected to affect results this year.