Procter & Gamble profit falls 1 percent, but consumer products maker reports rising sales

P&G 3Q profit dips despite sales jump

CINCINNATI — Consumer products giant Procter & Gamble Co. reported Thursday that its profit fell 1 percent in its third quarter, hurt by charges including from the U.S. health care overhaul. But sales jumped 7 percent as households around the globe responded to new products, price cuts and stepped-up advertising.

The maker of Tide detergent and Pampers diapers reported net income of $2.59 billion, or 83 cents per share, for the quarter. That compares with $2.61 billion, or 84 cents a year ago, while sales rose to $19.2 billion.

While that was better than Wall Street projections of 82 cents per share, analysts surveyed by Thomson Reuters had expected higher revenue of $19.5 billion — promotions and sales of lower-priced products contributed to keeping P&G revenue below that expectation.

P&G shares fell $1.85, or nearly 3 percent, to $61.32 in morning trading. They have traded in a 52-week range of $48.25 to $64.58.

P&G said its core earnings per share, excluding tax, legal and restructuring charges, were 89 cents, up 10 percent. The company took a 5-cents-a-share charge for the recently passed U.S. health care reform.

P&G’s chief executive said the results topped the company’s core earnings goals, as P&G stepped up marketing, cut some prices, and rolled out new products across price tiers. P&G said U.S. sales were strong for the “basic” versions of Charmin toilet paper and Bounty paper towels and in western Europe for a lower-tier Pampers called Simply Dry.

P&G is trying to combine brand strength with lower-priced alternatives to draw shoppers back from store brands, while also grabbing their attention with upgraded products.

“We are doing what we have to do price-wise to stay price-competitive,” Bob McDonald, chairman and CEO, told investors on a conference call. But he said stepped-up innovation has not only produced a low-priced version of Tide in India that’s off to a strong start but also the Gillette ProGlide shaver, hitting U.S. store shelves in June, that will cost about 10 percent more than than the top-selling Gillette Fusion.

“So we are just doing what we have to do to continue to win the consumer value equation, and we are attempting to do that through the strongest innovation program that we’ve had in my 30-year career,” McDonald said.

P&G, which introduced new versions of Pampers, Crest toothpaste and Olay skin cream during the quarter, said broad-based growth included double-digit sales volume increases in emerging markets.

Edward Jones analyst Jack Russo pointed to the sales upswing in calling it a good quarter for P&G.

“I’m a little bit old-fashioned; I like it when companies are focused on growing sales,” Russo said. “It’s hard to move the needle when you’re this size.”

The sales were a turnaround from last year’s third quarter, when they slid 8 percent, to $18.42 billion, from the 2008 quarter as recession-pressured households tightened spending.

The company also lifted the low end of its guidance range for diluted net earnings per share for the full year by 4 cents, to a range of $4.06 to $4.12. Analysts expect $4.14.

P&G says it expects sales to rise 6 percent to 7 percent in the current fourth quarter, with earnings per share in a range of 68 cents to 74 cents. Analysts are expecting 76 cents.