P&G earnings sink on strong dollar
New York (AFP) - US consumer products giant Procter & Gamble Tuesday reported a sharp drop in quarterly earnings and warned of a tough year due to the strengthening dollar.
P&G, which sells Bounty paper towels, Gillette razors and other consumer staples, said second-quarter earnings were $2.4 billion, down about 31 percent from last year.
Results, however, were hit hard by the strength of the dollar.
The US currency has hit multi-year highs against other major currencies during the quarter.
P&G's net sales dropped four percent in raw dollars. But when currency effects and the impact of acquisitions and divestitures were stripped out, sales gained two percent.
"The October-December 2014 quarter was a challenging one with unprecedented currency devaluations," said P&G chief executive A.G. Lafley.
"Virtually every currency in the world devalued versus the US dollar, with the Russian ruble leading the way."
Lafley said the outlook for the rest of the year "will remain challenging" due to the lofty dollar, with foreign exchange reducing fiscal sales by five percent and net earnings by 12 percent, or at least $1.4 billion.
P&G chief financial officer Jon Moeller said the company was in the process of enacting price increases in foreign markets.
"Generally, the principle is that over time you recover the amount of the price effect," he told reporters on a conference call.
That means if a P&G good is in a market where the dollar has appreciated 20 percent, the price of the good to consumers will also increase by 20 percent, but the increase might not happen all at once, Moeller said.
Other steps include boosting local sourcing in Russia, Venezuela and other markets significantly affected by currency devaluation.
Moeller said P&G was building factories in some hard-hit currency markets, or swapping sourcing of materials and inputs to other weak-currency markets.
Other measures include corporate cost-cutting and the implementation of a previously announced plan to eliminate about 90 underperforming brands. Moeller said P&G has so far reached agreements to sell about 35 brands. The objective is to focus marketing and growth around the best prospects.
P&G's net earnings for the quarter translated into $1.06, with the foreign exchange hit at 16 cents per share. The company had been forecast by analysts to notch $1.13 per share.
Quarterly revenues were $20.16 billion, down 4.4 percent from last year.
P&G shares fell 3.1 percent to $86.79 in pre-market trade.
