The Procter & Gamble Company announced that second quarter net sales increased 2% to $21.3 billion driven by 6% volume growth which was partially offset by unfavorable foreign exchange and mix impacts. Organic sales grew 3%.Volume was up 6% behind growth in all major geographic regions, 16 of 17 top countries, five of six business segments and 19 of 23 billion-dollar brands. Market share was up in all geographic regions and the majority of key countries and brands. Businesses representing about 60% of net sales maintained or grew market share.
"We are expanding market shares by touching and improving the lives of more consumers in more parts of the world, more completely through our innovation and expansion plans," said Bob McDonald, chairman of the board, president and CEO, P&G. "This is driving strong volume and sales growth ahead of market levels. Core EPS is ahead of year-ago levels, and we are on track to deliver seven to 9% growth for the year."
In its beauty business, net sales increased 1% to $5.3 billion, and organic sales grew 3%. Volume grew 5%, while organic volume, which excludes the net impact of acquisitions and divestitures, increased 6%. Mix reduced net sales by 2% due to disproportionate growth in developing regions and retail hair care, both of which have lower than segment average selling prices. Volume in retail hair care grew high single digits behind double-digit growth in developing regions primarily due to initiative activity, value adjustments and distribution expansions in Asia and Latin America.
Volume in the female beauty business unit was up mid-single digits mainly due to skin care initiatives and market growth in Asia and the continued success of female blades and razors initiatives in North America and Western Europe. Volume in salon professional declined double digits due to the exit of non-strategic businesses and lower shipments in developed markets. Volume in prestige products was down low single digits due to the divestiture of minor brands, while organic volume was up low single digits behind market growth in Asia and the continued success of new fragrances launched in the prior quarter.
Net earnings increased 2% to $896 million driven by higher net sales and a lower effective tax rate, partially offset by lower operating margin. Operating margin contracted mainly due to increased marketing spending and higher commodity costs, mostly offset by lower foreign currency exchange costs and reduced overhead spending.
Grooming net sales increased 3% to $2.2 billion on a 5% increase in unit volume. Organic sales were up 6%. Volume growth in P&G's health and well-being business was led by oral care, which was up high single digits due primarily to the continued success and incremental merchandising support behind Crest 3D White in North America, Oral-B toothpaste expansions in Brazil, Belgium and Holland and the Pro-Health innovation in multiple markets around the world.
According to a Jan. 26, 2011, report in The Wall Street Journal, P&G plans to expand its Dolce & Gabbana makeup counters to more department stores to build its high-end business, which mainly consists of fine fragrances. The results of the move, along with the launch of Olay skin cream in 15 new markets supported by co-advertising with Pantene hair-care products, remain mixed, according to the report.
The full P&G financial report is available through the company.
