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P&G Q3 09/10 Earnings Results

Posted: April 29, 2010

P&G announced net sales for the third quarter of fiscal 09/10 increased 7% to $19.2 billion on a 7% increase in unit volume driven by a strong innovation program, increased marketing and merchandising support. Key initiatives launched included Crest 3D White and Olay Pro-X Firming in North America, Olay for Men and Olay Natural White in Asia, Oral-B Pro Health toothpaste in Latin America and Always Thick in the Central and Eastern Europe/Middle East/Africa (CEEMEA) region. Volume growth was broad-based with growth in all geographic regions, led by double-digit growth in developing regions. Organic sales growth was 4%. Mix reduced net sales by 2% due primarily to accelerated growth in developing regions. Pricing reduced sales by 1%. Favorable foreign exchange added 3% to net sales growth as key foreign currencies strengthened versus the U.S. dollar.

"We are very pleased with this quarter's results," said Bob McDonald, chairman of the board, president and CEO, P&G. "Volume growth was strong as we accelerated our pace of innovation and increased marketing support. Solid top-line results, in conjunction with our cost and productivity efforts, enabled us to exceed our core earnings per share targets. We are operating more effectively as one company, coordinating and scaling our activities. Our over-arching growth strategy—to touch and improve more consumers' lives, in more parts of the world, more completely—is working."

Beauty net sales increased 6% to $4.6 billion for the quarter on unit volume growth of 4%. Organic sales were up 2%. Volume growth was driven by double-digit increases in developing regions. Hair care volume was up mid-single digits driven by double-digit growth in developing regions behind initiative activity and market size expansion. All major hair care brands contributed to volume growth. Female beauty volume grew mid-single digits primarily due to a double-digit increase in shipments of female skin care products driven by the Olay Natural White initiative in Asia.

Salon Professional volume declined high single digits mainly due to the exit of non-strategic businesses, while organic volume declined mid-single digits primarily due to continued market contractions. Prestige volume increased mid-single digits due mainly to a weak base period comparison in travel retail and Western Europe, partially offset by continued market softness in Asia and North America. Net earnings were $562 million, up 2% behind higher net sales, a lower tax rate and expanded gross margin, partially offset by an increase in SG&A as a percentage of net sales driven by marketing investments.

Volume in male personal care grew low single digits due to the Zirh premium skin care acquisition, while organic volume was down low single digits behind market contractions and share losses in Western Europe.