The Procter & Gamble Company saw 4% sales growth to $22.1 billion for the October–December 2011 quarter. Growth was driven by higher volume and pricing actions, partially offset by geographic and product mix. The company continued to deliver broad-based organic sales growth, with all six business segments up versus the prior year.
“We continue to make progress against our key business priorities in a difficult macroeconomic environment,” said chairman, president and CEO Bob McDonald. “We delivered solid top-line growth and continued to accelerate productivity improvements to drive down costs. With the easing of commodity cost comparisons over the next two quarters, continued solid top-line growth and cost savings progress, we expect operating profit growth to accelerate in the second half of the fiscal year.”
The company recorded organic sales growth of 4% for the quarter. Volume increased 1% behind overall market growth, initiatives and continued market expansions. Volume grew at high single-digit rates in developing regions. This growth was partially offset by a mid-single-digit decrease in developed regions. Broad-based price increases across all segments and geographies, designed to recover higher commodity costs and devaluing developing market currencies, increased net sales by 4%. Geographic and product mix reduced net sales by 1%.
By segment, P&G saw beauty net sales increase 1% to $5.4 billion on unit volume growth of 1%. Organic sales grew 2% on 2% organic volume growth. Price increases added 3% to net sales growth. Mix reduced net sales by 4% due to disproportionate growth in developing regions, which have lower than segment average selling prices, and a decrease in the premium-priced product categories. Favorable foreign exchange increased net sales by 1%. Volume grew high single digits in developing markets and decreased mid-single digits in developed regions. Volume in hair care increased mid-single digits behind high-single-digit growth in developing regions due to product innovation activity and distribution expansions in Asia, while developed regions decreased mid-single digits. Volume in skin care, personal care and cosmetics decreased low single digits due to the Zest and Infasil divestitures, Olay share loss in developed markets, and the volume impact of price increases due to consumer value differences relative to competitive products in North America. Volume in salon professional declined high single digits due to market contraction in Europe, distribution share losses and non-strategic brand discontinuations. Volume in prestige products decreased low single digits driven by minor brand divestitures and a strong initiative base in the prior year, offset by current year market growth and initiatives for SK-II. Net earnings declined 8% to $802 million as higher commodity costs more than offset the impact of sales growth.
Grooming net sales increased 1% to $2.2 billion. Unit volume increased 1%. Organic sales were up 2%. Price increases added 2% to net sales growth, while unfavorable product mix decreased net sales by 2% mainly due to a reduction in premium appliances, which have higher than segment average selling prices. Volume grew high single digits in developing regions and decreased mid-single digits in developed regions. Shave care volume grew low single digits due to high single-digit growth in developing regions behind product and commercial innovation, Fusion ProGlide geographic expansion and market growth, partially offset by a mid-single-digit decrease in developed regions due to market contraction and competitive activity. Volume in appliances decreased double digits primarily due to a decrease in Western Europe as markets contracted and competitive activity increased. Net earnings increased 2% to $517 million, largely consistent with net sales growth. The decline in gross margin due to unfavorable geographic and product mix was offset by lower SG&A.
Overall net sales are expected to increase 3–4% in fiscal 2012. Organic sales are expected to increase 4–5%. Foreign exchange is expected to reduce net sales by 1% for the year. Pricing is expected to add 4% to sales while unfavorable product and geographic mix is expected to reduce sales by 1–2%.
P&G also provided additional perspective on the improved results expected in the second half of the fiscal year. The company said it expects net sales growth to be in line with year ago to up 2%. Organic sales growth in the range of 4–5% driven primarily by continued strong growth in developing markets. Foreign exchange is expected to reduce net sales by 3–4%. The company added that it expects sequential improvement in core operating profit in the third and fourth quarters as the benefits from pricing increase and commodity cost comparisons continue to ease. P&G said it expects double-digit growth in core operating profit for the second-half of the fiscal year.
