P&G Profit Hurt By Strong Dollar, Trims 2015 Sales Outlook

(RTTNews) - Consumer goods giant Procter & Gamble Co. (PG) reported Thursday a profit for the third quarter that declined 17 percent from last year, stung by a stronger U.S. dollar and disappointing revenues.

Core earnings per share matched analysts' expectations, while quarterly sales missed their estimates. The company also reaffirmed its core earnings guidance, but trimmed organic sales growth and sales growth outlook for the full-year 2015.

"Our third quarter earnings results were largely in-line with what we had expected. We delivered double-digit constant currency core EPS growth with significant currency-neutral gross and operating margin expansion from over 400 basis points of productivity savings from programs that continue to gain momentum. This quarter the productivity progress was offset by foreign exchange," Chairman, President and CEO A.G. Lafley said in a statement.

The Cincinnati, Ohio-based maker of Tide detergents, Crest toothpaste and Gillette shaving razors reported net earnings of $2.15 billion or $0.75 per share for the third quarter, lower than $2.61 billion or $0.90 per share in the prior-year quarter.

Net earnings from continuing operations for the quarter declined to $2.48 billion or $0.85 per share from $2.53 billion or $0.87 per share last year.

The company said core earnings from continuing operations, which excludes certain items, was $0.92 per share, compared to last year's $1.00 per share. On average, 19 analysts polled by Thomson Reuters expected the company to report earnings of $0.92 per share for the quarter. Analysts' estimates typically exclude special items.

Foreign exchange reduced earnings by $0.18 per share. On a currency-neutral basis, core earnings per share increased 10 percent to $1.10 per share.

Net sales for the quarter declined 8 percent to $18.14 billion from last year's $19.64 billion, and missed sixteen Wall Street analysts' consensus estimate of $18.49 billion.

Net sales include a negative eight percentage point impact from foreign exchange and a negative one percentage point impact from minor brand divestitures.

Foreign exchange reduced net sales by 8 percent, while favorable product mix across most segments increased sales by 1 percent, and pricing improved sales by 2 percent. Organic sales grew 1 percent, being at or above year ago levels in four of five reporting segments. Meanwhile, volume decreased 2 percent.

Beauty care net sales decreased 11 percent to $4.17 billion, grooming net sales declined 3 percent to $1.80 billion, and health care net sales dropped 1 percent to $1.91 billion from last year. Fabric care and home care net sales decreased 9 percent from a year ago to $5.25 billion, and baby care and family care net sales declined 6 percent to $4.89 billion from a year ago.

Operating margin for the quarter improved 50 basis points to 17.3 percent from last year, as selling, general and administrative expense, as a percentage of total sales, declined 80 basis points, partially offset by a 30 basis points drop in gross profit margins.

Looking ahead to fiscal 2015, P&G said it now expects organic sales growth in the low single digits and net sales growth is expected to be down 5 to 6 percent from last year, including a negative 6 to 7 percent foreign exchange headwind and a 1 percent impact from minor brand divestitures.

Previously, the company expected organic sales growth in the low-to-mid single digit range, and net sales decline of 3 to 4 percent, including a negative five point impact from foreign exchange.

Meanwhile, P&G maintained its outlook for currency-neutral core earnings per share growth in the double-digits, and core earnings per share to be in-line to down low single digits. All-in reported earnings per share are also expected to be down about 21 to 22 percent.

Street is currently looking for full-year 2015 earnings of $3.98 per share, on annual revenues of $77.31 billion.

"As we have done before, we'll offset foreign exchange over time through a combination of pricing, mix enhancement and cost reduction. We are focused on the significant opportunities in our control, including brand initiatives and product innovation, business and brand portfolio simplification, overhead savings and major supply chain productivity initiatives, to improve results in 2015 and beyond," Lafley added.

PG closed Wednesday's regular trading session at $83.09, down $0.13 on a volume of 6.72 million shares. In the past 52-week period, the stock has been trading in a range of $77.29 to $93.89.