Procter & Gamble Q4 Profit Tops View, But Sales Miss

(RTTNews) - Consumer goods giant Procter & Gamble Co. (PG) reported Thursday a profit for the fourth quarter that plunged 80 percent from last year, hurt by significant one-time Venezuela charge.

Stripping down the charge, core earnings per share topped analysts' expectations, while quarterly sales missed their estimates. The company also provides guidance for core earnings and organic sales growth guidance for the full-year 2016.

The company announced Tuesday that it is replacing CEO A.G. Lafley for the second time, effective November 1. He will be succeeded by David Taylor, a 35-year-veteran and current Group President of Global Beauty, Grooming and Health Care.

During Lafley's second term as CEO, P&G announced plans in February to divest, discontinue or consolidate more than 100 non-core brands in a bid to become more nimble and improve its profitability as well as margins. At that time, the company said it was looking to have agreements in place for the divestitures by July 2015.

P&G agreed in early July to merge its beauty business with perfume maker Coty, Inc. (COTY) in a Reverse Morris Trust deal valued at about $12.5 billion. P&G's beauty business includes salon professional, retail hair color, cosmetics and fine fragrance as well as select hair styling brands businesses that encompasses 43 beauty brands.

The Cincinnati, Ohio-based maker of Tide detergents, Crest toothpaste and Gillette shaving razors reported net earnings attributable to P&G of $521 million or $0.18 per share for the fourth quarter, sharply lower than $2.58 billion or $0.89 per share in the prior-year quarter.

Net earnings from continuing operations plunged to $0.22 per share from last year's $0.87 per share.

Results for the latest quarter include one-time Venezuela charge of $0.71 per share and non-core restructuring costs of $0.07 per share.

The company said core earnings from continuing operations, which excludes certain items, was $1.00 per share, compared to last year's $0.93 per share. On a currency-neutral basis, core earnings per share increased 22 percent to $1.13.

The company said core earnings per share results included a $0.09 per share benefit compared to the prior year from non-operating income, primarily minor brand divestiture gains.

On average, 20 analysts polled by Thomson Reuters expected the company to report earnings of $0.95 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter declined 9 percent to $17.79 billion from last year's $19.60 billion, and missed fifteen Wall Street analysts' consensus estimate of $17.98 billion.

Net sales included a nine percentage points negative impact from foreign exchange and a three percent negative impact from divestitures. Organic sales remained flat, as a three percentage point benefit from pricing and mix was offset by lower shipment volume.

Beauty care net sales decreased 10 percent to $4.14 billion, grooming net sales declined 18 percent to $1.69 billion and health care net sales dropped 6 percent to $1.71 billion from last year.

Fabric care and home care net sales declined 7 percent from a year ago to $5.32 billion, and baby care and family care net sales slipped 7 percent to $4.82 billion from a year ago.

Operating margin for the quarter contracted 1,090 basis points to 5.2 percent from last year's 16.1 percent, while adjusted operating margin improved 90 basis points to 18.1 percent from last year.

"In fiscal 2015, P&G delivered strong, double-digit constant currency core EPS growth and very good free cash flow productivity of over 100% on modest organic sales growth. We made significant productivity gains and have largely executed the reshaping of our business portfolio," Lafley said.

Looking ahead to fiscal 2016, the company said it expects core earnings per share to be down slightly to up mid-single digits range from a restated $3.77 per share in 2015, on projected organic sales growth of in line to up low single digits range, and net sales decline in the low-to-mid single digit range, including a negative 5 points impact from foreign exchange.

The company noted that the guidance is relative to restated figures for fiscal 2015 as it will report the earnings from the Beauty categories it plans to exit as discontinued operations.

Street is currently looking for full-year 2016 earnings of $4.18 per share, on annual sales drop of 0.7 percent to $75.93 billion.

"Going forward, our objective is to deliver balanced results across the three main drivers of operating total shareholder return - sales growth, operating profit margin expansion and free cash flow generation. We expect continued strong cost savings and free cash flow productivity, and we are investing behind product innovation to support an improvement in top-line growth," Lafley added.

In Thursday's regular trading session, PG is currently trading at $77.74, down $2.88 or 3.57% on a volume of 8.65 million shares. In the past 52-week period, the stock has been trading in a range of $77.10 to $93.89.