P&G to cut about 10 percent of non-manufacturing jobs
BOCA RATON, Florida
BOCA RATON, Florida (Reuters) - Procter & Gamble Co plans to cut a total of 5,700 nonmanufacturing jobs as part of a new plan to reduce costs by $10 billion by the end of fiscal 2016, Chief Executive Officer Bob McDonald said on Thursday.
The world's largest household products company has about 57,000 non-manufacturing employees among its total workforce of about 129,000.
P&G had already said it would cut 1,600 positions in the current fiscal year. On Thursday, it said it would cut another 4,100 jobs during fiscal 2013, which begins in July.
The company expects to save a total of $800 million from the job cuts, executives said at the annual Consumer Analyst Group of New York, or CAGNY, conference in Boca Raton, Florida. P&G also trimmed its profit forecast due to the pending sale of its Pringles snacks business.
In total, P&G aims to trim $10 billion of costs, including $1 billion in marketing costs and $3 billion in overhead costs.
After years of expanding, bringing products such as Gillette Guard razors to India and Pantene shampoo to Brazil, P&G realized that it needs to be more nimble in order to ensure strong growth, especially in emerging markets, at a faster clip.
P&G is still the largest consumer products maker but it has been hit by some performance issues lately. For example, it could not make enough of its new Tide Pods detergent for a major in-store marketing push and it had to rescind price increases on items such as Cascade dishwasher detergent after competitors decided not to raise their prices.
Some analysts expected a smaller restructuring plan, and seemed to believe that the new plans could finally be enough to push P&G back to a more dominant stance.
"It's what they need to do," said UBS analyst Nik Modi, who said that given P&G's size, there is a lot of opportunity for improving productivity, "you just have to find it."
He kept his "neutral" rating and $66 price target on the shares until he can start to see "the company delivering on these targets."
The $10 billion in cost reductions appeared to be "well thought out," said Consumer Edge Research analyst Javier Escalante.
P&G outlined a variety of projects it is putting in place, including using less-expensive packaging, eliminating duplicate work, working on innovations with outside companies and virtual technology, and advertising for a variety of brands at once.
Escalante said that as P&G gains more flexibility there could be repercussions for competitors, many of whom already went through recent restructuring, job cuts and cost cutting and now have less wiggle room to respond to a leaner, tougher P&G.
P&G gave a look at the rapid growth of its Oral-B toothpaste business in Latin America on Thursday, suggesting that it is prepared for a continued fight with Colgate-Palmolive Co, the dominant oral care player in countries such as Brazil.
Colgate is set to speak at the CAGNY conference on Friday.
P&G also took a humorous jab at some of its smaller competitors, who sometimes say that they can be more nimble than the large P&G, which had sales of $82.56 billion in fiscal 2011.
"Over (the past) nine quarters, we've organically added $7 billion to company sales. This is roughly equivalent to growing one Energizer and one Church & Dwight in a little over two years," Chief Financial Officer Jon Moeller said near the beginning of his presentation.
Shares of Cincinnati-based P&G closed up 3.1 percent at $66.42 on the New York Stock Exchange.
P&G trimmed earnings forecasts for the current quarter and fiscal year because of the new plan to sell its Pringles snack business to Kellogg Co. The two companies announced their deal last week after P&G walked away from selling Pringles to Diamond Foods Inc, whose accounting practices came under fire after that agreement had been signed.
P&G lowered earnings per share expectations by 2 cents for the current third quarter and by 7 cents for the fiscal year due to the pending sale of Pringles. It now expects to earn 89 cents to 95 cents per share in the third quarter, which ends in March, and $3.93 to $4.03 per share in the fiscal year ending in June.
(Reporting by Jessica Wohl; Editing by Lisa Von Ahn and Mark Porter)