P&G profits rise but still struggles for higher growth

Wed Apr 23, 2014 12:43pm EDT

Downy softener and Tide laundry detergent, products distributed by Procter & Gamble, are pictured on sale at a Ralphs grocery store in Pasadena, California January 21, 2014. REUTERS/Mario Anzuoni

Downy softener and Tide laundry detergent, products distributed by Procter & Gamble, are pictured on sale at a Ralphs grocery store in Pasadena, California January 21, 2014.

Credit: Reuters/Mario Anzuoni

(Reuters) - Procter & Gamble Co (PG.N), the world's largest household products maker, reported a higher quarterly profit on Wednesday, helped by cost cutting and stronger sales of items like detergent and air freshener.

But net sales in the third quarter were unchanged at $20.6 billion, disappointing investors looking for faster growth several years into P&G's efforts to focus on core products.

Organic sales, which exclude the impact of divestitures and acquisitions, rose 3 percent, but a strong U.S. dollar wiped out those gains.

Shares fell 1 percent to $79.85 in morning trading and one analyst said P&G needs faster growth to lift shares.

"We believe a sustained acceleration in organic growth toward the upper end of the 3 percent-4 percent range is necessary for material upside to the stock," said Oppenheimer & Co analyst Joseph Altobello in a research note

P&G stock is 7 percent below a 52-week high in November.

It has been under pressure to launch innovative products and streamline its businesses. Two weeks ago, P&G said it was selling the bulk of its pet food business to Mars Inc for $2.9 billion. In recent years, it also sold its Folgers coffee brand and Warner Chilcott pharmaceuticals.

Under a 5-year, $10 billion restructuring plan announced in February 2012, P&G has sought to cut expenses by streamlining management, lowering overhead costs, cutting jobs and reducing marketing costs. Chief Financial Officer Jon Moeller told reporters the restructuring was running ahead of schedule.

Organic sales in P&G's fabric care and home care division, which generates almost one third of sales, rose 6 percent. Brands in that category include Tide, Febreze air freshener and Duracell batteries.

Grooming, its most profitable business, saw sales rise 1 percent. P&G's struggling beauty division, which includes Head & Shoulders and Olay, improved, with sales up 2 percent.

The company has been pushing hard for market share in emerging markets. The effort is paying off. Organic sales in emerging markets rose 5 percent, compared to 1 percent in developed markets, Moeller said.

But P&G's profit in those markets is lower given the money it is spending on marketing to establish itself.

The maker of Pampers diapers and Tide detergent earned $2.61 billion, or $0.90 per share, in the fiscal third quarter ended March 31, up slightly from $2.57 billion, or $0.88 per share, a year earlier.

Core earnings per share, excluding restructuring charges, rose 5 percent to $1.04, 3 cents better than expected, according to Thomson Reuters I/B/E/S.

P&G left its fiscal 2014 forecasts unchanged. It still expects organic sales to rise 3 percent to 4 percent, and core earnings to rise 5 percent to 7 percent.

P&G graphic: link.reuters.com/jyc78v

(Reporting by Phil Wahba in New York, Editing by Franklin Paul and Sofina Mirza-Reid)

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