Procter & Gamble quarterly profit rises

CHICAGO (Reuters) - Procter & Gamble Co (PG.N) posted a higher quarterly profit on Wednesday, helped by price increases and a benefit from foreign exchange rates, but warned volatile markets would weigh on annual results.

The world's largest consumer products maker lowered the bottom end of its fiscal year profit forecast, citing volatility in commodity, energy and currency markets.

It said this year's sales growth would be weaker than previously forecast and that revenue might even fall in the current quarter because of the hit it expects from foreign exchange.

P&G, whose products include Tide detergent and Pampers diapers, has seen some consumers switch to low-price private label brands.

But it expects consumers will continue to buy pricier, innovative items such as clinical-strength deodorants, as well as its own lower-priced products like Gain detergent and Luvs diapers.

Selling "products that consumers purchase weekly and use daily gives me continuing confidence P&G will deliver target growth over the long term, even in a challenging economic environment," Chairman and Chief Executive A.G. Lafley said in a statement.

P&G said profit in its fiscal first quarter rose to $3.35 billion, or $1.03 per share, from $3.08 billion, or 92 cents a share, a year earlier, matching analysts' average forecast, according to Reuters Estimates.

Sales rose 9 percent to $22.03 billion, topping Wall Street's view. Excluding the impact of acquisitions, divestitures and foreign exchange, sales rose 5 percent.

Shares of P&G, a component of the Dow Jones industrial average .DJI, were up 0.9 percent at $63.80 in premarket trading.

FORECAST HIT BY FOREX

Products that sold well included Head & Shoulders shampoo, Gillette Fusion razors and Luvs diapers, which are priced lower than P&G's Pampers brand.

P&G, like other companies, has raised prices to counter higher raw material and transportation costs. Now that those costs are coming down, consumers might expect to see lower prices in stores as well.

The cost reductions P&G has seen would not trigger revised prices at this time, outgoing Chief Financial Officer Clayton Daley said on Wednesday, speaking on CNBC.

P&G said it now expects to earn $3.77 to $3.87 per share in fiscal 2009, versus a prior forecast of $3.80 to $3.87 per share. That forecast still excludes a gain of about 50 cents per share from the sale of the Folgers coffee business and about 12 cents a share in increased restructuring costs. The company's fiscal year began on July 1.

Analysts' average forecast is $3.83.

A weak U.S. dollar helped boost revenue in recent quarters. Now that the dollar is gaining, sales in foreign markets have a lower dollar value on the income statement.

P&G now expects revenue to rise 1 percent to 3 percent this year, versus a prior view of 5 percent to 7 percent growth, due to foreign exchange.

P&G expects to earn 98 cents to $1.03 per share in the current fiscal second quarter, excluding the gain from Folgers and 3 cents per share in Folgers-related restructuring charges. Analysts' average forecast is $1.03.

The company forecast second-quarter revenue to be down 1 percent to up 2 percent. Excluding acquisitions, divestitures and foreign exchange, revenue should rise 4 percent to 6 percent.

P&G said its credit ratings are in the top 5 percent of all public companies, which should allow it to access credit markets without issue.

(Reporting by Jessica Wohl; Editing by Steve Orlofsky)