NEW YORK (Reuters) - Procter & Gamble Co (PG.N) and Kimberly-Clark Corp (KMB.N), two of the world’s biggest household products makers, forecast strong sales gains in emerging markets on Friday, quelling investor fears that slowing growth in some countries would hurt their prospects.
P&G, the maker of Pampers diapers and Tide detergent, said revenue rose 8 percent in developing countries in its fiscal second quarter, but barely edged up in mature markets like the United States and Europe. It stuck to its 2014 sales and profit forecasts.
Kimberly-Clark reported similar gains in emerging markets, helped by strong growth in China, and gave an upbeat 2014 forecast.
Earlier this weak, rival Unilever (ULVR.L)(UNc.AS) said it would stick to its developing markets growth strategy as it reported 2013 results were boosted by a fourth-quarter recovery in sales in the segment.
P&G shares were up 2.8 percent to $80.41 in early-afternoon trading, while Kimberly-Clark was up 2.7 percent to $108.25. The broader market was sharply lower. .N
“The emerging markets have become increasingly volatile,” said Ali Dibadj, an analyst with Sanford C. Bernstein & Co. “People say emerging markets have slowed, but they’re still doing well.”
In conference calls with analysts, executives at both companies said they were concerned about currencies in both Argentina and Venezuela.
Kimberly-Clark Chief Executive Tom Falk said he expected “significant” pressure from foreign exchange and higher commodity costs in 2014.
The Argentina peso’s official rate has fallen 20 percent against the U.S. dollar so far this month, pressuring inflation even higher as confidence falls in Latin America’s No. 3 economy.
Under pressure to fix myriad economic ills, Venezuela’s socialist government announced on Wednesday that hotly sought U.S. dollars would now be traded at two different rates.
The growth in emerging markets was one reason P&G reported a decline of 0.9 percentage point in its profit margins. The company is building its presence in the developing segment.
The costs are worth paying, said one longtime investor.
“The emerging markets are definitely the future for P&G,” said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel, which manages about $11 billion and holds both P&G and Kimberly-Clark shares.
P&G’s gross margin was also hurt by stagnant sales in beauty products, including a drop in skin-care sales.
P&G still expects organic sales, which strip out the impact of currency changes as well as acquisitions and divestitures, to rise 3 percent to 4 percent, and core earnings to rise 5 percent to 7 percent.
Chief Executive Officer A.G. Lafley, who did not speak on the company’s conference call, has said the current fiscal 2014 would be a “transition” year, after the “stepping stone” year that ended in June.
Lafley, who returned in late May as CEO to replace Bob McDonald, will give a presentation on P&G’s strategy on February 20 at an industry conference in Florida.
“It is reassuring to see it has confidence it can hit the numbers, despite the weak categories,” J.P. Morgan analyst John Faucher wrote in a note.
P&G’s healthcare segment reported the fastest growth, with organic sales rising 5 percent.
The company earned $3.43 billion, or $1.18 per share, in its fiscal second quarter ended December 31, down from $4.06 billion, or $1.39 per share, a year earlier. Core earnings per share, which exclude restructuring charges, fell 1 percent to $1.21. Analysts expected $1.20 a share.
Sales rose 0.5 percent to $22.28 billion, in line with the average Wall Street estimate, according to Thomson Reuters I/B/E/S. Organic sales rose 3 percent.
(For a graphic on P&G’s performance: link.reuters.com/gyv36v)
Kimberly-Clark, which makes Huggies diapers and Cottonelle toilet paper, reported organic sales rose 5 percent, and forecast they would rise 3 percent to 5 percent in 2014.
Kimberly-Clark reported a fourth-quarter profit of $1.40 per share, compared to 68 cents a year earlier.
Editing by Jeffrey Benkoe and Amanda Kwan