P&G’S Q3 EARNINGS
BUT COSTS DIM OUTLOOK
• Procter & Gamble Co. lowered its
earnings outlook for the year due to fast-rising costs for raw materials and fuel and
the still-sluggish economies in the U.S. and
other developed countries.
The maker of Tide detergent and Crest
toothpaste said that profits and sales rose
in its third quarter, led by sales in emerging
markets. The company also announced
plans for more price increases.
P&G, based in Cincinnati, said net income was $2.87 billion, up 11% over last
P&G reported double-digit sales increases in Asia, with strong sales for Pantene shampoo there and in Brazil, and for
Gillette razors in countries such as India,
areas the company is increasingly relying
on for sales growth. But developed market
sales, which still account for two-thirds of
P&G’s business, continued to be nearly flat.
“The results show that consumers in
developed markets are struggling,”Bob Mc-
Donald, chairman and CEO, told reporters.
“They’re struggling with higher gasoline
prices ... which is causing them to make
McDonald said P&G is counting on of-
fering more value and innovation, such as
Tide Pods, concentrated laundry detergent
tablets it will roll out in North America this
July (see p. 61 in this issue), to keep con-
sumers buying its big-name brands instead
of trading down to store brands or other
The world’s largest consumer products
maker and its competitors face rising costs
for key raw materials such as pulp and resin
and fuel and have begun testing household
tolerance for higher prices.
Jon Moeller, chief financial officer, said
P&G’s commodity costs are increasing
even faster than expected earlier, now estimated at $1.8 billion higher for the year, up
from $1 billion projected in February, and
were more than double what was expected
in the third quarter.
P&G increased prices in the quarter on
Gillette blades and razors and just hiked
prices on Pampers diapers and wipes as
well as Charmin toilet paper and Bounty
Moeller said pulp costs are up 10% for
the paper-related products. He said diesel
oil is up 25%, adding to transportation
costs, while resin used in packaging rose
P&G will raise prices this summer on
Head & Shoulders shampoo and Cascade
dishwashing detergent, among other items.
The company also said it is trying to reduce
costs with less packaging, alternative materials and more efficient energy use.
Moeller told analysts on a conference
call that Middle East turmoil and the Japanese earthquake also hurt sales in those
markets, although P&G operations are
continuing as normal.
For overall sales, P&G expects growth of
4-5%; analysts project about 3% for the
year, to $82.02 billion.
Nu Skin Expects Q1
Revenue Will Be Up 9%
• Nu Skin Enterprises, Inc. said it expects
to exceed previous company guidance by
posting first-quarter revenue of approximately $395 million, a 9% improvement
over the prior-year period. Revenue is expected to benefit approximately 5% due to
foreign currency fluctuations.
“We are starting the year off strong with
record first-quarter revenue, driven largely
by impressive gains in our emerging markets,” said Truman Hunt, president and
chief executive officer. “Our performance
this quarter is particularly impressive when
taking into consideration last year's first-quarter launch of ageLOC Transformation,
which contributed to 23% growth. In addition, we estimate the natural disasters in
Japan had a negative first-quarter impact of
approximately $5 million in revenue and
$.01 to earnings per share.
“Our overall geographic diversity contributed to the impressive quarter. Revenue
was particularly strong in mainland China
and South Asia/Pacific, which generated
local currency growth rates of approximately 45% and 30%, respectively. South
Korea and Europe were also solid perform-ers in the first quarter.
“We anticipate that our U.S. business
will report a decline of approximately 10%
partially due to a difficult comparison with
the prior-year launch of ageLOC Transformation, while Japan revenue is expected to
decline 7%, which includes the negative
impact from the natural disasters,” Hunt
“As the Nu Skin global family rallies
around our friends and colleagues in Japan,
we have gained an even greater apprecia-
tion for the resiliency of the people of this
great nation. We have been inspired by our
Japanese sales leaders as they courageously
respond to this tragedy. As a company, we
believe that the natural disasters will slow,
but will not derail, our turnaround efforts
Hunt reiterated 2011 guidance of $1.60
to $1.63 billion in revenue with earnings
per share in the $2.25 to $2.35 range, or
$1.92 to $2.02 when including charges re-
lated to the Japan Customs decision.
“We estimate the natural disasters will
have an annual negative impact on Japan
sales of 5%, or approximately $25 million.
Although the situation is fluid, we project
an impact of about $5 million in the first
quarter, $10 million in the second quarter,
$7 million in the third quarter and about $3
million in the fourth quarter,” he said.
However, Nu Skin expects overall results will benefit from stronger-than-anticipated revenue growth in South
Asia/Pacific and China, as well as healthy
growth in South Korea and Europe. The
company also anticipates a stronger product launch in the fourth quarter than initially forecast. •