Bloomberg News

P&G Quarterly Net Income Falls Amid Higher Commodity Costs

October 27, 2011

(Updates with analyst’s comment in fourth paragraph.)

Oct. 27 (Bloomberg) -- Procter & Gamble Co., the world’s largest consumer-products company, reported a 1.9 percent drop in first-quarter net income as higher costs for raw materials countered price increases and sales gains in emerging markets.

Net income in the fiscal period ended Sept. 30 fell to $3.02 billion from $3.08 billion, a year earlier, the Cincinnati-based company said today in a statement. On a per share basis, profit rose to $1.03 because the number of outstanding shares decreased. That matched the average of 19 estimates compiled by Bloomberg.

Chief Executive Officer Robert McDonald raised prices across all divisions and regions in the quarter to help make up for higher costs for commodities. Consumer confidence in the U.S. unexpectedly sank this month to the lowest level since March 2009.

“The cost of doing business has gone up -- higher competition, more difficult consumer, more demanding retailer, tougher to market,” Ali Dibadj, an analyst at Sanford C. Bernstein & Co, said in an interview. He has an “outperform” rating on the shares.

P&G, the maker of Charmin paper towels and Head & Shoulders shampoo, rose 0.5 percent to $65.26 at the close in New York. The shares have gained 1.4 percent this year.

Profit Forecast

The company projected profit for the fiscal second quarter of $1.05 to $1.11. Analysts predicted $1.16, the average of estimates compiled by Bloomberg

Total sales at P&G, which last year generated two-thirds of its revenue from outside the U.S., advanced 8.9 percent to $21.9 billion, topping the $21.5 billion average estimate of analysts’ compiled by Bloomberg. The company said price increases boosted sales by 4 percent in the quarter.

Gross margin, or the percentage of sales left after subtracting the cost of goods sold, narrowed to 49.5 percent from 51.9 percent a year earlier. That matched the average of 9 analysts’ estimates in a Bloomberg survey.

The company reiterated its forecast for earnings per share in fiscal 2012 to be $4.17 to $4.33. Analysts projected $4.19, the average of 23 estimates compiled by Bloomberg.

“There should be pockets of strength, particularly the business they do with high-end consumers,” said John San Marco, an analyst at Janney Montgomery Scott LLC in Philadelphia. He has a “buy” rating on the shares.

Kimberly-Clark Corp., the maker of Scott toilet paper and Huggies diapers, this week cut the high end of its annual profit forecast amid lower demand in developed markets.

--Editors: James Callan, Robin Ajello

To contact the reporter on this story: Lauren Coleman-Lochner in New York at

To contact the editor responsible for this story: Robin Ajello at

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