By Paul Ziobro and Chelsey Dulaney
Procter & Gamble Co.'s broad effort to boost growth ran into
a buzz saw at the end of the year: the dollar's rout of currencies
around the world.
The consumer products giant called the widespread weakening of
foreign currencies against the U.S. dollar unprecedented and said
it led to declines in all of its main business segments. P&G
said currency volatility will now reduce its sales by five
percentage points and cost it $1.4 billion in profit over the
course of the year that ends in June, far more than expected when
the fiscal year began.
The blow from currency is an outgrowth of P&G's successful
expansion into overseas markets over the years. That expansion has
left it heavily exposed to Russia's plunging ruble, for example,
and net short against the soaring Swiss franc, the company said
Tuesday.
To offset the impact, the maker of Gillette razors and Pampers
diapers is relying on cost cuts including reduced head count and
cutbacks in spending on marketing. That will include shifting more
of advertising to digital channels, which already account for more
than 30% of the total.
The company is also raising prices and shifting sources of its
products, but those moves take time to have a pronounced effect on
the bottom line.
"We have many things at our disposal, which we are obviously
engaged in, " P&G Chief Financial Officer Jon Moeller said on
conference call with the media. But, he added, "most of them come
with some time lag."
P&G's warning came as the company reported
weaker-than-expected results for the quarter that ended in
December.
The company's profit fell 31% to $2.4 billion, as revenue fell
4% to $20.2 billion.
P&G has been slimming down layers of management and
refocusing on the products that account for the bulk of its revenue
and profit. Absent the currency effects, P&G's business
performed largely as expected. Organic sales, which strip out the
effects of currency, acquisitions or disposals, rose 2%, with all
but P&G's beauty business, a longtime laggard, posting
gains.
Unit volume was flat in the quarter, with volume down 2% in its
beauty and personal care, grooming and health care units. The
fabric segment posted a 2% increase.
P&G shares fell 2.9% in early trading.
The company is planning to shed up to 100 of its brands as it
focuses its resources on the most important 70 to 80. It agreed in
November to sell its billion-dollar Duracell battery business to
Warren Buffett's Berkshire Hathaway Inc.
The company said at the time that it was close to the sale of
another 10 small brands, with information packets in the hands of
potential buyers. In December, P&G agreed to sell its Camay and
Zest soap brands to Unilever PLC. P&G has sold or shut down 35
brands as part of the culling, Mr. Moeller said Tuesday.
On the plus side, the company said the drop in the price of oil
will give the company a $600 million annual boost before tax, most
starting to arrive in the spring quarter. But it will be swamped by
the hit from currencies.
Write to Paul Ziobro at Paul.Ziobro@wsj.com and Chelsey Dulaney
at Chelsey.Dulaney@wsj.com
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