The Rising Influence of Rising Affluence

[DewDiligence]

PG Expects 3-6% ‘Organic’ Growth in FY2012

[FY4Q11 (ending 6/30/11) EPS was $0.84, modestly beating analysts’ consensus; FY4Q11 sales were +10% YoY, but 5% of this was due to the weak dollar.

More important, PG’s EPS guidance for FY2012 is $4.17-4.33 based on 5-9% growth in sales and 3-6% growth in “organic sales,” which excludes acquisitions and currency changes. The $4.25 midpoint of this range represents 8% YoY growth and a P/E of 14x based on the current share price.]

http://finance.yahoo.com/news/PGs-4Q-profit-rises-15-pct-apf-1614947579.html?x=0

›Friday August 5, 2011, 9:48 am EDT

CINCINNATI (AP) -- Procter & Gamble Co.'s fourth-quarter revenue and net income jumped by double digits on strong sales in emerging markets such as China and India. But the world's largest consumer products company expects a slowdown this quarter as the U.S. and other developed economies struggle.

The Cincinnati-based maker of Tide detergent, Pantene shampoo and Gillette shavers on Friday reported net income rose 15 percent to $2.51 billion, or 84 cents per share. Revenue jumped 10 percent to $20.86 billion. Analysts expected earnings of 82 cents per share on revenue of $20.57 billion.

P&G boosted revenues by hiking prices for products including Pampers diapers and Cascade dish detergent. [Pricing contributed 3% to the FY4Q11 sales growth.] P&G and other consumer products makers have raised prices as they deal with higher raw materials and energy costs. Organic sales, a key measure that excludes impacts such as currency changes and acquisitions and sell-offs of businesses, grew by a solid 5 percent in the quarter [3% from volume, 3% from pricing, -1% from mix].

The company also said it's cutting costs by streamlining its operations, while outspending competitors in research and development of new products and in marketing. The world's biggest advertiser said it spent $9.3 billion on marketing last year, the second straight year it has set a company record, while investing $2 billion in R&D that has led to popular new products such as Crest 3D White and a Gain dishwashing liquid spun off from the laundry detergent.

P&G expects earnings for the year ahead to be in a range of $4.17 to $4.33 per share, with sales growing 5 to 9 percent. Analysts expect earnings of $4.29 per share on revenue of $87 billion, up 5 percent.

In the current quarter, P&G expects earnings per share in a $1 to $1.04 range; analysts were looking for $1.14. P&G also sees sales slowing down in places such as the U.S., Europe, and Japan. It projects organic sales growth of 2 to 4 percent overall, with net sales up 6 to 9 percent.

"I don't think there's any question that consumers, particularly in developed markets, are under pressure," Bob McDonald, P&G's chairman and CEO, told reporters in a conference call. He said P&G was pleased with results overall under the economic conditions in developed countries.

He said P&G feels confident it can keep growing sales behind innovative new products and by offering its well-known brands at a variety of price tiers to stave off private label trade down by shoppers. [Well, duh—that’s the business they’re in.]

"We've been to this movie before," McDonald said.

P&G has scored a big hit in India with the Gillette Guard razors that sell for pennies. P&G said it added 11 million new users in India in the past quarter; the company hopes getting men in emerging markets to try its big brand will lead to them trading up to higher-priced Gillette products.

Other strong growth came from SK2 cosmetics and Always feminine products in China, Olay skin care in the Philippines, Saudi Arabia and India, and Pantene and Head & Shoulders shampoos in Brazil.

Consumers in developed markets slowed spending on Duracell batteries and on P&G's high-end salon beauty products.

The fourth-quarter results looked even brighter against last year's quarter, when net income slid 12 percent as the company spent heavily on marketing to get sales moving.

Citi analyst Wendy Nicholson said P&G results got help from lower taxes, but she told clients in a note she's keeping her "buy" rating on the stock on its sales growth.

"PG's organic sales growth momentum is good, and we like that PG seems to be acting as a leader in taking pricing up, while at the same time still gaining market share on the heels of innovation and distribution expansion," Nicholson wrote.‹