P&G returns to organic sales growth

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David Taylor’s tenure as Procter & Gamble’s new chief executive is off to an encouraging start after US consumer goods heavyweight posted a return to organic sales growth, a measure that strips out currency swings, during the final quarter of 2015.

The maker of Tide washing detergent and Gillette razor blades said organic sales – a metric watched in the industry – rose 2 per cent in the quarter to end of December. The rise – which was ahead of analysts’ expectation for a 1 per cent gain – comes after P&G shocked investors when last quarter it reported its first decline in organic sales since the US recession of 2008-2009.

Nonetheless, the gain in organic sales wasn’t enough to offset the impact of the strong dollar. Net sales dropped 9 per cent during the period to $16.9bn, in line with market forecast. Net income was up more than a third to $3.2bn, or $1.12 per diluted share.

Mr Taylor said:

We are encouraged by our return to organic sales growth in the quarter. With the top-line improvement and continued cost reduction, we delivered solid core operating income and EPS growth in the face of significant macro-economic and geopolitical headwinds.

Faced with slowing growth in many of its key brands, P&G has been pulling out of unprofitable businesses and pushing through improvements in productivity. In July it announced a deal to spin-off Clairol and 42 other beauty brands to Coty through a complex $12.5bn-plus deal.

Although the continued strength of the dollar and weaknesses in emerging market currencies has prompted P&G to raise its forecast on the impact of currency headwinds to 7 percentage points from 5-6 percentage points, the company is keeping its full year sales and earnings guidance intact.

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