Procter & Gamble

Listen to this article

00:00
00:00

To push a tanker off-course takes more than a gentle breeze. Shampoo–to–pet food conglomerate Procter & Gamble, gave a nod to the stormy economic winds yesterday as first-quarter numbers were released, but accepted only the merest widening of targets for the year ahead. While the reporting season has been characterised by companies unable to predict the near-future, P&G cut the lower end of its profits guidance by less than 1 per cent. The group forecasts to produce earnings per share somewhere between $4.15 and $4.25 next summer.

Yet in spite of barely a raised eyebrow on the bridge – Clayt Daley, chief financial officer, feels sufficiently sanguine to be retiring at 56 – every sinew must be straining below decks. Input prices have fallen dramatically in recent months, but the time lag before the benefit is felt by manufacturers means P&G still faces a $2.7bn cost headwind this year. Currency volatility also makes life difficult – from boosting sales, P&G now expects foreign exchange effects to take 1-2 percentage points off top-line growth this year.

At the same time consumers are “de-loading the pantry”, running down stocks of items such as batteries or razors, and waiting longer to buy replacements. (And there is no need to shave every day if you are not going to work.) A widening price gap between P&G’s premium products and private label goods has also prompted greater trading down. How consumption patterns in emerging markets will change as rates of growth slow also remains unknown.

The group is a master cost-cutter. Stripping out expenses related to selling, overheads and administration, moderated most of the hit to margins from commodities in the first quarter. Big, solid and diversified, P&G should chug safely on. But it is a mark of how tough times have become that few others will be able to follow in its wake.

To e-mail the Lex team confidentially click here

OR

To post public comments click here

Lex is the FT’s agenda-setting column, giving an authoritative view on corporate and financial matters. It is also one of the few parts of FT.com available only to Premium subscribers. This article is provided for free as an example. A Premium subscription gives you unlimited access to all FT content, including all Lex articles and the FT mobile Newsreader.

Subscribe now

If you have questions or comments, please e-mail help@ft.com or call:

US and Canada: +1 800 628 8088

Asia: +852 2905 5555

UK, Europe & Rest of the world: +44 (0)20 7775 6248

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.