Procter & Gamble profit tops forecast, plans buybacks

Fri Aug 3, 2012 12:33pm EDT
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By Jessica Wohl

(Reuters) - Procter & Gamble Co (PG.N: Quote) posted a higher-than-expected quarterly profit despite a drop in sales, as the world's largest household products maker tries to prove that it can make the improvements needed to move past recent disappointments.

The maker of Tide laundry detergent, Olay skin cream and a host of other products also reversed course by announcing a $4 billion share repurchase program just weeks after saying it would not buy back shares this year.

The results, released on Friday, are being watched closely for any signals of how well P&G and its current leadership can fix a long list of problems, especially after activist investor William Ackman stepped in and bought about $1.8 billion worth of its shares.

"Procter & Gamble is a great company, it's a blue chip, it's well-known, but the results that we have seen over the last couple of years have just been pretty uninspiring," said Channing Smith, co-manager of the Capital Advisors Growth Fund CIAOX.O. "It's a show-me story for the next couple of quarters."

P&G announced a $10 billion restructuring in February and in June cut expectations as it launched a more focused strategy.

During a nearly 90-minute conference call with analysts, Chief Executive Bob McDonald and Chief Financial Officer Jon Moeller repeatedly outlined the steps they believe will right their $83.68 billion ship, from cutting more jobs to setting the right level of investment in sluggish developed markets and growing in developing ones where P&G has less of a presence.

"It really comes down to them delivering what they say," said UBS analyst Nik Modi, who has a "neutral" rating on the shares. "The message sounded like, 'Hey, give us some time, we're showing you that what we're doing is working, give us some time.' ... Obviously that was designed, I believe, to address the stake Ackman has taken."

P&G's forecast for the current quarter sits below Wall Street's estimate, suggesting it could take several more months before the bulk of the company's efforts pay off.   Continued...

Procter & Gamble's Gillette shaving foam can be seen on display at a new Wal-Mart store in Chicago, January 24, 2012. REUTERS/John Gress