Emerging markets lift P&G second-qaurter sales, crimp gross margin

Fri Jan 24, 2014 9:17am EST
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By Phil Wahba

(Reuters) - Procter & Gamble Co, the world's largest household products maker, reported a dip in quarterly profit on Friday as its push in emerging markets led to a lower gross profit margin.

Chief Financial Officer Jon Moeller told reporters on a conference call that sales in emerging markets had risen 8 percent during the second quarter, easily outpacing developed markets, where sales barely edged up.

But P&G's gross margin is lower in those markets as the company establishes itself. Still, the costs are worth paying, said one investor.

"The emerging markets are definitely the future for P&G," said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel, which manages about $11 billion and has long owned P&G and Kimberly-Clark Corp shares.

P&G's Moeller said its market shares in both emerging and developed sectors had held steady.

Earlier this weak, rival Unilever said it would stick to its emerging markets growth strategy as a fourth-quarter recovery in sales there boosted 2013 results.

P&G's gross profit margin slipped 0.9 percentage points, in part because of stagnant sales of its beauty products, which have higher margins. The margins were helped by lower manufacturing costs.

P&G, the maker of Pampers diapers and Tide detergent, left its 2014 forecasts unchanged. It still expects organic sales, which strip out the impact of currency changes as well as acquisitions and divestitures, to rise 3 percent to 4 percent, and core earnings to rise 5 percent to 7 percent.   Continued...

Tide detergent, a Procter & Gamble (P&G) product, is displayed on a shelf at a store in Tempe, Arizona October 29, 2009. REUTERS/Joshua Lott