P&G's Q3 segment results prove to be mixed bag

CINCINNATI — Procter & Gamble posted on Thursday third-quarter earnings that were largely in-line with expectations as segment results proved to be a mixed bag.



“Our third quarter earnings results were largely in-line with what we had expected,” said chairman, president, and CEO A.G. Lafley. “We delivered double-digit constant currency core EPS growth with significant currency-neutral gross and operating margin expansion from over 400 basis points of productivity savings from programs that continue to gain momentum. This quarter the productivity progress was offset by foreign exchange. As we have done before, we’ll offset foreign exchange over time through a combination of pricing, mix enhancement and cost reduction. We are focused on the significant opportunities in our control, including brand initiatives and product innovation, business and brand portfolio simplification, overhead savings and major supply chain productivity initiatives, to improve results in 2015 and beyond.”



During the quarter, P&G posted core earnings per share of 92 cents. Diluted net earnings, which include all restructuring charges and impacts from discontinued operations, were 75 cents per share.



All-in net sales decreased 8% versus the prior year to $18.1 billion in the January-March quarter, including a negative eight percentage point impact from foreign exchange and a negative one percentage point impact from minor brand divestitures. Organic sales grew 1%.



Beauty, hair, and personal care segment organic sales decreased 3% as a positive impact from pricing was more than offset by lower volume. Innovation-driven organic sales growth in the deodorants, cosmetics and salon hair care categories were more than offset by sales declines mainly from the prestige fragrance and mass skin care categories. Hair care organic sales were down in developed markets due mainly to increased competitive promotional activity in the United Stats and customer inventory reductions in China.



Grooming segment organic sales increased 9% due to higher pricing across all regions on blades and razors, favorable volume and product mix from premium innovation on both the Gillette and Braun businesses.



Healthcare segment organic sales increased 6% behind favorable geographic mix and pricing in oral care and higher pricing in personal health care. Higher volume in personal health care driven by a stronger cough-and-cold season was offset by lower volume in oral care developing markets following price increases.



Baby, feminine and family care segment organic sales increased 2% behind pricing and mix in baby care and feminine care, including the benefits from the Always Discreet entry into the adult incontinence category and continued strong growth of Pampers Swaddlers in North America.



For fiscal year 2015, P&G said it now expects organic sales growth of low single digits for the fiscal year. Net sales growth is expected to be down 5% to 6% versus the prior fiscal year, including a negative 6% to 7% headwind from foreign exchange and a 1% impact from minor brand divestitures.