Procter & Gamble’s cost-cutting drive is paying off as the FMCG behemoth reported a higher than expected profit for the second quarter of fiscal 2016 yesterday – up 35 percent to US$3.21 billion. Product costs fell 11 percent and general expenses were cut by 14 percent, helping to offset a 9 percent decline in revenue to US$16.92 billion, just shy of analysts’ predictions of US$16.96 billion.
Organic sales, excluding the impact of foreign exchange and acquisitions and divestitures, jumped 2 percent, indicating that P&G’s efforts to slim down its portfolio and focus on core brands is helping to stem the slump witnessed in recent years. Total sales volume was down 2 percent for the quarter.
The Beauty segment reported organic sales growth of 1 percent, with a positive 4 percent impact from pricing offset by a 3 percent impact from lower volumes. The SK-II brand and Personal Care unit both reported organic sales increases, compensating for a disappointing performance over at Olay.
Grooming was up 3 percent in organic sales terms, again on the back of higher pricing. In the Health Care division, meanwhile, sales growth was driven by oral care in developed markets.
Core earnings per share jumped 21 percent on a currency-neutral basis, with diluted net earnings per share of US$1.12.
“We are encouraged by our return to organic sales growth in the quarter,” said President and Chief Executive Ofiicer David Taylor. “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.”