P&G boosts sales forecast on China recovery

Procter & Gamble has raised its full-year sales guidance, as a strategy change in China in its Pampers business paid off, and demand at home in the US and in Latin America increased.

The world’s largest consumer goods company by market capitalisation now expects organic sales, which exclude the negative impact of currency moves and divestitures, to increase between 2 and 3 per cent for the fiscal year to June 2017, up from an earlier forecast of 2 per cent.

P&G also said on Friday that it was still expecting core earnings per share growth of “mid-single digits”.

Shares were up 3.6 per cent at $87.75 in mid-morning trading in New York.

P&G has been revamping its Pampers business in China. It had underestimated demand for higher-end nappies and was losing share to Japanese rivals just as the economy there began to slow. Now that it has premium products in place and is making an ecommerce push, the sales decline is reversing.

In its most recent quarter to the end of December, Chinese organic sales rose 3 per cent year on year, up from 2.5 per cent in the quarter ending September, having declined as much as 8 per cent in the quarter that ended June 2016.

However, competition is stiff, and this has led to discounting in the market. P&G did not break out its profit or margins by country.

Jon Moeller, chief financial officer, said he was confident about the outlook for China. He cited the increasing propensity of consumers to choose higher-end products, the shift away from the one-child policy and the move towards a consumer-based economy from a manufacturing one.

He said that he was not expecting the protectionist rhetoric that has characterised remarks on international trade from new president Donald Trump to hurt the positive outlook for P&G.

“It’s hard to believe that those positives would be overcome in any significant way by US policy objectives. We’ll have to see, of course,” Mr Moeller said.

Mr Trump has threatened to impose tariffs on imports to the US. Mr Moeller said that P&G’s net imports into the US stood at about 5 per cent of its products.

Group-wide sales were $16.9bn in the quarter ending December, unchanged from the same period a year earlier, the company said. That beat analysts’ forecasts for sales of $16.8bn. Organic sales rose 2 per cent.

Earnings per share for the quarter surged 157 per cent to $2.88 a share because of a one-time gain from the divestiture of dozens of P&G brands to rival Coty.

Excluding that gain and the effect of the strong dollar, core EPS increased 4 per cent to $1.08, slightly higher than consensus analyst estimates of $1.06.

The company said that organic sales growth had increased by “high single digits” in Brazil, where investments into its Pantene haircare brand had been paying off. Mr Moeller warned, however, that the Russian market remained volatile, pushing sales down “low single digits”.