(Reuters) -Procter & Gamble raised its annual profit forecast as commodity costs fall and consumers, particularly in the United States and Europe, keep buying its pricy Tide detergent and Dawn dish soap.
P&G’s high-end SK-II skincare line, a top seller in China, saw lower sales again due to weaker consumer spending along with customers shunning it due to environmental concerns.
Chief Financial Officer Andre Schulten said the company has “reached the bottom of the trend” in China with SK-II, which sells for around $100 a bottle.
Volumes grew around 3% in its top market, the United States, Schulten said on a media call. He said consumers were not switching from P&G’s products to non-branded products.
“The consumer is not trading down,” Schulten said.
Don Nesbitt, senior portfolio manager at P&G investor ZCM, however, said cost-conscious consumers were turning to value-based products.
“I think the top line is disappointing,” Nesbitt said.
As raw material prices come down from the peaks seen during the pandemic, global consumer goods companies are benefiting from lower production costs.
P&G said it now expects a benefit of about $900 million after-tax from favorable commodity costs for its fiscal year 2024, which ends in June, compared with its earlier forecast of an $800 million benefit.
The consumer goods giant sees core earnings per share to rise between 10% and 11% in this fiscal year, above its prior forecast of 8% to 9% growth.
Excluding items, P&G earned $1.52 per share topping estimates of $1.41 per share.
Still, third-quarter net sales rose to $20.20 billion from $20.07 billion a year earlier, but fell short of analysts’ average expectation of $20.41 billion, according to LSEG data.
Shares of the company were down about 2% in premarket trading.
The focus is now also shifting to the company’s ability to increase volumes as the benefits from price hikes to sales growth are waning.
P&G reported overall flat volumes in the third quarter, while average prices across its product categories rose 3%.
Schulten added that P&G is not increasing prices further and volumes are sequentially increasing “which is exactly what we would want to see.”
Source: Economy - investing.com
