Procter & Gamble Co posted higher quarterly profit on Tuesday as price increases and cost controls more than offset soaring costs for oil and other commodities.
But the company also said it expects commodity and energy costs to rise by $3 billion in the fiscal year begun July 1, cutting gross margins, and forecast earnings that could be below the average Wall Street estimate.
“It’s just a tough environment and they are, in the next fiscal year, going to feel the brunt in the recent run up in oil and commodity cost,” SunTrust Robinson Humphrey analyst William Chappell said. Chappell has a “neutral” rating on the company, which makes products ranging from Pampers diapers to Olay skin-care products.
The company said it has been increasing prices in amounts that will offset the higher costs.
The world’s largest consumer products maker said profit in the fiscal fourth quarter ended June 30 rose to $3.02 billion, or 92 cents a share, from $2.27 billion, or 67 cents a share, a year earlier.
Excluding benefits from the adjustment of tax reserves, earnings were 80 cents a share. On that basis, analysts’ average forecast was 78 cents a share, according to Reuters Estimates.
Sales rose 10 percent to $21.27 billion, topping analysts’ average forecast of $21.04 billion, helped by sales in emerging markets, price increases and the impact of the weaker dollar, which boosts the value of sales in countries outside the United States.
Organic sales, which exclude the impact of acquisitions, divestitures and foreign exchange, rose 5 percent.
Like most consumer products companies, P&G has raised prices and cut costs to cope with rising costs for energy, resin and other raw materials.
Analysts have been watching closely for signs that those price increases will drive consumers to trade down to lower-priced items.
Chappell said P&G’s results so far and its forecast for 2009 do not indicate that the company is seeing that trade-down.
The company forecast fiscal 2009 earnings of $3.80 to $3.87 a share, excluding a 50-cents-a-share gain from the sale of the Folgers coffee business and 12-cents-a-share in increased restructuring costs. Analysts’ average forecast is $3.86.