Turnaround starting to pay off as Procter & Gamble profits surpass expectations

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Procter & Gamble’s quarterly profit soared past expectations as the world’s largest household products maker used higher prices and new products to drive sales growth, the strongest indication yet that turnaround efforts are paying off.

The results, along with improved forecasts for the fiscal year, follow months of criticism from analysts and most notably from activist investor William Ackman, who blamed P&G’s top brass, led by chairman and chief executive Bob McDonald, for earlier missteps.

The results, with profit and sales ahead of analysts’ expectations, come after months of P&G trying to reignite growth in sluggish markets such as the United States while also expanding in emerging markets, where it typically sells lower-priced merchandise.

Back in April 2012, analysts took Mr McDonald to task on a tense conference call after P&G cut its outlook. That summer, Mr Ackman’s Pershing Square Capital Management bought the company’s shares and began pushing for more change.

Profit has exceeded analysts’ expectations every quarter since, helped by new products such as Tide Pods single-dose laundry detergent.

Still, P&G’s growth lags that of peers such as Unilever. P&G’s organic sales, which strip out the impact of divestitures and foreign exchange, grew 3 per cent in the latest quarter, while Unilever posted 6.9 per cent sales growth on Wednesday.

While P&G’s “absolute performance still trails peers, the sequential improvement in results seems apparent”, said JP Morgan analyst John Faucher.

Organic volume rose in baby and family care; fabric and home care; and in health care; but was flat in beauty and grooming.

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