Procter & Gamble smashed growth expectations in the third quarter, but has warned of a $1bn blow from rising oil costs next year.
P&G exceeded market expectations to post 7% growth to $21.1bn (£15.7bn), with 3% organic growth made up of a 2% improvement in volumes and 1% in pricing.
Sales were driven by the US conglomerate’s beauty division, which at 7% organic sales growth beat estimates by 400bps.
“We delivered a solid acceleration in top-line results in our fiscal third quarter, with broad-based growth across product categories and regions,” said CEO Shailesh Jejurikar.
“We’re increasing investments to accelerate momentum with consumers despite the challenging geopolitical and economic environment, while still maintaining our guidance ranges for the fiscal year.”
P&G’s bottom line came under pressure in the quarter to 31 March, however, as the group’s gross margin of 50% missed estimates by around 90bps. Unfavourable product mix and reinvestments were joined by tariff costs and higher oil prices.
P&G expects commodity costs to rise by $1bn next year if oil prices remain just above $100 a barrel. The Brent crude futures market has remained around that level since early April, after the US and Israel began the Iran war.
P&G confirmed it does not have any commodity hedging in place, leaving it exposed to rising costs of oil-derived chemicals and packaging.
Despite that exposure, RBC analyst Nik Modi said P&G remained “one of the best-positioned CPG companies to deal with the volatility that has come to define the past few years and most likely the next few years”.
“While PG’s top line has slowed in recent quarters, we view this more as a function of the macro environment rather than operational missteps,” he said.
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