Procter & Gamble

P&G put in a “strong” performance in the face of “severe cost and operational headwinds”

Price rises pushed through by Procter & Gamble have helped increase sales at the US consumer products group, but it warned of another year of “significant” headwinds ahead.

Organic sales jumped 7% to $19.5bn (£16.1bn) in the fourth quarter to the end of June, driven by an 8% increase in pricing, while full-year net sales rose 5% to $80.2bn (£66.4bn) on price hikes of 4% – with organic growth of 7% after currency effects and M&A were stripped out.

Volumes in the final quarter fell 1%, which P&G blamed in lockdowns in Greater China and reduced operations in Russia, but were up in the full year by 2% on an organic basis.

CEO Jon Moeller said 2021/22 was a “strong” year in the face of “severe cost and operational headwinds”.

He warned of another year of “significant headwinds” ahead as the owner of Pampers, Flash, Oral-B, Pantene, Gillette and Ariel forecast a $3.3bn (£2.7bn) hit from higher commodity and freight costs, as well as  unfavorable currency translation.

P&G added it expected the headwinds to be weighthed towards the first half of the new financial year.

Higher input costs led to margins being squeezed in the year to the end of June 2022, with a 370 basis points decline driven by 450 basis points of increased commodity costs and 80 basis points of higher freight costs.

However, the group also reduced its selling, general and administrative expenses thanks to the leverage benefit of increased revenues, savings on overheads and “marketing efficiencies”.

Bernstein analyst Callum Elliott questioned whether cost cutting would harm P&G’s performance going forward.

“Whilst the cost environment is clearly exceptional and likely captures the lion’s share of attention, we can’t help but wonder if the bigger question should be around PG’s cost cuts, and the impact they’re having on competitive performance,” he said.

“It seems too much of a coincidence that PG’s first market share losses for almost five years, have come at a time when the company is taking a chainsaw to costs.”

Shares in P&G plunged 4.2% to $141.92 as markets in the US opened.

Although sales beat analyst expectations, earnings came in below predictions.

P&G forecast organic growth of 3% to 5% in FY 2022/23.

Moeller said: “We remain committed to our integrated strategies of superiority, productivity, constructive disruption and an agile and accountable organization structure. They remain the right strategies to step forward into the near-term challenges we are facing and continue to deliver balanced growth and value creation.”