Procter & Gamble is restructuring at Gillette, after having to admit that the razor blade manufacturer appears to be worth 1.3 billion dollars less than its estimated value when acquired by P&G in 2005.
Shaving off a billion
P&G is impairing subsidiary Gillette before the end of this quarter, writing off a billion euros (before tax) on its intangible assets. The estimated value has gone down due to a higher discount rate, P&G stated.
This is not the first time Gillette has been devaluated: just four years ago, P&G already booked a depreciation of more than seven billion euros due to exchange rate fluctuations. Now, again, it is the stronger dollar that makes it very difficult for the company to create value in economically weak markets.
P&G will also restructure in Argentina and Nigeria. In Nigeria, only imports will remain, while the group wants to divest its textile and home care business in Argentina completely. The reorganisation will generate another 0.9 to 1.4 billion euros in additional after-tax costs.
P&G will spread the total cost of those devaluations and divestments over the next two financial years. P&G bought The Gillette Company for 57 billion dollars (more than fifty billion euros). The company is counting on future growth of 5 %, but does not rule out possible future impairments.