Procter & Gamble expects less after radioactivity scare

Procter & Gamble is slashing its expectations drastically despite a solid quarter. The brand manufacturer suffered setbacks with Gillette and discharged water in Japan.

Cushion

The past second quarter was rather good for P&G, with sales volumes up 4 % in the United States and 3 % in Europe, despite higher product prices. Personal and home care categories performed particularly strongly. Total sales rose 3.2 % to 21.4 billion dollars (19 billion euros).

As production costs are falling back now, gross margin rose 520 basis points. Net earnings per share (excluding exceptional items) were 1.84 dollars, slightly above the expected 1.70 dollars. A good sign, according to analysts, as this also gives P&G a cushion for the second half of the year.

Profit warning

Yet the Ariel and Pampers producer itself is less optimistic. A hefty 1.3 billion dollar writedown on Gillette and falling prices in the US are taking the forecast down from 6 to 9 % profit growth to stable profit or even a 1 % decline.

Remarkably, sales in Greater China are also disappointing, especially of Japanese brand SK-II. In August, Japan started discharging treated radioactive water from the Fukushima nuclear plant, with UN approval, to China’s dismay. Ever since, a lot of Chinese consumers have avoided Japanese brands, fearing contamination.