Procter & Gamble Shows Soft Growth Led By Health And Baby Care

by Trefis Team
Procter & Gamble
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Procter & Gamble (NYSE:PG) reported its third quarter earnings for the fiscal 2013 on April 24. The company reiterated its overall strategy recently, emphasizing a deeper push into emerging markets and competitive pricing in developed markets to fight against competitors such as Unilever that have gained ground on P&G in several product segments during the previous fiscal year.

Organic sales for Q3 2013 grew 3% supported by 2% growth in volume sales, and a 1% positive impact from higher prices. Net sales stood at $20.6 billion, a 1% positive change year-on-year. This was completely in line with our expectations as highlighted in our pre-earnings analysis. [1]

See our full analysis for Proctor & Gamble

Health Care And Baby Care segments drove revenues

The company’s health care and baby care segments grew organic sales by 8% and 4% respectively, in Q3 2013, as compared to the previous year. The volumes for health care products saw significant growth in developing regions as they grew by high single digits, as opposed to low single-digit growth in the developed regions.

Within the health care segment, oral care volume increased mid-single digits due to double-digit growth in developing regions behind market expansion and market growth, and low single-digit growth in developed regions due to innovation. Organic volume in personal health care increased due to a relatively weaker cough/cold season in the previous year and the market expansion for Vicks.

Developing markets contributed mid-single-digit growth in baby care volume as these markets grew by low single digits. Product innovation and market expansion helped baby care segment to achieve positive 3% change in net sales year-on-year.

Beauty, Grooming And Fabric Care segments disappoint

The net sales declined in Beauty and Grooming segments by 2% each year-on year owing to heavy competition within the industry and partially offset by innovation in the U.S., as well as pricing and product mix improvements in developing markets.

The fabric care segment saw 3% growth in organic sales driven by strong product innovations. As we discussed in our previous analysis, P&G has created new categories and new brands like Tide PODS, Swiffer and Crest Whitestrips to expand its reach among consumers. These products, along with older brands, resulted in a disproportionate growth in developing regions. Home care also delivered higher net sales due to product innovation and geographic expansion.

We have updated the $70 Trefis price estimate to incorporate the earnings release.

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