Proctor and Gamble report upbeat earnings, predict fall in future profits due to higher costs

Procter & Gamble reported its quarterly earnings and revenue, beating analysts’ estimates as consumers started spending more on personal care and health products.

Shares of the company were up 2.48% to $142.94 ,at 1:14 PM ET, after the company reported fourth-quarter sales that beat estimates.

Despite the upbeat earnings, the company forewarned a hit of approximately $2 billion to its margins due to higher commodity and transportation expenses. The consumer goods firm is relying on cost cuts and increased prices to soften the blow.

Last week, consumer goods firm, Unilever, also noted that it is facing higher costs for packaging, ingredients, and transportation.

P&G intends to raise prices on some products this fall in response to higher commodity costs. The company intends to hold its market share by trying to increase consumers’ perception of the value of its products and introducing new or upgraded items.

Chief Financial Officer Andre Schulten said during a media call that about 75% of P&G’s products are considered superior or premium, so consumers are already showing a willingness to pay a higher price for those goods.

Disrupted supply chains due to the various lockdowns during the pandemic have led to increased shipping and commodity costs for all items, from palm oil to plastics. As a result, consumer goods firms have raised prices, leading to a price hike in emerging markets and on products such as Pampers diapers in the U.S. earlier this year.

CFO Andre Schulten said that P&G bore other major input costs such as pulp, resin, and polypropylene, for its commodity basket. Driver shortage in the U.S would add another $100 million in transportation charges, he added.

P&G reported a net income of $2.9 billion, or $1.13 per share, compared with $2.8 billion, or $1.07 per share, a year earlier. Net sales were up 7% to $18.9 billion from $17.7 billion a year earlier, beating Wall Street’s expected estimate of $18.41 billion. Organic sales rose 4%.

The strongest growth was registered in its beauty and health-care businesses, as consumers prepare to head back to the office and return to social gatherings. Organic sales for the beauty segment increased 6% versus a year ago whereas health care witnessed a 14% increase for the quarter.

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