P&G raises annual forecasts on sustained cleaning boom

Elevated demand for paper towels, washing up liquid and laundry detergent has lasted into the winter, giving Procter & Gamble another bump in sales and prompting the consumer goods bellwether to increase its annual forecasts once again.

The US-based household product group behind brands including Ariel, Bounty, Tampax, Pampers and Head & Shoulders generated $19.7bn worth of net sales in the final three months of last year, 8 per cent more than a year ago.

Wall Street analysts had forecast P&G’s rate of organic sales growth in its fiscal second quarter to cool from 9 per cent in the previous quarter to about 6 per cent, yet the group’s latest batch of forecast-beating results indicates a pandemic-induced boost to the business is showing little sign of fading.

The trend for consumers to stay inside is leading them to wash and cook at home more often than usual and visit the bathroom more frequently. The phenomenon has fuelled demand for a wide range of staples, from dishwashing tablets to toilet paper.

Concerns about the spread of coronavirus has made consumers more hygiene-conscious, further benefiting companies in the sector including Reckitt Benckiser of the UK and Kleenex maker Kimberly-Clark, as well as Procter & Gamble.

P&G shares rallied 14 per cent in 2020, although before the gain on Wednesday they had shed 3 per cent this year as Wall Street has queried how much longer the boom can continue.

Concerns about the economy have also prompted some analysts to raise concerns about how long shoppers will remain prepared to pay a premium for P&G brands, which tend to be more expensive than rivals.

Yet shares in the Cincinnati-based company, which has a market capitalisation of $331bn, rose 2.5 per cent in pre-market trading on Wednesday after P&G said it was now on track to deliver an annual increase in sales of between 5 and 6 per cent in its fiscal year — up from its previous forecast for a rise between 3 and 4 per cent.

Net income in the fiscal second quarter rose 4 per cent from the same period a year ago to $3.89bn, equivalent to diluted earnings per share of $1.47.

Each of the company’s five main divisions posted increases in organic sales, led by a 12 per cent rise at its fabric and home care division and a 9 per cent gain in healthcare. Even the grooming business, which has been hurt by men’s tendency to shave less, produced a 6 per cent increase.

P&G was able to edge up prices by 1 per cent, while volumes rose 5 per cent. A more favourable mix of business also contributed to the revenue improvement, and organic sales, which exclude the impact of foreign exchange, acquisitions and divestitures, rose 8 per cent overall.

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