Procter & Gamble: global balancing act keeps business healthy

Men are not shaving. Few people are getting the flu in an era of homeworking. And supply-chain bottlenecks have become painfully apparent. Despite all that, Procter & Gamble continues to plug along. The US consumer products titan behind razors, cough syrup, laundry detergent and skin cream announced a solid fiscal third quarter on Tuesday with organic sales growth of four per cent. 

Still, the trend in its results remains clear. A pandemic high driven by demand for cleaning products is coming down as quarterly organic sales growth dipped from 9 per cent six months ago. Meanwhile, the company is grappling with overheating developed economies and growth markets such as India and Brazil going through the worst stretch of the pandemic.

P&G said organic sales in its grooming segment were up 4 per cent, driven by appliance sales which more than made up for declines in men’s razors. Similarly, within the health segment sales of toothbrushes in China compensated for what the company described as a “historically low cough cold flu season”. 

So far in 2021, P&G shares are flat while the overall S&P 500 is up a tenth. There has been a rotation into growth stocks and away from staples like P&G. But the US group also has come to embody some of the everyday perils of global investing. The company said its forecasts now include another $200m of additional freight costs with another $125m for higher commodity charges.

P&G plans to raise prices later this year in at least three segments: baby care, feminine care and adult incontinence. Both equity and fixed income markets are looking for signals of incipient inflation. Last week US government data showed that consumer prices in March rose by the most in almost a decade. P&G’s announcement will add to concerns.

This year, the company expects its organic growth rate to still be about 5 per cent, with earnings growth roughly double that. The company said it would also return $19bn in cash to shareholders. With so many units and geographies, weakness in one part of the business has been offset elsewhere. Buy P&G and you buy the world.

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