P&G Plans to Exit Duracell as CEO Slims Down Company

Procter & Gamble Co. (PG) said it would exit its Duracell battery business and posted first-quarter profit that met analysts’ estimates as Chief Executive Officer A.G. Lafley works to slim down the company.
Net income fell 34 percent to $1.99 billion, or 69 cents a share, from $3.03 billion, or $1.04 a share, a year earlier, the Cincinnati-based company said today in a statement. Excluding some items, profit was $1.07 a share, matching the average of 21 analysts’ estimates compiled by Bloomberg.
Lafley has been streamlining the world’s largest consumer-products company by cutting costs, selling its pet-food business and starting the process of jettisoning as many as 100 slow-selling brands. P&G today said it would exit Duracell, preferably by splitting the
business into a standalone company and giving shareholders the option of exchanging P&G shares for stock in the new entity.
“We continue to accelerate and increase productivity savings, sharpen our strategies and strengthen our portfolio by focusing on our biggest opportunities,” Lafley said in the statement. “The pet-care divestiture and exit of the battery business will allow us to further focus these efforts.”
P&G rose 2.6 percent to $85.40 at 9:41 a.m. in New York. The shares gained 2.2 percent this year through yesterday, compared with a 5.5 percent advance for the Standard & Poor’s 500 Index.

Photographer: Daniel Acker/Bloomberg

Procter & Gamble Co. Duracell brand batteries sit on display in a supermarket in... Read More

Forecast Maintained

P&G maintained its forecast that organic sales, which exclude the effects of acquisitions, divestitures and foreign-currency exchange-rate fluctuations, would rise at a low- to mid-single-digit percentage rate this year.
However, the company said net sales, which don’t exclude those factors, would be little changed or rise by a low-single-digit percent, hurt by “significant negative” effects of currency fluctuations in the current quarter.
P&G also reiterated its projection that profit excluding restructuring charges, impairments and other items would increase by a mid-single-digit percent while saying net income would fall as much as 5 percent from a year earlier.
“The quarterly profile of earnings will be heavily influenced by the variation of foreign-exchange impacts from period-to-period,” the company said in the statement.
First-quarter sales fell 0.2 percent to $20.8 billion, matching analysts’ average projection. Organic sales rose 6 percent in the company’s health-care business and 4 percent in the baby, feminine and family-care unit. Sales by that measure were little changed in the grooming division, the fabric and home care unit as well as the beauty, hair and personal-care business.

Healey Retirement

P&G said earlier this week that Melanie Healey, president for North America and a potential successor to 67-year-old Lafley, plans to step down in June. She’ll be replaced by Carolyn Tastad, who’s held executive positions in P&G’s cosmetics, fine fragrances and global prestige units.
Lafley has been working to cut $10 billion in costs through 2016 and plow some of the savings back into developing new products. Chief Financial Officer Jon Moeller said today on a call with media that the company expects to “significantly” exceed the $10 billion goal.
P&G recently has introduced new Gillette Fusion ProGlide with FlexBall Technology razors and Always Discreet incontinence pads in a bid to boost sales. The strategy has yet to help much because blockbuster products take time to develop, said Erin Lash, an analyst at Morningstar Inc. in Chicago.
“The innovations that they’ve been bringing to market have been lackluster and have failed to really drive category performance,” Lash said in a phone interview before the results were released.

Price Cuts

P&G and other consumer-products makers also have faced pressure to cut prices to lure shoppers reluctant to spend amid the choppy economic recovery.
“There has been a fairly vicious cycle across the consumer-products landscape in terms of promotional spending, and it hasn’t necessarily been driving the incremental volumes that manufacturers have been looking for,” Lash said. “That highlights the tough consumer-spending environment that’s been plaguing the developed markets.”