P&G grocery giant gets earnings boost as raw material prices fall 

Shares in the maker of Ariel and Head & Shoulders surged almost 6%.

Shares in Procter & Gamble, the US grocery giant that makes Ariel, Head & Shoulders, Always, Gillette and many other products, surged almost 6% as an improved profit outlook offset slower-than-expected sales growth.

The latest quarter topped market projections, as the company benefitted from lower commodity costs and production cost savings. P&G lifted its outlook for earnings, excluding some items. 

The key measure of organic sales, however, missed estimates. The shares had fallen by over 3% last year, while the S&P 500 Index had climbed by 24%.

The more-optimistic profit outlook, along with adjusted earnings per share that outpaced expectations, is being fueled by favourable commodity costs along with productivity savings. P&G is seeing efficiency gains as it adds more manufacturing lines, chief financial officer Andre Schulten said. Less expensive raw materials are also helping profit. 

In December, the company said it posted a $1.3bn (€1.2bn) charge related to a drop in the book value of its Gillette business. Shoppers in North America, where the company gets about half of its revenue, are still shelling out more money on essentials. 

P&G’s prices were 4% higher in the company’s latest quarter than a year earlier. The quantity of items shipped continued to trend downward, in part due to lagging demand in China.  

“What we saw this quarter is very weak volumes in China driven by what we said all along, a bumpy recovery,” Mr Schulten said. “We’re making progress.” 

Bloomberg