P&G profits down 4% in 3rd quarter

April 28, 1994|By New York Times News Service

Procter & Gamble Co., the country's largest maker of household goods and personal care products, said yesterday that its losses from interest-rate swaps pushed down earnings for its fiscal third quarter.

The company, based in Cincinnati, said earnings for the quarter that ended March 31 fell to $482 million, from $502 million in the comparable period a year ago, a slide of 4 percent.

The current figure includes an after-tax charge of $102 million, announced earlier this month, for the trading losses.

Interest-rate swaps are among so-called derivatives that companies can use to hedge against sharp market fluctuations or even attempt to profit from them. The investments are called derivatives because they are based on, or derive from, the performance of an underlying asset, like interest rates or stocks.

Without the charge, quarterly profits would have improved by 16.3 percent for the company, parent of Hunt Valley-based cosmetics maker Noxell Corp.

"Pretax operating profit was up 20 percent vs. January-March a year ago," the chairman and chief executive of P&G, Edwin L. Artzt, said in a statement. "This improvement reflects our cost reduction programs along with solid unit volume gains in the U.S. and a continued double-digit volume growth rate in our international operations."

One P&G stockholder apparently did not share Mr. Artzt's enthusiasm. On Monday, Elaine Drage of Cleveland sued the company in the Hamilton County Common Pleas Court, an Ohio state court, charging that company executives should repay the $102 million charge.

A spokeswoman for the company, Linda L. Ulrey, said the lawsuit was the only one she knew of stemming from the loss. P&G is studying its legal options regarding Bankers Trust Co., which sold the company the interest-rate swaps.

Several major corporations and sophisticated investors recently have lost hundreds of millions of dollars on derivatives investments as interest rates have risen sharply and unexpectedly this year.

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