First-quarter profit up 33% at Procter & Gamble Co.

Clairol sales climb

new CEO pares costs

October 30, 2002|By BLOOMBERG NEWS

Procter & Gamble Co., the largest U.S. maker of household goods, reported yesterday that first-quarter profit jumped 33 percent on lower costs and rising sales from the Clairol hair-care unit acquired last year.

Net income climbed to $1.46 billion, or $1.04 a share, from $1.1 billion, or 79 cents a share, a year earlier, the company said in a statement. Sales in the three months that ended Sept. 30 rose 11 percent to $10.8 billion.

Clairol and Olay skin creams boosted cosmetics and hair-care sales 27 percent, while new varieties of Crest toothpaste and toothbrushes lifted health-care product sales 20 percent.

Chief Executive Officer A.G. Lafley has cut costs $2 billion a year, using savings to increase advertising and develop products.

"The numbers are encouraging, to say the least," said Simon Burton, an analyst with Banc of America Capital Management. "Lafley came in with a clear vision of what had to be done. That increased focus is starting to pay off."

Shares of Cincinnati-based Procter & Gamble rose $3.26 to $89.01 yesterday on the New York Stock Exchange. They've risen 26 percent in the past year, giving Procter & Gamble the biggest gain of the 30 stocks in the Dow Jones industrial average, which has dropped 10 percent.

Excluding $113 million for severance pay and to write down the value of assets, Procter & Gamble said, first-quarter profit would have been $1.12 a share. On that basis, earnings were 2 cents more than the $1.10-a-share average estimate of analysts surveyed by Thomson First Call.

The company, which employs 1,100 at its cosmetics division in Hunt Valley, repeated that annual earnings excluding some costs will rise at least 10 percent. Second-quarter profit is expected to rise less than 10 percent because of tougher comparisons with a year earlier, when the sale of the Comet cleanser brand added 9 cents a share.

The quarter's sales gain was the biggest since 1995, when results were helped by an earlier restructuring program. Some investors say profit growth could slow as the savings decrease.

"I'm concerned about the sustainability of the growth," said Daniel Peris, analyst with Federated Investors. "Restructuring savings will peter out at some point."

The company's gross margin, a measure of profitability, widened to 49.2 percent of sales from 47.7 percent.

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