Top Stories
Top Stories
Wires

UPDATE 3-P&G posts strong profit amid $8 bln writedown of Gillette

Richa Naidu and Soundarya J

(Adds CFO, analyst quotes; updates shares)

July 30 (Reuters) - Procter & Gamble Co's quarterly revenue and profit beat Wall Street expectations on Tuesday, sending shares up even as the world's No.1 personal goods company took an $8 billion writedown on its Gillette shaving business.

Boosted by price hikes and strong demand for its SK-II and Olay beauty products, P&G's organic sales rose 7%. Price hikes contributed 3 percentage points to organic sales growth, a closely-watched metric which excludes items like acquisitions, divestitures and currency effects. Shares rose 4.3% in premarket trading.

However, P&G reported a net loss of about $5.24 billion, or $2.12 per share, for the quarter ended June 30, due to an $8 billion non-cash writedown of Gillette. For the same period last year, P&G's net income was $1.89 billion, or 72 cents per share.

Gillette razors, gels and foams are some of P&G's most internationally distributed products. P&G said the writedown was due primarily to foreign exchange fluctuations, increased competition over the past three years, and a shrinking market for blades and razors as consumers in developed markets shave less frequently. Net sales in the grooming business, which includes Gillette, have declined in 11 out of the last 12 quarters.

"Initial carrying values for Gillette were established nearly 14 years ago in 2005 ... new competitors have entered at prices below the category average," Chief Financial Officer Jon Moeller said on a call. P&G paid $57 billion in 2005 for Gillette, the world's No.1 shaving brand that is more than a century old.

The company has been cutting prices and investing in new products at its grooming business, hoping to claw back market share from upstart shaving brands bought by rivals, such as Edgewell Personal Care's Harry's and Unilever's Dollar Shave Club.

Excluding items, the company earned $1.10 per share, beating the average analyst estimate of $1.05.

"Expectations were creeping higher into the print, but P&G far exceeded even the most optimistic expectations," Wells Fargo analyst Bonnie Herzog said, adding that P&G's organic sales growth of 7% was its strongest in 13 years.

P&G, like other consumer goods companies, has been raising prices on many of its products to tackle soaring freight and raw material costs that have dented margins. Organic sales in P&G's beauty business rose 8%, boosted by demand for its super-premium SK-II brand and Olay skin care products. In the fabric and home care unit, the company's biggest business that sells Tide detergent and Febreze air fresheners, organic sales climbed 10%.

The company's net sales rose 3.6% to $17.09 billion in the fourth quarter, beating analysts' average estimate of $16.86 billion, according to IBES data from Refinitiv. (Reporting by Soundarya J in Bengaluru; Editing by Maju Samuel and Nick Zieminski)