P&G cuts forecast

22 Jun, 2012

Procter & Gamble Co on Wednesday admitted that it has been lacking in big new products and has not been fast enough at cutting costs as it deals with persistent slowing demand in Western Europe, the United States and China. The world's largest household products maker also cut its growth forecasts as expected on Wednesday, and said it did not expect to repurchase shares in the coming fiscal year as it tries to maintain its "AA-" credit rating.
The US maker of Tide laundry detergent, Gillette razors and a host of other products, said it would focus on its 40 biggest businesses, 20 biggest new products and 10 most important developing markets to try to improve results. P&G's shares fell 3.3 percent to $60.10 in morning New York Stock Exchange trading as the plans were likely to take some time to bear fruit. P&G has frustrated investors with its inability to increase operating profit in recent years. Sales have been hurt by slowing global economies and the strong dollar, and higher commodity costs have cut into earnings. But Chief Executive Bob McDonald focused some of the blame on the company, which has also raised prices too much on some products.
"It's our job to overcome these (external factors), but we haven't always been able to do this, in part because we haven't been hitting on all cylinders internally," he said. One disappointing area has been in the lack of innovation from a company that used to develop whole new categories, such as the Swiffer floor mop in 1999 and the Whitestrips tooth whitening product in 2001.
"We haven't created a new category or a meaningful new brand in some time," McDonald said. To solve this, the company is reducing the number of products in development, focusing on the biggest 20, he said. The company also plans to focus on its 40 biggest businesses, which represent about 50 percent of sales and 70 percent of profit, and 10 most important developing markets including Brazil, China and Russia. P&G is currently undergoing a restructuring plan to cut 5,700 non-manufacturing jobs and $10 billion of costs by the end of 2015/16.

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