Procter & Gamble shows soft growth
Led by health and baby care, the company emphasized a deeper push into emerging markets and better pricing.
Organic sales for Q3 2013 grew 3% supported by 2% growth in volume sales, and a 1% positive impact from higher prices. Net sales stood at $20.6 billion, a 1% positive change year-on-year. This was completely in line with our expectations as highlighted in our pre-earnings analysis.
Health care and baby care segments drove revenues
The company's health care and baby care segments grew organic sales by 8% and 4% respectively in Q3 2013, as compared to the previous year. The volumes for health care products saw significant growth in developing regions, as they grew by high single digits, as opposed to low single-digit growth in the developed regions.
Within the health care segment, oral care volume increased by mid-single digits -- due to double-digit growth in developing regions behind market expansion and market growth, and low single-digit growth in developed regions due to innovation. Organic volume in personal health care increased due to a relatively weaker cough/cold season in the previous year and the market expansion for Vicks.
Developing markets contributed mid-single-digit growth in baby care volume, as these markets grew by low single digits. Product innovation and market expansion helped baby care segment to achieve a positive 3% change in net sales year-on-year.
Beauty, grooming and fabric care segments disappoint
The net sales declined in beauty and grooming segments by 2% each year-on year -- owing to heavy competition within the industry. That decline was partially offset by innovation in the U.S., as well as pricing and product mix improvements in developing markets.
The fabric care segment saw a 3% growth in organic sales, driven by strong product innovations. As we discussed in our previous analysis, P&G has created new categories and new brands like Tide PODS, Swiffer and Crest Whitestrips to expand its reach among consumers. These products, along with older brands, resulted in a disproportionate growth in developing regions. Home care also delivered higher net sales due to product innovation and geographic expansion.
We have updated the $70 Trefis price estimate to incorporate the earnings release.
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