Procter & Gamble Co. posted a higher-than-expected quarterly profit despite a drop in sales, just weeks after the world's largest household products maker took the blame for its disappointing performance and said it was focusing on ways to improve.
The results, released on Friday, are being watched closely for any early signals of how well P&G and its current leadership can fix a long list of problems, especially after activist investor William Ackman stepped in and bought about $1.8 billion worth of its shares.
The maker of Pampers diapers and Tide laundry detergent said it had talked with Ackman's Pershing Square Capital Management, but did not divulge details of those discussions.
"We have a dialogue with Pershing just as we do with all investors, but of course we keep the content of these discussions confidential to protect the interests and proprietary thoughts of our investors," Chief Executive Officer Bob McDonald told reporters on a conference call on Friday.
P&G also said it would repurchase $4 billion worth of its shares this fiscal year. In June it said it did not expect to do so because it wanted to preserve its credit rating.
Chief Financial Officer Jon Moeller said P&G changed its mind because it had growing confidence in its turnaround plan and more cash on hand than it had anticipated in June, while interest rates continued to fall.
Shares of P&G, a component of the Dow Jones industrial average, were up 2 percent at $64.81 in trading before the market opened.
'WE KNOW WHAT HAS TO BE DONE'
P&G has struggled as growth dropped off significantly in developed markets, which make up 60 percent of sales, while in emerging markets, it is dealing with mandated price cuts in Venezuela and import curbs in Argentina.
McDonald, who has been at the helm of Cincinnati-based P&G since July 2009, unveiled a $10 billion restructuring program in February and also is refocusing on core categories, countries and innovations.
Some analysts have suggested that the company could cut more than outlined in the $10 billion plan.
"We know what has to be done at Procter & Gamble, and we're taking the right steps to get it done," McDonald said.
The company's job cuts are coming in ahead of schedule. P&G planned to eliminate 10 percent of its 57,000 nonmanufacturing jobs, with 1,600 layoffs expected in fiscal 2012 and another 4,100 during fiscal 2013.
The company had eliminated 2,000 jobs by June 30, the end of fiscal 2012, and has cut 5 percent of nonmanufacturing jobs to date. It now expects to complete the majority of the 10 percent headcount reduction by the end of this calendar year, McDonald said.
P&G said it had earned $3.63 billion, or $1.24 per share, in the fourth quarter ended on June 30, compared with $2.51 billion, or 84 cents per share, a year earlier.
Core earnings, or profit from continuing operations excluding items, were 82 cents per share, in line with a year earlier. That surpassed the company's June forecast of 75 cents to 79 cents and the analysts' average estimate of 77 cents, according to Thomson Reuters I/B/E/S.
A better-than-anticipated tax rate accounted for 3 cents of the earnings per share, Moeller said.
P&G said it expected to earn $3.61 to $3.85 per share this year, with core earnings of $3.80 to $4.00.
Back in June, it forecast 2013 core earnings that would be flat to up by a mid single-digit percentage rate. Core earnings were $3.85 per share in fiscal 2012.
Analysts on average expect the company to earn $3.88 per share.
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