P&G sees organic sales growth from current quarter

By Yashaswini Swamynathan

REUTERS - Procter & Gamble Co reported a higher-than-expected quarterly profit and said it expected organic sales to grow from the current quarter as it moves through a "portfolio cleanup."

The company has been shrinking the number of its brands to focus on more profitable lines such as Gillette shaving products, Pampers diapers and Tide detergent.

Shares of P&G, which sold 43 brands to Coty Inc in July, rose as much as 4.8 percent on Friday.

P&G expects organic sales growth "to further strengthen in the back half," Chief Executive A.G. Lafley said. Chief Financial Officer Jon Moeller said pricing was expected to be a "bigger driver" of sales this year.

Some analysts, however, said the company needed to "decentralize" its operations to move faster on trends in emerging markets such as China.

"The more strong people they have with a local understanding of running their business, the better chances they have of not being late with their innovation and marketing strategy," CLSA analyst Caroline Levy said.

"They've missed huge trends," Levy said, notably a move to online shopping and the launch of new diaper products in China.

P&G, which gets nearly two-thirds of its revenue from markets outside North America, reported its seventh straight quarter of sales decline as demand fell further across product categories and a strong dollar eroded international sales.

Organic sales, which exclude the impact of currency, divestitures and acquisitions, fell 1 percent in the first quarter.

RBC Capital markets analyst Nik Modi also expressed concerns over P&G's margin expansion and a fall in volumes, which he said suggested that the company was not spending enough to attract customers at a time when rivals were gaining market share.

WEAK FORECAST

P&G cut its full-year revenue growth forecast, saying the hit from the dollar was now expected to be bigger than previously anticipated.

Sales in all its product categories fell in double-digit percent in the quarter, with beauty, baby care and grooming products recording the worst drop.

Net sales fell 12 percent to $16.53 billion, missing the average analyst estimate of $17.17 billion, according to Thomson Reuters I/B/E/S.

However, the net income attributable to P&G rose 31 percent to $2.60 billion, helped by cost cuts and accounting changes in its Venezuela operations.

Excluding items, P&G earned 98 cents per share, beating analysts' expectations of 95 cents.

P&G shares were up 2.5 percent at $76.74 in noon trading.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Kirti Pandey)