P&G GETS EARNINGS BOOST FROM CLAIROL

Marketer Expects Ad Spending to Remain High

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CINCINNATI (AdAge.com) -- Procter & Gamble Co. today said fiscal third-quarter earnings were up primarily due to cost reductions and the impact of the company's November acquisition of Clairol hair care products.

Net earnings for the quarter rose 16% to $1 billion, with earnings per share up 17% to 74 cents. P&G said cost-cutting measures included lower raw material costs, headcount reductions and other operating efficiencies from its ongoing Organization 2005 restructuring program that began in 1999.

Volume growth for

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the quarter was up 10%, P&G said, while sales were up 4% thanks to Clairol, which accounted for all of the quarter's gain in dollar sales. Foreign currency effects reduced sales by 3%.

Ad spending up
Chief Financial Officer Clayton Daley said marketing spending for the quarter was up both in absolute terms and as a percent of sales as P&G incorporated the more marketing-intensive Clairol business. He said he expected P&G to continue its higher marketing outlays in the year ahead as it supports new product launches in several areas, including fabric care.

While the consolidation of the Clairol business helped the top line, a 5% decline in Clairol sales for the quarter, combined with a 6% decline in food and beverage and continued weakness in feminine care, offset gains in other parts of the business.

Health care sales rose 11% on the strength of last year's Crest Whitestrips and Crest Spinbrush launches and osteoporosis drug Actonel.

Strong gains in market share
Overall, President-CEO A.G. Lafley said P&G gained share for eight of its 10 leading $1 billion brands in North America, with U.S. dollar sales in all retail outlets up 15% in the quarter and 6% in the past 12 months.

P&G executives sounded an upbeat note on the results and projected P&G would meet the low end of its long-term target of 4-6% annual sales growth. P&G also plans to reach its goal of double-digit earnings growth in 2003, excluding restructuring and other special charges.

Mr. Daley also announced P&G is moving management of its troubled feminine care business from the paper sector to health and beauty care. It's the third reorganization in three years for feminine care, which went from part of the paper business to a stand-alone unit in 1999, then back to the other paper businesses in 2000.

He pointed to the recent launch of Tampax Pearl in test market as an example of the product improvements the business would see more of in the future, adding that inclusion with the faster-growing health and beauty business would better fit how most retailers are structured and fit better with product development and marketing strategies.

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