33% jump in net income
The packaged goods giant beat analyst estimates on both the top and bottom lines. Net income for the quarter, which ended Sept. 30, was up 33% to $1.46 billion, or $1.04 a share. Excluding restructuring charges of $113 million, net income was up 17% to $1.58 billion or $1.12 a share, 2 cents ahead of analysts surveyed by Thomson First Call.
Excluding positive foreign currency effects of 1% and impact of acquisitions and divestitures, sales were up 6% to 7% as P&G broke out of a two-year pattern of flat-to-down organic sales growth.
Sales and earnings were up across all of P&G's business units in the quarter. The broad-based gains were the strongest P&G has reported since launching its Organization 2005 restructuring program in 1999.
Marketing spending up
P&G said marketing spending
Chairman-CEO A.G. Lafley singled out progress in oral care, baby care and dish care businesses, all of which struggled and lost market share in the 1990s and all of which posted sales and market share gains in the quarter.
P&G's fabric and home care business posted 9% sales growth in the quarter on unexpectedly strong gains in what the company termed "mid-tier" brands such as Cheer, which recently took a reduction in package size and price to combat a similar move by rival Unilever's Wisk. P&G's baby- and family-care business lagged behind results of the rest of the company, with P&G locked in a fierce new-product, price and promotional battle with rival Kimberly-Clark Corp. Still, sales in the unit were up 5% to $2.4 billion, with earnings up 8% to $241 million.
Overall, health care continued to be P&G's strongest business, with sales up 20%, primarily on growth of Crest and Iams pet food.
But P&G will have to wait longer than expected for the over-the-counter version of Prilosec, an AstraZeneca prescription drug for which it owns OTC conversion rights. P&G said the U.S. Food and Drug Administration will need six months to review a revised OTC label after the company completes its own eight-week study, pushing the planned OTC launch date from early 2003 to fall 2003. Publicis Groupe's D'Arcy Masius Benton & Bowles, New York, handles the Prilosec OTC launch, pending reassignment of the brand as Publicis phases out the agency and reassigns accounts. P&G expects OTC Prilosec to be a $400 million brand.