Friday, August 3, 2007

P&G 4Q Net Up 19%, Plans Buyback Up To $30 Billion


NEW YORK -(Dow Jones)- Procter & Gamble Co.'s (PG) fourth-quarter profit jumped 19% despite hefty commodity-cost pressures, as sales jumped in the consumer giant's razor and home-care businesses.

The maker of Pampers diapers and Oil of Olay beauty products also said it will buy back $24 billion to $30 billion of its shares over the next three years at a rate of $8 billion to $10 billion a year. That is sharply higher than the company's fiscal 2007 repurchases of $5.6 billion.

Procter & Gamble's stock has had a weak performance this year, and the buyback may be a positive for the shares going forward. "Net net it's going to be good for the shares," said Sanford Bernstein analyst Ali Dibadj. The improved topline and margins also could make investors more comfortable about P&G's performance, he said. Still, the company's first-quarter guidance was slightly below analysts' average estimate, he pointed out.

The consumer company's sizable share repurchase comes at a time when shaky credit markets have derailed several buyouts and even caused one large company, online travel concern, Expedia Inc. (EXPE), to slash the size of its proposed stock buyback by 79%. Standard & Poor's said in a statement that its rating and outlook on P&G are unaffected, and the buybacks are expected to be funded mostly through free cash flow with some incremental debt.

However, P&G projected fiscal first-quarter and fiscal 2008 earnings just below analysts' mean estimates. For the first quarter, the company anticipates earnings of 88 cents to 90 cents a share, with overall sales increasing 6% to 8% and organic sales - a closely watched measure that excludes the effect of acquisitions and exchange rates - rising 4% to 6%. Mean estimates of analysts surveyed by Thomson Financial were for earnings of 91 cents a share on 6% revenue growth to $19.95 billion.

Procter & Gamble also projects fiscal 2008 earnings of $3.44 to $3.47 a share, revenue growth of 5% to 7% and organic sales growth of 4% to 6%. Analysts were expecting, on average, earnings of $3.48 a share on revenue growth of 6% to $ 80.69 billion.

P&G's stock recently was up 12 cents to $63.42 in premarket trading.

The Cincinnati consumer and health-care products company had fourth-quarter earnings of $2.27 billion, or 67 cents a share, up from $1.9 billion, or 55 cents a share, a year earlier.

Procter & Gamble said net sales for the quarter ended June 30 rose 8% to $ 19.27 billion from $17.84 billion a year ago.

Analysts surveyed by Thomson Financial expected, on average, earnings of 66 cents a share on revenue of $19.11 billion.

The company's organic sales growth rose 5%. The weaker dollar added 3 percentage points to overall sales.

During the quarter, P&G reorganized into three divisions - beauty care, global health & well being, and household care. The company plans to expand further into health and beauty products, which generate higher margins than the household line.

Sales at P&G's beauty segment, which includes Pantene shampoo and Olay skin- care products, increased 8% to $5.87 billion as volume rose 4%.

Sales of global health & well-being products jumped 11% to $2.19 billion amid high-teens growth at P&G's oral-care business.

Sales of fabric and home-care products climbed 10% to $4.8 billion as volumes increased 8%, thanks to double-digit gains in developing nations.

As the integration of Gillette nears completion, it continues to drive P&G's bottom line - during the quarter, blade and razor sales jumped 18% to $1.4 billion on a 6% volume increase.

P&G previously said that it continues to expect sales growth of 6% to 7% and per-share earnings of 64 cents to 66 cents for its fourth quarter.

Consumer-product companies continue to struggle with a difficult commodity cost environment. Procter & Gamble, like others in its sector, has been been fighting that pressure by aggressively cutting costs and raising prices for some products.

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