April 27, 2015
By Mark Terry, BioSpace.com Breaking News Staff
Procter & Gamble Co. , headquartered in Cincinnati, announced last week that it would cut 3,000 to 6,000 jobs globally over the next two years. The overall cuts are 25 to 30 percent of office jobs.
The news came in the course of the company’s third quarter fiscal report on April 23, 2015. The company indicated that all-in net sales decreased eight percent compared to the prior year period of January to March. The decrease also included a negative eight percent impact from foreign exchange and a negative one percent decrease from minor brand divestitures.
The company’s five divisions include Beauty, Hair and Personal Care; Grooming; Health Care; Fabric Care and Home Care; and Baby, Feminine and Family Care. All sectors had a drop in net sales, with -11 percent, -3 percent , -1 percent, -1 percent, and -2 percent, respectively. Health Care was one of the stronger divisions, growing 6 percent in organic sales, second only to Grooming with 9 percent in organic sales.
“We delivered double-digit constant currency core EPS growth with significant currency-neutral gross and operating margin expansion from over 400 basis points of productivity savings from programs that continue to gain momentum,” said A.G. Lafley, P&G chairman, president and chief executive in a statement. “This quarter the productivity progress was offset by foreign exchange. As we have done before, we’ll offset foreign exchange over time through a combination of pricing, mix enhancement and cost reduction.”
For the Health Care segment, higher volume in Personal Health Care was apparently driven by a worse cold and cough season than usual, which was offset somewhat by lower volumes in Oral Care in developing markets related to price increases.
Since February 2012, P&G has been cutting jobs starting at that time with 5,700 layoffs, which accounted for approximately 10 percent of non-manufacturing jobs. Since then, the company has cut 11,000 office jobs and 10,000 manufacturing jobs.
The company’s $2.2 billion quarterly profit was a drop of 17 percent from the same period a year ago. P&G took a big hit of $300 million with an after-tax charge against its Duracell batteries division, which it is currently selling to Warren Buffett’s Berkshire Hathaway. It also sold Iam’s and other pet-related brands, and gotten out from under several fragrance labels, global laundry brands, soaps and some health-related ventures.
John Moeller, P&G’s chief financial officer, indicated that the company was in “probably the biggest transformation the company has gone through.”
Analysts, however, have expressed skepticism at the company’s slow turnaround. “We’ve been hearing a lot of promise that help is around the corner for years, years,” said Ali Dibadj, an analyst with Bernstein Research at the third-quarter conference call. “Now the promise is wait till we break up 14 percent of sales, 6 percent of operating profit out of our business. Things will be much better. How much longer would we have to wait for you guys to decide maybe something even bigger has to happen?”
Dibadj may have been alluding to rumors that P&G might divest its beauty brand or shop around for a new chief executive officer. It is also selling or moving out of 100 noncore brands in hopes of growing sales and turning a consistent profit.
The company’s health care products include Prilosec OTC, Pepto-Bismol and ovulation test/fertility test kits like Clearblue.
In respond to Dibadj’s comments, Moeller said, “It’s hard to see that all come together at this point. We’re happy with the progress, and we’ll see.”
Proctor & Gamble did not respond to queries regarding how the cuts will impact the Health Care segments by deadline.
As Boston Booms, What’s Next for Biotech?
After a week that saw Boston biotechs vastly increasing their rosters and a new IBM health unit installed, BioSpace wants your predictions for what Boston can expect in the next year. Get out your crystal ball and tell us what you think is most likely in the cards for Genetown!
