P&G annual profits drop 7% after $700m rise in adspend

Procter & Gamble's net earnings suffered a sharp year-on-year decline in the 12 months to the end of June, despite top-line growth.

P&G: recent 'Thank You Mum' campaign
P&G: recent 'Thank You Mum' campaign

Net earnings for the owner of Ariel, Gillette and Febreze declined 7% year on year to $11.8bn in the 12 months to 30 June.

The drop came despite the company increasing net sales by 5% to $82.6bn and was due in part to input costs rising and a large increase in marketing spend.

Advertising spending, which makes up the majority of P&G's marketing expense, increased more than $700m year on year to $9.3bn – 11.3% of net sales – the company said.

FMCG rival Unilever yesterday said it reduced its first half marketing spend by 1.5% in reaction to cost pressures, but has still boosted revenues including in its problem region of Western Europe.

Unilever said revenues were up by 4.1% year on year to €22.8bn during the first half of its financial year and pre-tax profits were up 9% to €3.2bn.

Today P&G said it increased sales volume in all business segments, all geographic regions, and in 15 of 17 key countries during the twelve months to the end of June.

According to the company the increase resulted from investments in innovation and market expansions such as Olay and Head & Shoulders in Brazil, Gillette Guard in India, Downy fabric enhancers in Indonesia, Fusion ProGlide in Western Europe, and Gain hand dishwashing liquid in the US.

Global market share was up for the year, the company said, and held or grew in businesses accounting for approximately 60% of sales.

In Western Europe in the fourth quarter (April to June) it was hit by sales volume decreases in home care products and batteries (it owns Duracell) and market contraction in fabric care.

Western Europe did, however, witness low-single digit growth for retail hair care products after marketing activity and distribution expansion.

Overall, P&G said its fourth quarter provided strong growth as net sales were up 10% year on year to $20.9bn.

The company predicted net sales growth this year of 5% to 9%.

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