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P&G Profit Tops Estimates Amid Price Increase


Procter & Gamble Co. (PG), the consumer products company targeted by activist investor Bill Ackman, reported fourth-quarter profit that beat analysts’ estimates, helped by price increases.

Net income in the period ended June 30 rose 45 percent to $3.63 billion, or $1.24 a share, from $2.51 billion, or 84 cents, a year earlier, Cincinnati-based P&G said today in a statement. Profit excluding some items totaled 82 cents a share. Analysts projected 77 cents, the average of 21 estimates compiled by Bloomberg.

Procter & Gamble Co. Chief Executive Officer Robert McDonald faces scrutiny over whether his pricing and plan to save $10 billion by 2016 through cutting jobs and marketing are enough to improve results. Last month, Ackman’s Pershing Square took a $1.8 billion stake in P&G, and people familiar with the matter said he plans to push for leadership changes.

“It’s easy to clamp down on spending for three to six months, but he has to convince investors that he can permanently reduce P&G’s cost structure and, at the same time, grow sales,” Erik Gordon, a business professor at the University of Michigan, said in an e-mail.

P&G, the maker of Tide laundry detergent and Duracell batteries, rose 0.9 percent to $64.10 at 7:51 a.m. in New York. The shares had declined 4.8 percent this year through yesterday.

McDonald said on a conference call today that the company has had talks with Ackman, and declined to provide specific details. The CEO also forecast job reductions of 10 percent at P&G by the end of 2012.

Annual Forecast

The company reiterated its forecast for earnings per share for fiscal 2013 will be $3.80 to $4. Analysts projected $3.90, the average of estimates compiled by Bloomberg. P&G also said it will repurchase $4 billion in stock this year.

Price increases added 4 percent or more to net sales growth in the quarter, P&G said. The sale of the company’s snacks business resulted in a net gain of 48 cents per share in the quarter, according to the statement.

Fourth-quarter sales fell 1.2 percent to $20.21 billion, trailing the $20.25 billion average of analysts’ estimates compiled by Bloomberg.

Ackman, who said his P&G stake is his largest initial investment ever, this year won an effort to remove Canadian Pacific Railway Ltd. (CP) CEO Fred Green and replace him with Hunter Harrison. Ackman also pushed Fortune Brands Inc. to break up, and the company last year split into spirits maker Beam Inc. (BEAM) and a company that sells home products such as faucets and locks.

Source: Bloomberg