Why Are P&G Earnings Getting SLAPPED?

Procter & Gamble (NYSE:PG) Chief Executive Bob McDonald has had to cut forecasts for the company’s April through June quarter as growth slowed in China and difficult market conditions persisted across Europe and the United States. Conditions were aggravated by the strength of the dollar and higher commodity costs.

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Sales growth expected for the fourth quarter has been revised downwards from 4-5 percent to 2-3 percent, while earnings have been cut from the earlier forecast of 79-85 cents to 75-79 cents.

For the new financial year 2012/13, commencing July 1, McDonald said he doesn’t expect much improvement, with sales forecast to grow by only 2-4 percent. Earnings for the year will likely be flat, or slightly better by a mid-single digit percentage.

The company is in the midst of implementing a massive restructuring program that would cut 5,700 jobs and $10 billion in costs by the end of 2015/16. The current difficult market conditions come on top of a lackluster profit performance over the last three years, though the group did manage to grow sales over the period.

McDonald is changing tack on the revival of the company by focusing on its 40 largest markets, its 20 best innovations, and the 10 most important developing markets.

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