US consumer products giant Procter & Gamble reported better-than-expected profits Friday, but lowered its current fiscal 2016 sales forecast due to the strong dollar and the impact of asset sales.
The maker of such household items as Crest toothpaste and Tide detergent said fiscal first-quarter revenues fell 12.0 percent to $16.53 billion, missing estimates of $17.17 billion.
Sales declined in all five of P&G's businesses, with grooming suffering the biggest drop at 14 percent.
However, excluding currency effects, two of the businesses notched flat sales and the other three saw much smaller drops in revenues.
Chief financial officer Jon Moeller said revenues have been hit by the decision to stop selling some low-return products in favor of goods with higher profit margins.
He cited as examples an upgrade to tissue products in Mexico and a scale-back of the company's business in India, where P&G previously scored double-digit revenue growth.
"We made a choice to accept a lower sales growth rate. We improved margins," Moeller said. "As a result, we're making good money in India and the growth we have going forward will be worth something."
P&G revised its fiscal 2016 sales outlook and now expects net sales to be down "high single digits" as compared with the July forecast for a fall of "low-to-mid single digits."
The shift is due to minor brand divestitures and the impact of a revision in its accounting of the Venezuela business due to a series of foreign exchange policy changes in the South American country.
Moeller said P&G has hiked prices of some goods in Russia due to the strong dollar, but has seen lower volumes there. The company is monitoring consumer response to recent price increases in Brazil.
Net income in the quarter rose 30.7 percent to $2.6 billion. The favorable year-over-year comparison was due to the impact of a charge in the year-ago period related to divestitures.
Earnings from continuing operations translated into 98 cents per share in the quarter ending September 30, better than the 95 cents projected by analysts.
P&G in the last year has divested its Duracell battery business and dozens of beauty and fragrance brands, part of a makeover to emphasize the company's biggest sellers, such as Pampers and Gillette.
In July, the company announced it was promoting David Taylor to chief executive beginning November 1.
Morgan Stanley said P&G's underlying results were "weak," but praised the improvement in profit margins.
"All in all, we would declare today a victory vs expectations," Morgan Stanley said.
Shares in Dow member P&G jumped 2.6 percent to $76.78 in early trade.
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