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P&G Raises Outlook

Strong sales growth offset higher costs.

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By: Karen McIntyre

Editor, Nonwovens Industry

Hygiene products giant Procter & Gamble has raised its outlook for the full year based on second quarter sales and earnings results. While earnings rose 14%, strong sales growth and cost-cutting measures more than offset higher commodity costs. Net income rose to $3.27 billion in the October-December period from $2.86 billion a year ago. Sales grew 9% to $21.6 billion from $19.7 billion a year ago.

“This quarter is another demonstration of P&G’s capability to deliver strong results in a difficult competitive and commodity cost environment,” said A.G. Lafley, P&G’s chairman and chief executive.

For the first half of the fiscal year, P&G earned $6.35 billion, up 10% from $5.56 billion, in the first half of 2006. Sales for the six-month period rose 8% to $41.8 billion, from $38.5 billion a year earlier.

In its baby and family care sector, net sales increased 8% to $3.4 billion, including the impact of the Western European family care divestiture. Baby care volume increased double-digits behind strong results in developed regions on Baby Dry, Swaddlers and Luvs and continued successful expansion of Pampers in developing regions. Net earnings in baby and family care were up 23% to $418 million as sales growth and lower manufacturing and overhead costs as a percent of net sales more than offset higher commodity costs.

The company has been raising prices on many of its household products because of rising energy and raw materials costs. Executives said in a conference call with analysts that price increases of 6% or more are coming soon for many P&G products. Mr. Lafley said the company tries to introduce product innovations along with price hikes and closely monitors consumer response and what competitors are doing on prices. “I think we’re clearly in a situation where everybody’s feeling the same commodities and price pressures,” he said.

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