P&G fiscal 2Q earnings drop 31 pct, hurt by exchange rates

Procter & Gamble’s second-quarter earnings sank 31 percent as the strong U.S. dollar cut into the performance of the world’s largest consumer products maker.

The Cincinnati company, which sells products ranging from Tide detergent to Crest toothpaste, said Tuesday that exchange rates will remain a challenge well into fiscal 2015, especially in the second half of its year. Overall, it expects foreign exchange to chop its core, fiscal 2015 earnings by 12 percent and reduce its revenue by 5 percent.

The company’s stock slid 3 percent after markets opened Tuesday.

P&G Chairman and CEO A.G. Lafley said in a statement from the company that during the quarter, nearly every currency in the world lost value compared with the U.S. dollar, with the Russian ruble “leading the way.”

A stronger dollar can hurt companies that do a large share of their business overseas because sales in other countries translate back into fewer dollars. Health care products maker Johnson & Johnson and drugmaker Pfizer Inc. also recently reported a hit from foreign exchange rates.

P&G Chief Financial Officer Jon Moeller said that the company will offset the foreign exchange impact by reducing costs, shifting sourcing and raising prices.

The projected impact on fiscal 2015 earnings is now double what the company anticipated in the last quarter and five times what it expected heading into fiscal 2015, spokesman Paul Fox said.

In the quarter that ended Dec. 31, P&G earned $2.37 billion, or 82 cents per share. That compares with earnings of $3.43 billion, or $1.18 per share, the previous year.

Earnings, adjusted to account for discontinued operations and non-recurring costs, were $1.22 per share.

Revenue fell more than 4 percent to $20.16 billion.

Analysts expected, on average, earnings of $1.14 per share on $20.7 billion in revenue, according to Zacks Investment Research.

P&G booked a non-cash charge of $740 million after taxes, or 26 cents per share, on the sale of its Duracell battery business to Berkshire Hathaway, a deal expected to close in the second half of the 2015 calendar year.

P&G acquired Duracell in 2005 but has been trimming its product lineup to focus on its top performers. The company has said it will be left with about 70 to 80 brands after it finishes jettisoning more than half its brands around the globe over the next year or two.

Shares of Procter & Gamble Co. fell $2.72, to $86.86 Tuesday shortly after the opening bell. The stock price climbed nearly 12 percent last year, outpacing the 11.4 percent gain of the Standard & Poor’s 500 index. But shares were already down more than 4 percent so far this year, counting Tuesday morning’s drop.

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