- The Washington Times - Tuesday, January 28, 2003

CINCINNATI, Jan. 28 (UPI) — Consumer products giant Procter & Gamble Co. said Tuesday its second quarter net income was lifted by strength in its healthcare segment and hot products such as Crest tooth whitening strips.

P&G;, which makes such products as Pampers diapers, Tide detergent and Crest toothpaste posted a second quarter net income of $1.6 billion, or $1.13 a share, excluding special items, compared with $1.4 billion, or $1.03 a share during the same period a year earlier.

Analysts on Wall Street had expected P&G; to report a net income of $1.12 a share, according to Thomson First Call.

The company's second-quarter core earnings of $1.13 a share topped the First Call consensus estimate by one cent. P&G; had raised its forecast for the quarter last month.

The consumer products maker also said it expects to meet or beat forecasts for the current quarter.

Procter & Gamble Co. said unit volume rose 8 percent for the second quarter because of double-digit growth in the health care and beauty care businesses, as well as strong results in baby and family care segments. Excluding acquisitions and divestitures, unit volume increased 7 percent from a year ago.

Sales rose 6 percent to $11.01 billion from $10.4 billion a year earlier. Foreign exchange added 1 percentage point to sales growth, as the stronger euro offset currency devaluations in Latin America, the company said.

Sales growth was slower than volume growth as the company cut prices in some products to help gain or defend market share.

The company said second-quarter healthcare sales rose 17 percent to $1.57 billion, thanks to particularly strong volume and sales growth in Crest Whitestrips, a teeth-whitening system, and osteoporosis treatment Actonel.

Beauty product sales rose 10 percent for the quarter to $3 billion, trailing a 14 percent jump in volume due to the impact of repositioning hair care brands into multiple price tiers.

In the baby and family care segment, sales rose 7 percent to $2.53 billion for the quarter, as strength in premium-priced diapers offset temporary price cuts in some products. Procter & Gamble also lowered some prices in its fabric and home care business as part of an effort to retool its North American Cheer brand. Sales in that segment were up 5 percent for the quarter to $3.1 billion.

Snacks and beverages posted a 1 percent unit volume decline for the quarter, though sales increased 1 percent to $881 million. Increased merchandising investments in beverages were offset by positive category mix, the company said.

The company, which has said it will look for more business in the mid-price market, where consumers have turned to save money, also said it cut prices on its Cheer laundry detergent.

The company said it expects third-quarter volume to rise 6 percent to 8 percent, with sales up in the mid-single digits before the impact of foreign exchange.

Looking ahead the consumer goods maker said it is well positioned to achieve its financial targets for the year. It expects third-quarter earnings to increase 11 percent to 13 percent — despite a difficult comparison with strong year-ago results — with volume up 6 percent to 8 percent. For the full year ending June 30, earnings are expected to rise 12 percent to 13 percent.

Based on year-ago "core" earnings, which exclude restructuring charges, Procter & Gamble's outlook indicates third-quarter earnings of 93 cents to 95 cents a share, and full-year earnings of $4.02 to $4.06.

Polls by Thomson First Call show that analysts, on average, currently estimate Procter & Gamble's earnings at 93 cents for the third quarter and $4.02 for the full year.

Procter & Gamble now expects full-year sales growth at the high end of its standing forecast range of 4 percent to 6 percent, which would indicate sales of up to $42.6 billion. Foreign exchange is expected to add a 1% benefit to reported revenue for fiscal 2003.

Third-quarter sales, excluding foreign exchange, are expected to be up in the mid single-digits compared with the year-ago quarter. Reported sales for the 2002 quarter were $9.9 billion.

"At the midpoint of our fiscal, we are well positioned to meet our growth goals for the year. We have the right strategies and we're making the necessary systemic interventions to sustain long-term top- and bottom-line growth objectives," Procter & Gamble said.

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