Procter & Gamble, Activist Spar Over Latest Results -- 6th Update

By Sharon Terlep 

Procter & Gamble Co. sparred with activist investor Nelson Peltz on Thursday, with the two sides debating whether the company's latest results prove a turnaround is taking hold.

P&G executives argued the company's higher profit and sales showed progress on multiyear efforts to cut costs and refocus on its biggest brands, building their case against Mr. Peltz's demand for a board seat.

But soon after Thursday's report, Mr. Peltz's Trian Fund Management issued a statement saying the maker of Tide, Crest and Gillette continues to lose market share and is saddled with "excessive costs and bureaucracy."

In an interview, P&G Chief Executive David Taylor said he would listen to Mr. Peltz but there was no reason to revisit the company's strategy or give the activist a board seat. "I want to stay focused on delivering the plan," he said. "We have done a tremendous amount of work -- redoing it is not needed."

Mr. Peltz "hasn't offered incremental thoughts that we haven't considered," Mr. Taylor said, "and there's a history of establishing a shadow management team which we believe firmly would derail the work that is already delivering improvement."

Mr. Taylor said Mr. Peltz had offered to have Trian researchers do additional analysis on the company, something the CEO considered unnecessary. DuPont Co., which won a proxy fight against Mr. Peltz in 2015, had accused Trian of seeking to establish a "shadow management" team focused on short-term results.

P&G said organic sales increased 2% for the quarter and full year ended June 30. The closely watched metric, which strips out currency moves, acquisitions and divestitures, remains well below prerecession levels and lags behind some rivals. P&G forecast growth of 2% to 3% next year.

Shares of P&G rose 1% to $90.21 in afternoon trading. The shares are up about 7% this year compared with the S&P 500's 11% rise.

Trian is arguing that P&G remains bogged down by bureaucracy and failed to capitalize on a recently completed five-year, $10 billion cost-cutting plan. P&G last year launched a second $10 billion savings plan and Mr. Peltz said giving him a seat on the board will help ensure that money is well-spent.

On Thursday, Mr. Taylor said men's razors in the U.S. and diapers in China will be two major areas of focus as P&G, which has dropped hundreds of brands in recent years, looks to use its smaller size to win back share in key markets. Mr. Taylor said that turning around the Gillette razor brand, which has ceded market share in recent years to cheaper online upstarts, is P&G's biggest challenge.

In the final quarter of the company's fiscal year, P&G reported a profit of $2.2 billion, or 82 cents a share, compared with $1.96 billion, or 69 cents a share, a year ago.

Total revenue fell 0.1% in the quarter to $16.07 billion, and slipped 0.4% in the full year. The revenue figures were depressed by currency swings, since P&G generates much of its sales outside the U.S.

Organic sales of beauty products and fabric and home-care products both rose 5% in the quarter. Still, concerns remain about the company's grooming and health-care lines, where organic sales fell 1% each. Customers have increasingly turned to online sellers for things such as razors and over-the-counter medications.

P&G fared better than some rivals in the most recent quarter. Colgate-Palmolive Co.'s organic sales for the quarter were flat and Kimberly-Clark saw a 1% decline. Unilever PLC reported a 3% organic sales increase, a decline from 4.7% growth a year ago.

One analyst questioned whether heavy discounting by P&G is in part responsible for the sluggish market. "You are taking prices down more and raising prices less than competitors," Bernstein analyst Ali Dibaj said on the call with executives.

P&G's Mr. Moeller said discounting by retailers has contributed to lower pricing on consumer goods. "The ultimate price consumers pay is at the discretion of retail partners and that's at their sole discretion," he said.

--Cara Lombardo contributed to this article.

Write to Sharon Terlep at [e-mail]

(END) Dow Jones Newswires

July 27, 2017 14:32 ET (18:32 GMT)

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