P&G Beats Expectations, Projects $150 Million of Commodity Costs

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(Bloomberg) — Procter & Gamble Co. reported stronger-than-expected results for its latest quarter, driven by growth in the beauty category, while significantly raising its outlook for commodity costs in the company’s current fiscal year. 

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Organic sales, which strip out items such as acquisitions and currency variations, rose 3% in the company’s fiscal third quarter ended March 31, surpassing the most optimistic of analyst estimates compiled by Bloomberg. It was the highest organic growth in more than a year.  

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The maker of Tide laundry detergent and Herbal Essences shampoo also reported volume that outpaced expectations in the period. 

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P&G has focused in recent quarters on developing new versions and formulations of its products and marketing them as being more effective than those from competing brands, a strategy that appears to be paying off. In a statement, Chief Executive Officer Shailesh Jejurikar said the company had “broad-based growth across categories” and is increasing investment. 

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The results are also a positive sign for the wider household-goods industry as consumers spend cautiously amid higher prices and uncertainty due to unrest in the Middle East and elsewhere. P&G is the largest player in the category and the first to report results this earnings season.

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Stock Advances

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The company’s shares rose as much as 4.6%. The stock had gained about 2% this year through Thursday, compared with a roughly 4% advance for the S&P 500 Index.

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P&G mostly maintained its outlook for the current fiscal year, which ends in late June, but now projects higher commodity costs of about $150 million, after taxes. Previously, the company had expected the impact of commodities to be neutral. The company maintained its outlook tariff-related expenses of about $400 million, after tax, for the year. 

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The cost impact during the remainder of this fiscal year is primarily driven by higher transportation expenses, Chief Financial Officer Andre Schulten said during a media call.

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“With the timing of these cost impacts, there is little opportunity to create short-term offsets within cost of goods sold,” he said during a separate call with analysts.

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Beyond higher fuel costs, a significant portion of the company’s products are petrol-based, leaving P&G exposed to rising input prices, Schulten said. 

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$1 Billion Hit

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Should oil stay above $100 a barrel for an extended period, the company estimates an additional $1 billion after tax hit in fiscal 2027. Still, the company will move quick to blunt the impact. 

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“We know how to drive enormous productivity with our own system to help offset some of the cost impacts,” Schulten said. The company will likely reformulate products or shift suppliers when necessary. 

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Those changes may come with price increases for consumers, Schulten said. “While we might pass on some pricing, it will be combined with innovation.” 

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The company said it has been working to limit price increases in order to boost demand and gain market share.