CINCINNATI - Consumer products maker Procter & Gamble Co. said Thursday its earnings rose 14 percent in its fiscal second quarter as strong sales growth and cost-cutting measures more than offset higher commodity costs.
The results prompted the company — which manufacturers products including Tide detergent, Olay skin care and Gillette shavers — to raise its outlook for the full year.
P&G also said it will separate its coffee business into an independent company. Cincinnati-based Folgers Coffee Co., which had sales of about $1.6 billion in 2007, will employ about 1,250 employees at four sites in the United States. Jamie Egasti, president of coffee and global snacks at P&G, was named chief executive of Folgers Coffee.
P&G, also based in Cincinnati, said its net income rose to $3.27 billion, or 98 cents per share, in the October-December period from $2.86 billion, or 84 cents per share, a year ago. Sales grew 9 percent to $21.58 billion from $19.73 billion a year ago.
Analysts surveyed by Thomson Financial expected profit of 97 cents per share on revenue of $21.25 billion.
"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.
Looking ahead, P&G raised its 2008 profit outlook to $3.46 to $3.50 per share, up about 15 percent year-over-year. The old estimate had been $3.46 to $3.49 per share. Fiscal third-quarter earnings per share are expected to be 79 cents to 81 cents a share, the company said.
Wall Street has been predicting quarterly profit of 83 cents per share and fiscal 2008 earnings of $3.49 per share.
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 percent or more are coming soon for P&G products ranging from Iams dog food to Cascade dishwasher detergent and Zest bar soap.
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 when everybody's feeling the same commodities and price pressures," Lafley said.
In Thursday trading, P&G shares rose 33 cents to $65.42.
P&G shares have been slipping after a strong second half of 2007, when they traded at a record high of $75.18 per share. Shares have traded as low as $60.42 over the last 52 weeks.
For the first half of the fiscal year, P&G earned $6.35 billion, or $1.90 a share, up 10 percent from $5.56 billion, or $1.63 a share, in the first half of 2006.
Sales for the six-month period rose 8 percent to $41.77 billion, from $38.51 billion a year earlier.
P&G officials last year said they were reviewing their portfolio to possibly divest slower-growing brands, and Folgers, obtained by the company in 1963, had been subject of speculation as a spinoff target.
P&G said Thursday that the move will help the company focus on faster-growing businesses, while the coffee business will get greater attention as a standalone company.
The company said it hasn't decided on the form of the Folgers separation, but was leaning toward a transaction in which shareholders would have the option of exchanging P&G shares for shares in the new coffee company. P&G said the structure will depend on market conditions, and it expects to make a final decision in the April-June quarter and complete the transaction in the second half of 2008.
While Folgers has been the nation's No. 1 ground coffee brand and is among P&G "billion-dollar brands" in annual sales, it has faced increased competition from Starbucks and other coffee-makers. Folgers, which dates to a 19th century California family business, has been expanded with gourmet and other specialty lines in recent years.
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