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P&G FIRST QUARTER WORLDWIDE UNIT VOLUME UP 4%

This article was originally published in The Tan Sheet

Executive Summary

P&G FIRST QUARTER WORLDWIDE UNIT VOLUME UP 4% for the period ended Sept. 30, Procter & Gamble Chairman and CEO Edwin Artzt told the firm's annual shareholders meeting on Oct. 12. Excluding discontinued businesses such as the orange juice and pulp operations, worldwide unit volume gained 6% for the period, Artzt said. P&G achieved a "new shipping record for the quarter," Artzt noted, adding that September was the company's "largest shipment month ever." He cited the volume growth as a primary impetus to expected "record highs" in unit volume and earnings for the quarter. Without the effects of unfavorable foreign exchange rates, first-quarter earnings would be "well ahead of our average growth rate in" fiscal 1993, Artzt said, "and even after these effects, we still expect to report a very substantial profit increase year to year," he continued. P&G will report first-quarter results on Oct. 26. Artzt explained that P&G's domestic business is "key" to increased shipments in the quarter. From the fourth quarter of fiscal 1993 through the first quarter of the current year, "U.S. shipments have been running 6% ahead of a year ago -- compared with 4% average growth throughout the entire decade of the '80s," he pointed out. The volume improvement is "broadly based geographically and by business sector, indicating that our strategies of stepped up investment in product innovation for our core brands, total quality management, value pricing, and customer partnering, are all starting to reap rewards," Artzt said. First-quarter volume growth in the firm's international operations was 6%, with "good balance across the geographies of the world," Artzt added. He also noted that the company expects international sales to reach 60% of total sales by the year 2000. The international business exceeded 50% of the company's worldwide sales for the first time in fiscal 1992. Artzt maintained that Procter & Gamble has been able to reduce its costs quickly enough to offset lower revenues from the price reductions made recently in a number of its product categories. "We've matched all price reductions with dollar per dollar cost savings, and the folding in of less efficient price promotion funds," Artzt said. "Our profit margins are the highest in a decade, even though we've invested heavily in new products." P&G's price gap reductions versus private label and price brands is "working," Artzt maintained. Noting that P&G was "above our historic price spreads in several categories, both [in the U.S.] and internationally," he said that "where we have restored those [pricing spreads] to normal our business is responding. In the U.S., during the past six months, price and private label brand shares in our categories grew an average of only 2%." Updating shareholders on the progress of the company's recently announced workforce reduction and plant consolidation program ("The Tan Sheet" July 19, p. 7), Artzt said that P&G expects to announce by the end of the year which plants are to be closed. In the meantime, Artzt noted that the company has begun to consolidate management in its Latin America and Far East operations into regional structures "to avoid duplication in small countries and to facilitate growth without parallel increases in cost." The Latin American operation is expected to "double its business in five years," he noted. Artzt also discussed the success of a recent new marketing program for Crest toothpaste featuring a guarantee for a "dramatic reduction" in tartar build-up after using the brand for six months. Advertising for the program, which offers consumers a refund of up to $ 15 for Crest purchased if they are not completely satisfied, began approximately one year ago. "So far, nearly 70,000 consumers have responded to the offer," Artzt said. "The guarantee has contributed to a two-point growth in Crest share since the initiative began."
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