Despite board battle, P&G says it has ‘the right plan’
Company suggests it won’t be derailed by activist investor
Facing a fight with a prominent activist investor, consumer goods giant Procter & Gamble defended its business plan Thursday and vowed to continue to cut costs.
It didn’t help that revenue from the wide variety of consumer products it makes — from Crest toothpaste to Tide detergent — was flat, even though there was an uptick in profit.
Cincinnati-based P&G, whose brands also include Gillette razors and Pampers diapers, reported revenue of $16.1 billion in the fiscal fourth quarter ended June 30, effectively unchanged from a year earlier. Revenue was also flat for the fiscal year.
Quarterly net earnings increased 14% to $2.2 billion, while full-year earnings rose 46% to $15.3 billion.
The company is facing pressure from activist investor Nelson Peltz of Trian Partners, who is seeking a board seat after blasting the company for what he called excessive costs and bureaucracy and disappointing financial performance.
While P&G did not address the Peltz fight directly in Thursday’s earnings report, it was the elephant in the room.
“Achieving our objectives will not only require continued focus as an organization, but also that we prevent anything from derailing the work that is delivering improvement,” CEO David Taylor said in a statement. “We, as a management team and board, are confident we have the right plan in place.”
While P&G has held talks with Peltz, the company’s board refused to capitulate to his demands.
Trian, whose firm owns more than $3 billion in P&G shares, said Thursday that “P&G needs to address the root causes of this consistent underperformance, including deteriorating market share across most of its categories and excessive cost and bureaucracy.”
Trian said P&G executives’ reassurances ring hollow. “Shareholders have heard similar promises in the past, and results have not materially improved.”
Sales of beauty products were a bright spot, rising 5%, with skin and personal care led by the booming premium lineup of SKII products. Fabric and home care goods also performed well, increasing 5%.
But declining sales of razors and other shaving products amid stiff competition drove sales of grooming products down 1%. Health care products were also down 1%.
P&G has struggled to grow both sales and profits in the last half-decade amid a tepid world economy and unfavorable currency exchange rates. Facing financial pressure, P&G has cut 34,000 jobs, or 26% of its workforce, since 2012 through a combination of brand sales and waves of buyouts. Last fall, P&G completed the sale of or split from more than 100 lagging brands in a bid to simplify operations.
Nelson Peltz of Trian Partners is seeking a board seat after blasting P&G for its performance and what he called excessive costs.