Procter & Gamble to raise prices as supply chain costs bite
The company keeps its full-year forecast steady as it banks on price hikes to recoup rising cost of raw materials
Procter & Gamble (P&G) said on Tuesday it will raise prices of some of its products to counter higher commodity and freight costs that are expected to take a bigger bite out of its earnings this year.
Shares of the company, which reported lower quarterly earnings, while maintaining its full-year forecasts, were down 2.2% at $139.24.
The latest increases in grooming, oral hygiene and skincare products are in addition to the price hikes earlier in 2021 that targeted Pampers nappies and Always sanitary pads.
The latest price hikes are not being implemented broadly, but marked for specific items such as razors and in some subcategories, CFO Andre Schulten said on a media call. US retailers are aware of the new sticker prices, he said.
Global supply chains are under strain due to factors such as a resurgence of Covid-19 cases in Asia and labour shortages in the US, leading to a surge in raw material prices that is also squeezing profits at Unilever and Reckitt Benckiser.
On Tuesday, P&G raised its commodity and freight costs forecast for this fiscal year to $2.3bn from $1.9bn.
Schulten blamed the price hikes on warehousing and raw material costs, adding that diesel and energy prices were also trending higher.
“We do not anticipate any easing in these commodity cost pressures, he said.
The Gillette maker said the additional expenses will shave off 90c from its full-year earnings per share, compared with a previous forecast of a hit of 70c.
P&G kept its full-year forecast for earnings per share growth in the 3% to 6% range and net sales between 2% and 4%, banking on price hikes and higher demand for premium products to help offset the increase in costs.
“We expect pricing to be a larger contributor to sales growth in coming quarters as more of our price increases become effective,” Schulten said.
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