P&G unveils first loss in eight years

Iams: credited with an "excellent" financial performance

Household products giant Procter & Gamble, reporting its first loss in eight years, has credited pet lovers with helping keep it on the road to recovery.

The company lost $320m in the three months ending 30 June, compared with a $516m profit a year before, with the cleaning products division reporting a drop in sales, a briefing revealed.

But the company's Iams business, which makes petfood and animal health products, achieved an "excellent performance" during the quarter.

Alan Lafley: "We have work to do"

Helped by expansion into UK, Italian and Japanese markets, Iams "drove" 14% sales growth in its division, which also includes the Crest toothpaste and Vicks inhaler operations, Tuesday's statement said.

And, with the fourth quarter loss hiding a $1.16bn contribution to an ongoing restructuring drive, which has seen thousands of jobs go, chief executive Alan Lafley said he was "encouraged" by the overall result.

'Solid progress'

"These results are the outcome of the plans we put in place this year - making tougher choices, focusing on our biggest brands and customers and tighter cash and cost control," he said.

Underlying earnings hit $837m in the quarter, compared with $777m a year before, Tuesday's briefing said.

"Our goal this year was to get P&G's business growing again," Mr Lafley said. "We have made solid progress."

Soap washout

But he warned the Chicago-based firm still has "work to do" in progressing its restructuring drive, aimed at refreshing brands and cutting costs equivalent to $2bn a year by 2004.

Sales at the cleaning products arm, which manages brands including Bold, Dreft, Tide and Bounce, fell during the quarter thanks to "heavy competitive activity", primarily in European markets.

And growth in hair and skin products, backed by a relaunch of Pantene and Head and Shoulders shampoos, was offset by difficult conditions in the deodorant and soap markets.

restore consistent innovation on our core brands and achieve the restructuring savings we have promised," Mr Lafley said.

Wall Street reaction

The firm, blaming currency movements, also warned it expected overall sales to fall below target, if above last year's figures, for the 2001/02 financial year.

"If foreign exchange remains at current levels, it is expected to negatively affect top-line growth by about 2%," Tuesday's statement said.

But the figure for underlying profits was nonetheless welcomed by Wall Street analysts, who had been expecting slower growth.

"It looks like a good number," said Ann Gillin Lefever, consumer products analyst at Lehman Brothers.

P&G shares added $0.08 to $70.83 in early trade on Tuesday.