US consumer giant Procter & Gamble has posted a 5% rise in first quarter net sales, but warned it faces a $2.1bn headwind from higher commodity prices and a further $200m due to freight costs.
The household goods, head and beauty conglomerate posted net sales of $20.3bn in the three months to the end of September, a rise of 5% year-on-year.
Excluding the impacts of foreign exchange, acquisitions and divestitures, organic sales increased 4%, with volumes up 2%, prices contributed 1% growth and mix changes responsible for 1%.
P&G said the volume increase was driven by strong consumer demand for superior products and innovation, partially offset by a high base period in some markets due to rebuilding of inventories by retailers.
Positive mix was driven by the disproportionate volume growth of the North America region, the healthcare business and premium products, all of which have higher than company average selling prices.
Beauty organic sales were up 2%, with hair care up low single digits due to pricing and mix and skin and personal care up low single digits from pricing and higher volumes.
Grooming organic sales increased 4%, with shave care organic sales up mid-single digits due to pricing and positive mix from premium innovation.
Health care segment organic sales increased 7%, with oral care up by low single digits due to positive geographic and premium product mix and personal health care up by double digits, primarily due to market recovery of respiratory products, innovation and pricing in some markets.
Fabric and home care segment organic sales increased 5%, while baby, feminine and family care organic sales increased 2%.
“We delivered solid results in our first quarter of fiscal 2022 in a challenging cost and operating environment,” said CEO David Taylor.
“These results keep us on track to deliver our top-line, bottom-line and cash targets for the fiscal year. We remain focused on executing our strategies of superiority, productivity, constructive disruption and continually improving P&G’s organization structure and culture.
“These strategies enabled us to build strong momentum before the COVID crisis and accelerate progress as we navigate through the crisis, and they remain the right strategies to deliver balanced growth and value creation.”
However, P&G said gross margin for the quarter decreased 370 basis points versus year ago, driven by 350 basis points of commodity cost increases, 80 basis points of unfavourable mix (primarily due to product and pack-size mix), 50 basis points of higher transportation costs and 60 basis points of product and packaging investments and other impacts.
These decreases were partially offset by 100 basis points of gross manufacturing productivity savings (50 basis points net of higher transportation costs) and 50 basis points of pricing benefits.
The company said its current outlook estimates headwinds of $2.1bn after-tax from higher commodity costs and an additional $200m from higher freight costs.
Organic sales growth for the full year is expected to be in the range of 2%-4%.