NEW YORK, April 20 (Xinhua) -- The Procter & Gamble Company saw material deterioration of gross profit margin in the first quarter of 2022 as price hikes didn't fully offset the impact of cost increases, according to the latest operating results of the consumer products supplier released on Wednesday.
Procter & Gamble had 46.7 percent of gross profit margin in the first quarter, down 400 basis points from 50.7 percent in the same period of 2021.
The decline of gross margin was driven by 410 basis points of increased commodity costs, 80 basis points of higher freight costs, 30 basis points of product and package reinvestments and 130 basis points of negative product mix, said Procter & Gamble in a release.
These negative impacts on gross margin were partially offset by benefits of 220 basis points from increased pricing and 50 basis points from gross productivity savings and other impacts, according to Procter & Gamble.
Still, the operating profit margin of Procter & Gamble in the first quarter only showed a slight decrease to 20.8 percent from 20.9 percent in the same period of 2021 thanks to smaller weight of selling, general and administrative expense in the period.
Procter & Gamble reported 19.38 billion U.S. dollars of net sales in the first quarter, up 7 percent year on year, and higher than market expectation of 18.73 billion U.S. dollars.
Excluding the impacts of foreign exchange, acquisitions and divestitures, organic sales in the first quarter increased 10 percent year on year with 3 percentage points contributed from increase in shipment volume, 5 percentage points from increased pricing and 2 percentage points from positive geographic and product mix.
Procter & Gamble posted 3.367 billion U.S. dollars of net earnings in the first quarter, 4 percent higher year on year.
The imbalance between supply and demand, geopolitical disruption, supply chain disruptions, higher energy costs due to the war between Ukraine and Russia will continue to put pressure on the cost side, said Andre Schulten, chief financial officer of Procter & Gamble.
Procter & Gamble expected 3.2 billion U.S. dollars of headwinds from higher commodity costs, higher freight costs and negative foreign exchange impacts in its fiscal year 2022, which ends at the end of June 2022. The projection of headwinds is 400 million U.S. dollars higher than that in January.
Procter & Gamble raised its sales growth outlook in its fiscal year 2022 and kept its forecasts on the growth range of diluted net earnings per share (EPS) and core EPS unchanged.
However, Procter & Gamble now expects the growth of core EPS in fiscal year 2022 to be at the low end of EPS growth range, given increased cost and foreign exchange challenges. ■
