* P&G to cut 2-4 pct of non-manufacturing jobs in 2014-16
* Share repurchases could reach $6 bln, up from $4 bln
* No changes to sales, earnings forecasts for quarter, year
* Shares slide 44 cents
By Jessica Wohl
CINCINNATI, Nov 15 Procter & Gamble plans to
trim more non-manufacturing jobs through 2016, on top of cutting
10 percent of that workforce by the end of June, as the world's
largest household-products maker tries to reinvigorate what has
become a sluggish organization.
P&G also said it may increase stock repurchases to $6
billion from $4 billion, but said such additional buybacks
should not have a big impact on earnings per share. The company
maintained the forecasts for sales and earnings for the
current quarter and the fiscal year it had given in late
P&G remains on track to eliminate about 5,700
non-manufacturing jobs by the end of this fiscal year, which
will end in June. It now plans to reduce another 2 percent to 4
percent of its non-manufacturing jobs each year during fiscal
2014, 2015 and 2016.
"These are all continued steps in the right direction, but
we wish they had taken bolder ones like even more aggressive
cost-cutting," said Sanford Bernstein analyst Ali Dibadj, who
attended P&G's bi-annual analyst meeting at the company's
Cincinnati headquarters on Thursday.
Shares of P&G, a component of the Dow Jones industrial
average, were down 0.2 percent at $66.38 in afternoon
trading on the New York Stock Exchange.
CUTTING JOBS IN DEVELOPED MARKETS
The maker of Tide detergent and Pampers diapers has been
working for months to improve its structure and cut costs. It
has admitted that recent innovations were not as strong as
successes from years past such as Swiffer and Crest Whitestrips.
"The reality is that the pace of our disruptive innovation
has slowed over the past decade," said Jorge Mesquita, P&G's
group president of new business creation and innovation and
global pet care.
P&G did not outline exactly where it plans to cut jobs but
it would like to trim more positions in developed markets than
in developing ones, where it has "significant growth
opportunity," Chief Financial Officer Jon Moeller told reporters
after the meeting.
"We realize that we can't get the next round of productivity
just from squeezing harder, we need to really look at our
organization's design," he said, adding that P&G will maintain a
strong presence in Cincinnati.
Competitors such as Kimberly-Clark Corp and
Colgate-Palmolive Co are also trimming their ranks as the
industry contends with weak economic conditions in major markets
such as the United States and Western Europe.
Some industry watchers have suggested that P&G consider
splitting up, separating its beauty businesses from mainstays
such as diapers, paper goods and detergent. However, P&G
contends that its scale, including more than two dozen brands
that each generate more than $1 billion in annual sales, is an
During the meeting, P&G highlighted some success it has had
in emerging markets, such as seeing the Indian diaper category
increase fivefold since it started selling Pampers there five
years ago. At the same time it is promoting lower-priced items,
including Gain and Era detergents, to attract cost-conscious
U.S. shoppers it has lost to rivals such as Church & Dwight Co
Inc, known for its ARM & HAMMER products.
P&G has been under pressure to show improvement following
the investment of activist investor William Ackman, who may want
to see P&G Chairman and Chief Executive Bob McDonald pushed out
of his job. Even before Ackman's involvement, P&G was proceeding
with that $10 billion restructuring and other changes.
McDonald spoke only at the beginning and end of P&G's
meeting on Thursday, allowing Moeller and 11 others to address
the crowd, showcasing the company's strategy and its deep bench
of long-time executives.
When P&G unveiled a plan to cut $10 billion in costs over
five years back in February, it said $6 billion in savings would
come from its cost of goods. Now, as it tweaks product
formulations, works with local suppliers and takes other steps
to trim costs, it should see more than $6 billion in such
savings, said Global Product Supply Officer Yannis Skoufalos.
The company said it expects to deliver annual improvement of
5 percent in its manufacturing operations, measured by the
number of cases of products produced per person, per year.
Back on Oct. 25, a better-than-expected quarterly report
drove P&G shares to their highest level in four years.
P&G stood by the forecasts that it gave at that time,
calling for core earnings per share of $1.07 to $1.13 in the
current second quarter and $3.80 to $4 this fiscal year. It
still expects organic sales, which strip out the impact of
acquisitions, divestitures and foreign exchange, to rise 1 to 3
percent this quarter and 2 to 4 percent this year.
On Wednesday, Ackman's Pershing Square Capital Management
disclosed that it raised its combined stake in P&G by 27.4
percent to 27.9 million shares as of Sept. 30, while Warren
Buffett's Berkshire Hathaway reduced its holdings 11.4 percent
to 52.79 million shares.