P&G and Caterpillar profits hit by oil and currency turbulence

Oil Barrels

Two major US companies – Procter & Gamble, the US company behind Fairy washing-up liquid and Head & Shoulders shampoo, and the Caterpillar digger manufacturer – warned that they have been hit by turbulence in the financial markets.

P&G, already in the throes of a restructuring to try to bolster its performance, warned that $1.4bn (£926m) would be knocked off this year’s profits as a result of rise in the dollar.

Caterpillar, known for its yellow excavators and lorries, said it was buffeted by the falling price of oil, which has more than halved in value to below $50 a barrel. Chief executive Doug Oberhelman said he was disappointed at missing the group’s profit forecasts: “The recent dramatic decline in the price of oil is the most significant reason for the year-over-year decline in our sales and revenues outlook.”

AG Lafley, who returned as chief executive of P&G in May 2013 after leaving the same position in 2009, is focusing the company on 70 to 80 brands and in the process of selling off up to 100 others including the Duracell battery business, which has been bought by Warren Buffett’s Berkshire Hathaway. But these changes were not enough to offset the impact of “unprecedented currency devaluations”, Lafley said of the three months to the end of December.

“Virtually every currency in the world devalued versus the US dollar, with the Russian rouble leading the way,” Lafley said. The Russian currency has been hitting a series of record lows as a result of the plunging oil price and sanctions imposed on the country because of its intervention in the Ukraine. The rouble has halved in value against the dollar in the last six months. With the company half way through its financial year, Lafley said the outlook for the full year needed to be adjusted as he expected significant negative sales and earnings impacts from foreign exchange in the second half of its fiscal year.

“The outlook for the year will remain challenging. Foreign exchange will reduce fiscal 2015 sales by 5% and net earnings by 12%, or at least $1.4bn after tax. We have and will continue to offset as much of this currency impact as we can through productivity driven cost savings. And we will continue to invest in our businesses, brands and product innovation, because it is the right thing to do for the mid- and long-term, while we deliver another year of strong cash returns to shareowners,” said Lafley.

In the second quarter, P&G’s profits fell around 30% as a result of the surging dollar. The company generates around two thirds of its sales outside its domestic market.

Caterpillar was reporting its results for the final quarter of its financial year, publishing full-year profits of $3.7bn, down 2%.

Powered by Guardian.co.ukThis article was written by Jill Treanor, for The Guardian on Tuesday 27th January 2015 13.59 Europe/London

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