According to a recent Bloomberg report, The Procter & Gamble Company (PG) is planning to reorganize its international business to reduce costs and improve sales growth.
Bloomberg reported that according to sources close to the company the consumer giant is considering merging its Western European unit with its Central and Eastern Europe business to create one group for the continent. Also, the Indian unit is being planned to be merged with the Middle East and Africa unit.
Currently, P&G has five geographic units: North America, Latin America, Asia, Western Europe, and CEEMEA (which includes Central and Eastern Europe, the Middle East and Africa).
The sources further hinted that some senior managers in Europe could lose their jobs under this restructuring initiative, which is not expected to be announced before 2014.
The restructuring initiative is part of the Chief Executive Officer, Alan George Lafley’s plan to cut costs. P&G brought back Lafley to replace Robert McDonald in May this year to turn around its struggling business.
Lafley announced a new strategy in August to improve the company’s operating performance. The plan focuses on value creation for shareholders through sales growth, gross and operating margin expansion and strong cash flow productivity. In this regard, Lafley laid out four functions. Firstly, the company will invest selectively in core businesses, which include the most profitable categories, brands, markets, channels and customers. The other three functions include, making strategic, focused investments in innovation and go-to-market capabilities accelerating cost savings and improving productivity and operating discipline.
Overall, we are encouraged by this Zacks Rank #3 (Hold) company’s strong brand recognition, diversified portfolio, rapid growth in developing nations, impressive product development capabilities and marketing prowess. The company’s improving market share trends, disciplined geographic/product expansion and accelerated cost savings bode well for further growth. Though weaker in the first half, earnings growth is expected to accelerate in the second. However, currency headwinds, rising commodity costs, increasing competitive pressures, challenging consumer spending environment in the U.S. and volatile market dynamics in other countries remain overhangs.
Other better-ranked consumer staples companies are Reckitt Benckiser Group plc (RBGLY), Green Mountain Coffee Roasters, Inc. (GMCR) and The Hain Celestial Group, Inc. (HAIN). While Reckitt Benckiser sports a Zacks Rank #1 (Strong Buy), Hain Celestial and Green Mountain carry a Zacks Rank #2 (Buy).