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Price hikes on the horizon for P&G as material costs rise

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·2 min read
FILE PHOTO: A display of Pampers diapers are seen on sale in Denver
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(This story corrects to Always sanitary pads from Whisper sanitary pads in paragraph 5 of April 20 story)

(Reuters) - Procter & Gamble Co said on Tuesday it would raise prices of certain products in the United States to offset rising costs that were already weighing on its fourth quarter, after reporting a better-than-expected quarterly result.

The Cincinnati-based company joins a growing list of consumer product makers hiking prices this year as they battle increasing costs for everything from transport to pulp and resin or edible oils and nuts.

P&G said since it gave its initial guidance for fiscal 2021 last year, costs had risen by $400 million, including after tax costs of $125 million for commodities that will largely hit the fourth quarter and $200 million in higher freight costs.

"Rates continue to be up. Drivers and rigs continue to be in short supply. Sea freight continues to be at a premium. So we continue to see that pressure mounting and also impacting quarter four," Andre Schulten, P&G's new chief financial officer said on a call.

The company said it would hike prices of products including Pampers diapers and Always sanitary pads by mid-single-digits this year.

P&G kept its full-year core earnings per share guidance for growth in the 8% to 10% range, and sales in the 5% to 6% range.

The COVID-19 pandemic has boosted sales of P&G's hygiene and washing products for more than a year, as consumers stockpiled essentials and cleaning supplies even as vaccines roll out.

Toilet paper sales slowed during the January to March period, but at-home usage continued to be above pre-pandemic levels, P&G's chief operating officer Jon Moeller said.

While there was a high risk of supply chain disruption and social unrest and economic distress in many parts of the world due to rising cases in emerging markets which could affect some category growth, Moeller said he expected P&G's sales and profit to continue to grow and be highly cash generative.

Net sales rose 5% to $18.1 billion in the third quarter, with earnings per share of $1.26. Both beat analysts' estimates.

P&G also raised its planned share buyback for fiscal 2021 by $1 billion to $11 billion. Its shares rose 0.3%.

(Reporting by Uday Sampath and Siddharth Cavale in Bengaluru; Editing by Aditya Soni and Shinjini Ganguli)