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Official says business is booming in countries like Saudi Arabia, China
By Dan Sewell
Associated Press
Published on Sunday, Apr 06, 2008
CINCINNATI: A Procter & Gamble Co. leader says developing markets now account for half the Cincinnati-based consumer goods company's sales growth, providing ballast during rough U.S. economic sailing.
Robert A. McDonald, chief operating officer, said in an interview with the Associated Press that P&G is seeing double-digit increases in countries from India to Saudi Arabia.
Sales in emerging markets have jumped from $8 billion in 2001 to $21 billion in 2007, when P&G had $76.5 billion total, and McDonald said the company expects them to comprise 30 percent of all sales by 2010.
''We're excited about all the developing markets,'' said McDonald, as P&G sees big opportunities for building on strong sales growth in China and India.
''Our business is booming in both geographies,'' McDonald said, adding that P&G is also increasing sales in countries such as Brazil and Russia, and in oil-rich Middle East markets.
''Saudi Arabia has accelerated dramatically,'' McDonald said. ''We see a lot of growth in the Middle East.''
Increasing buying power for consumers in emerging markets has helped U.S. companies with big overseas presences even as American household budgets are tightening amid a credit crunch and housing slump.
Consumer products rival Colgate-Palmolive Co. recently credited strong overseas sales growth with helping to boost fourth-quarter profit by 3 percent and quarterly revenues by 13 percent over the prior year. Ian Cook, its chief executive, told analysts Jan. 31 the company wasn't seeing any signs that consumer spending was slowing in emerging markets.
P&G, whose global brands include Tide detergent, Pantene shampoo, and Pampers diapers, reported Jan. 31 that earnings rose 14 percent and revenues 9 percent for its second fiscal quarter, with double-digit sales and volume growth in developing markets.
''We think the emerging component is a good source of growth; it's lifting sales and profits and should be an important source of growth for a long time to come,'' said David Brady, who heads Chicago-area Brady Investment Counsel.
But Brady also said that for a company like P&G whose investors expect steady earnings, the new markets could bring swings in results.
''They're still going to be emerging,'' he said. ''There will be ups and downs just like any other market, and these markets can be volatile.''
McDonald said having worldwide business helps provide overall growth and ''a natural hedge'' against currency fluctuations.
''When you buy P&G stock, in many ways, you're buying a global index fund,'' he said. ''We believe that we are a good place to invest because of that economy of scale and because of that cushioning effect.''
P&G shares were at $69.79, up 15 cents, in Thursday trading. They traded as low as $60.76 in the past 52 weeks before a run of record highs late last year halted at $75.18.
In the interview Tuesday at P&G headquarters, McDonald also said the company was keeping an eye on Cuba, still under a U.S. trade embargo that has given European competitors a head start.
''We'd love to be there as soon as U.S. law allows us to be,'' he said.
Some in Congress are pushing to relax trade restrictions, but the Bush administration has said there must be human rights and democratic improvements there in the aftermath of Fidel Castro's recent resignation.
McDonald, a veteran of P&G's Asian business who also served as vice chair of global operations, became chief operating officer last year in a realignment of top executives. Susan Arnold, who was vice chair of the beauty and health unit, became president of global business units, among other changes.
McDonald described the moves as a response to the company's growing size.
''Our restructuring, which is a continuing evolution for us, is all about becoming more and more deliberate,'' he said. ''You've got to be very deliberate about your growth and your strategies and your execution of those strategies. You can't allow anything to just be serendipitous.''
CINCINNATI: A Procter & Gamble Co. leader says developing markets now account for half the Cincinnati-based consumer goods company's sales growth, providing ballast during rough U.S. economic sailing.
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