NEW YORK — Procter & Gamble reported Wednesday that fourth-quarter earnings surged 36 percent, boosted by the acquisition of Gillette, the razors and blades company.
“Gillette is a catalyst, a catalyst to improve the combined organization and lead transformational change where opportunities exist … I have no doubt that P&G and Gillette are much stronger together than either company was alone, and that our combined company will deliver our accelerated growth targets over the balance of the decade,” said A.G. Lafley, P&G chairman, president and chief executive officer, during a conference call.
The earnings report came as the biggest U.S. consumer products company — known as much for Tide detergent as it is for Cover Girl cosmetics — continued to gravitate toward higher-gross-margin products, including Wella hair care and Olay skin care.
Net earnings in the quarter were $1.9 billion, or 55 cents a share, up from $1.39 billion, or 52 cents, in the same period last year.
Sales climbed to $17.84 billion, up 25 percent from $14.25 billion in the year-ago period, with organic sales increasing 8 percent, outpacing the company’s post-Gillette organic sales target of 4 percent to 6 percent.
For the year, net earnings were $8.68 billion, or $2.64 a share, up 25 percent from $6.92 billion, or $2.53 per share. Sales rose 20 percent, to $68.22 billion from $56.74 billion a year ago. Organic sales for the year increased 7 percent.
Beauty sales, which accounted for more than 30 percent of the company’s total fourth-quarter sales, increased 9 percent in the quarter to $5.44 billion, driven by the addition of the Gillette personal care business, the double-digit growth of Olay’s Regenerist and Total Effects brands and new initiatives behind Herbal Essences, Pantene, Rejoice and Head & Shoulders hair care brands. Organic sales rose 7 percent for the quarter, with a unit volume increase of 9 percent.
For the year, beauty sales increased 7 percent to $21.13 billion, bolstered by launches, including Olay Ribbons and the restaging of the Head & Shoulders brand. Beauty unit volume rose 8 percent, despite a decline in cosmetics unit volume as a number of mass merchants and drugstores scaled back distribution of Max Factor.
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P&G shares were up $2.36, or 4.2 percent, to close at $58.29 in New York Stock Exchange trading, the biggest increase in four years.
The firm also provided an update on its Gillette business.
With the Gillette acquisition completed, chief financial officer Clayton Daley reaffirmed the company’s plan to return P&G to double-digit compound earnings per share growth by fiscal year 2008.
Daley noted that on July 1, the firm completed the “largest wave of business systems integration so far,” combining systems, sales forces and distribution networks in 26 countries across five regions, which represents about 20 percent of sales. The effort brings the total of integrated countries to 31.
In Germany on Wednesday, P&G said it plans to sell its 4711 fragrance brand along with its Tosca, Sir Irish Moos and Extase scents. P&G inherited the Cosmopolitan Cosmetics brands when it acquired Wella in 2003. The fragrance 4711 dates back to 1792 when Wilhelm Mühlens marketed this branded eau de cologne in the city of Cologne. The brand’s headquarters on Glockengasse, a street on one of Cologne’s most trafficked squares, is part of the deal.
P&G said in a statement the company’s worldwide strategy was “to concentrate on brands with a high potential for global growth. The named fragrance brands do not have this potential for P&G, but could be an interesting and valuable business for another company.”
The sale will affect about 40 of P&G’s 900 employees in Cologne, though the company said it expects them to be taken on by the new owner. A factory in Cologne’s Bickendorf district will not be affected and P&G asserted that the facility would retain its important role in the company’s integrated production facilities.
In other news, P&G filed a federal lawsuit Wednesday against Perrigo New York Inc., formerly known as Clay-Park Labs Inc., for trade infringement of P&G’s Oil of Olay skin care lines, including the Olay Age Defying brand.
— With contributions from Melissa Drier, Berlin, and Amy S. Choi, New York