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P&G To Slash 5700 Jobs; Targets Cost Savings Of $10 Bln By 2016

P&G To Slash 5700 Jobs; Targets Cost Savings Of $10 Bln By 2016
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2/24/2012 12:17 AM ET

Procter & Gamble Co. (PG: Quote) said Thursday it is targeting productivity and cost savings of about $10 billion by fiscal year 2016 to support its strategic and financial goals. As part of the plan, the consumer goods giant will eliminate about 5,700 jobs or 10 percent of non-manufacturing jobs by the end of fiscal 2013. The company revealed that the restructuring actions are expected to boost its operating profit margin by about 950 basis points.

Chairman, President and CEO Bob McDonald provided a broad outline on the planned actions at a Consumer Analyst Group conference in New York.

The company also lowered its earnings guidance for the first quarter and full-year 2012 to reflect the Pringles restatement. Last week P&G salvaged the deal to sell its Pringles snack business to cereal maker Kellogg Co. (K) for about $2.7 billion. This was after its agreed $2.35 billion deal with Diamond Foods, Inc. (DMND) fell apart due to an accounting probe at Diamond.

The company now projects first-quarter earnings in a range of $0.89 to $0.95 per share, down from the prior guidance range of $0.91 to $0.97 per share, while analysts are expecting earnings of $0.95 per share.

It also trimmed the core earnings forecast for fiscal 2012 to a range of $3.93 to $4.03 per share from the prior range of $4.00 to $4.10 per share. The Street is currently looking for full-year 2012 earnings of $4.04 per share.

Providing a break up of its cost savings goal, the company said it target to save about $8 billion through cost reductions and $2 billion through cost control & leverage.

These will primarily fall into savings of $3 billion by reducing overheads. The company has reduced overheads by about 150 basis points over last five years.

The announced job cuts would result in total overhead cost savings of about $800 million by the end of 2014. Of the 5,700 jobs, 1,600 will be eliminated in fiscal 2012 and 4,100 in fiscal 2013. These include the 1,600 job cuts announced in January.

Further, about $6 billion in savings is targeted by managing cost of goods through materials reduction, improving manufacturing cost efficiency and transportation & warehousing costs, as well as controlling research & development expenses.

The balance of about $1 billion of cost savings are projected to be achieved in the marketing area through the management of advertising & other marketing costs by increasing reach, frequency, and effectiveness.

PG closed Thursday's regular trading session at $66.42, up $1.98 or 3.07 percent on a volume of 20.17 million shares. In the past 52-week period, the stock has been trading in a range of $57.56 to $67.72.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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