Procter & Gamble deal is in line with growth strategy
CINCINNATI — Procter & Gamble Co.’s $3.1 billion sale of its prescription drug business is in line with its recent strategy of shedding products to focus on areas with the best growth and profit-margin prospects.
The deal announced Monday with Warner Chilcott PLC will take away $2.3 billion in annual revenue, including the billion-dollar brand Actonel, an osteoporosis treatment. Last year, P&G sold another billion-dollar brand, Folgers coffee, to J.M. Smucker Co. for some $3 billion.
"We know that our shareholders don’t reward us … for absolute size; they reward us for growth," Bob McDonald, who became P&G’s CEO on July 1, told analysts on a conference call.
"And we are going to do what we have to do to get the right portfolio of businesses together."
P&G, the world’s largest consumer products maker, reported Aug. 5 that its fourth-quarter profit fell 18 percent and sales 11 percent. Its revenue for the fiscal year that ended June 30 was $79 billion.
McDonald said Monday’s deal will allow P&G to concentrate more resources on consumer health care, including over-the-counter medicines such as Vicks and Prilosec OTC, feminine care products such as Always, and oral care led by the Crest toothpaste brand.
He said P&G has plenty of room to increase sales in the consumer health care market, which has grown 5 percent to 6 percent per year and has good margins and solid potential.
P&G, also targeting beauty and grooming, has recently acquired the upscale men’s skin care line Zirh and men’s grooming business The Art of Shaving. Analysts think P&G eventually could sell such major brands as Braun appliances, Duracell batteries and Pringles snacks.
Among satisfied buyers of P&G businesses has been Smucker, which earlier bought Jif peanut butter and Crisco shortening from P&G. Smucker reported Friday that its fiscal first-quarter profit more than doubled and beat expectations, mainly because of increased sales from Folgers.
Filed under: management by Specialist