P&G Faces Cost Pressure as Oil Prices Surge

Procter & Gamble (NYSE:PG) is facing significant cost pressure due to surging oil prices, which will impact its current financial year. The company is in the middle of a two-year portfolio and productivity programme that aims to reshape brands, roles, and manufacturing footprint.

The restructuring programme is expected to incur a before-tax cost of around $2 billion, with approximately half of it already incurred during the previous financial year. The programme involves exiting or divesting brands and categories where P&G does not command a defensible position, reducing non-manufacturing roles, and reconfiguring supply arrangements in selected markets.

The company's latest financial year saw modest sales expansion, flat underlying volume across several categories, and a slight decline in core earnings per share. The current financial year is expected to see a substantial cost headwind of around $1 billion from higher raw materials, energy, and transport costs, which will impact core earnings per share growth.

P&G has continued to raise its dividend over the years, with an unbroken sequence of annual increases that now stretches across seven decades. The company's ability to sustain this record through a period of restructuring cost and commodity pressure requires disciplined cash conversion, which is expected to be protected by the ongoing programme.