Procter & Gamble soars past profit expectations

(Reuters) - Procter & Gamble Co's profit rose more than expected on Thursday, indicating that the world's largest household products maker is making progress after coming under pressure from activist investor William Ackman.

P&G did not raise its key profit forecast for the fiscal year that began in September, in part because it plans to ramp up marketing support behind new products being introduced later in the year, and because it has to spend more to get an absorbent material for Pampers diapers, its largest brand, following a plant explosion in Japan.

P&G is cutting costs and narrowing its focus on key markets, products and countries. The company's goals and Chairman and Chief Executive Bob McDonald have been under intense scrutiny after Ackman bought shares this summer.

P&G earned $1.06 per share in the fiscal first quarter on a "core" basis, which excludes charges, up from $1.01 per share a year earlier. Analysts, on average, expected it to earn 96 cents per share, according to Thomson Reuters I/B/E/S.

The company had forecast a profit of 91 cents to 97 cents per share for the quarter, which ended in September.

"While we are encouraged by these results, we continue to believe the necessary improvements at P&G from both a cost and innovation standpoint will take time, and the stock seems to already reflect further momentum," said Oppenheimer analyst Joe Altobello.

Shares of P&G rose to $68.63 in light premarket trading after closing at $68.08 on Wednesday on the New York Stock Exchange.

Earnings from continuing operations fell to $2.85 billion, or 96 cents per share, from nearly $3.0 billion, or $1.01 per share, a year earlier.

Ackman, whose Pershing Square Capital Management is P&G's 10th-largest shareholder, has publicly blamed P&G's top brass for high costs and declining revenue while saying that he understands the board wants to give McDonald time to repair years of damage.

Net sales fell 4 percent to $20.74 billion, below analysts' target of $20.78 billion.

Organic sales, which strip out the impact of acquisitions, divestitures and foreign exchange, rose 2 percent, at the high end of the company's forecast.

P&G still expects to post core earnings per share of $3.80 to $4 this fiscal year. Analysts' average forecast for the year is $3.91 per share.

P&G is not raising its core earnings-per-share forecast because it is very early in the year, it wants to spend more on marketing in the second half of fiscal 2013 and it is dealing with the impact of a plant explosion in Japan that supplies a key material for Pampers diapers, Chief Financial Officer Jon Moeller told reporters on a call.

Pampers is the company's largest single brand, accounting for more than $10 billion in annual sales.

There was an explosion at a Nippon Shokubai Co <4114.T> factory in September that produces a key material for P&G's Pampers diapers. Nippon Shokubai is one of the world's biggest makers of acrylic acid, the main ingredient of a resin called SAP, which is used in diapers.

P&G has found other sources of the material and while any impact to consumers should be "minor," the company has to spend more get the supplies it needs, Moeller said.

The company raised its GAAP earnings-per-share forecast by 17 cents to $3.78 to $4.02 to reflect a gain from the purchase of a business in Iberia, which was completed on October 22.

(Reporting by Jessica Wohl in Chicago; Editing by Jeffrey Benkoe and Maureen Bavdek)

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