Alexander Coolidge reports:
Procter & Gamble on Thursday warned that Venezuela’s devaluation of its currency will hit the consumer product giant’s bottom line.
The Cincinnati-based maker of Tide said it will record a one-time charge of $200 million to $275 million after taxes. That means annual earnings will be cut by about 3 cents per share, or roughly $88 million.
P&G now indicates its annual profit will range between $11.4 billion to $11.8 billion for the fiscal year ending June 30. The company had previously forecast annual profits between $11.8 billion to $12.1 billion.
“When you deal overseas, you’ve got to deal with things like this and move on,” said Matt McCormick, a portfolio manager with Bahl & Gaynor, Downtown. “Investors are not going to like it, but they’ll take their medicine.”
McCormick expressed some surprise that one South American country’s currency valuations would cause such a notable impact. He speculated P&G might be acting conservatively in anticipation of further instability in the country.
P&G is not alone among consumer products companies. Colgate-Palmolive and Energizer Holdings also warned their profits would be impacted by Venezuela’s currency moves.
Venezuela is the world’s 33rd-largest economy with an estimated gross domestic product of $402.1 billion (roughly four times Greater Cincinnati’s economy), according to the CIA’s World Factbook.
Going forward, the action will trim earnings per share by 6 to 7 cents annually.
In other news, disclosures released Thursday show hedge fund manager Bill Ackman made no recent changes to his 1 percent stake in P&G. His Pershing Square Capital Management remains the company’s 10th largest investor.