By Alexander Marrow and Juveria Tabassum
April 24 (Reuters) - Procter & Gamble on Friday warned of a $150 million hit to its annual profit from higher input cost due to the Middle East conflict, even as demand
for its pricier hair and skin care products helped the consumer goods bellwether top quarterly expecatations.
The Tide parent expects fiscal 2026 earnings per share to be at the lower end of its target range of flat to 4% up and said the after-tax cost impact was due to a combination of commodity-linked cost inflation, feedstock exposure and logistics disruption from the Middle East conflict.
The higher costs account for the surge in oil prices from $60 a barrel before the conflict to around $100 today and its impact on plastics and paper for packaging, as well as transportation charges, a company spokesperson told Reuters.
The impact would be more substantial beginning the first quarter of fiscal 2027 if the conflict stretches out, the spokesperson said. P&G did not provide its fiscal 2027 forecast.
Consumer goods companies such as Nestle have warned of higher costs due to the blockade of the Strait of Hormuz, which has driven up oil prices.
PRODUCT INVESTMENTS PAY OFF
However, in the three months through March, P&G's volumes rose in three of its five reported segments, helped by new launches of products such as Pantene shampoo and Olay skin cream at higher prices in North America and Europe.
Wealthier consumers spent on nice-to-have items, even as lower-income households trade down to stretch budgets under stress from higher cost of living.
"We're increasing investments to accelerate momentum with consumers despite the challenging geopolitical and economic environment," said Shailesh Jejurikar, who took over as P&G's CEO at the start of the year.
TARIFF REFUNDS
The company's currency-neutral gross margin fell 100 basis points, sliding for the sixth straight quarter, partly due to tariffs and its ongoing investment in product innovation.
P&G maintained its expectation of a nearly $400 million hit from tariffs on fiscal 2026 earnings. About half of the impact was from the tariffs imposed under the International Emergency Economic Powers Act, which were invalidated by the U.S. Supreme Court in February.
P&G is planning to follow the process of applying for refunds, which was launched earlier this week, the spokesperson said, adding that there was no certainty as to when the refunds would be issued.
HAIR CARE DRIVES GROWTH
Overall organic volume rose 2%, led by a 5% growth in the beauty segment, while total price rose 1% in the third quarter.
Rival French cosmetics group L'Oreal also reported strong demand for premium hair care products and fragrances in North America and Europe, which led to its fastest quarterly growth in two years.
However, Nivea-maker Beiersdorf said it would consider raising prices in the second half of the year if commodity costs continued to rise.
P&G's quarterly sales rose 7% from a year ago to $21.24 billion, topping estimates of $20.50 billion, according to data compiled by LSEG.
(Reporting by Juveria Tabassum in Bengaluru and Alexander Marrow in London; Editing by Arun Koyyur)
