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Procter and Gamble up on cost cutting

Friday, October 26 08:37:00

Procter and Gamble Co's profit rose more than expected, indicating that the world's largest household products company is making progress in cutting costs and giving Chief Executive Bob McDonald a little relief after months of pressure. Shares of PandG, the maker of Tide detergent and Gillette razors, rose to their highest level in four years. Meanwhile, shares of rival Colgate-Palmolive Co slid as much as 3.3 percent after it announced plans to cut jobs as it strives to operate more nimbly as economies slow in many countries. Colgate's quarterly profit matched expectations.

PandG is cutting $10 billion of costs and focusing on key markets, products and countries. The company's goals as well as McDonald, who is also chairman, have been under intense scrutiny since activist investor William Ackman bought shares this summer. "They cleared a low hurdle," said Morningstar analyst Erin Lash. "The fact that they did report solid results is a plus, but I don't know if the pressure is necessarily off." PandG had given a quarterly forecast in August that was below Wall Street's view at the time, leading analysts to lower their expectations. PandG ultimately beat the initial analyst expectations, helped by sales that met the high end of its forecast and some relief in commodity costs. Shares of PandG rose as much as 4 percent to $70.83 on Thursday, their highest level since October 2008. The shares were up 3 percent at $70.11 by midafternoon. Colgate's shares were down 1.9 percent at $104.49 in the afternoon, off an earlier low at $103.06.

"It wouldn't surprise me if we're seeing some people saying it is time to sell some Colgate, buy some Procter, given Colgate's outperformance year to date," said JP Morgan analyst John Faucher, who has a "neutral" rating on Colgate and an "overweight" rating on PandG. Several consumer goods makers are trimming jobs, including PandG, as concerned consumers hold off on some purchases and growth slows in major markets such as China. PandG is on track to cut 4,200 jobs by the end of October on its way to eliminating 5,700 jobs by the end of its fiscal year. Colgate's plans, including moving away from single-country units toward regional hubs, should lead the toothpaste maker to trim about 2,300 jobs, or roughly 6 percent of its workforce, by the end of 2016. On Wednesday, Kimberly-Clark Corp said it would eliminate 1,300 to 1,500 jobs as it leaves some low-margin businesses in Europe, and Energizer Holdings Inc said in September that it plans to cut an unspecified number of jobs. ( C) Reuters