Procter & Gamble’s fiscal first-quarter earnings included a familiar bugbear for multinationals. The strong dollar is creating some big headwinds.
The company said it’s facing a currency headwind of about $1 billion after-tax, or an incremental $600 million, to its full-year guidance since it first offered it in late July.
The dollar has strengthened considerably in those few months, as a spike in Treasury yields has boosted its value relative to other currencies. The Federal Reserve’s higher-for-longer approach to interest rates is expected to continue to support the greenback for at least the next few months.
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The dollar index
DXY,
which measures its strength against a basket of currencies, has climbed 6.3% since it closed at a 15-month low on July 13.
P&G
PG,
said it’s sticking with its fiscal 2024 guidance for per-share earnings growth of 6% to 9% to a range of $6.25 to $6.43, despite the currency headwind. That compares with a FactSet consensus of $6.39.
But the company tweaked its sales growth forecast to a range of 2% to 4% from 3% to 4% in July.
“We expect the environment around us to continue to be volatile and challenging from input costs to currencies to consumer and geopolitical dynamics,” Chief Financial Officer Andre Schulten told analysts on the earnings call, according to a FactSet transcript.
The strong dollar hurts companies like P&G that compete all over the world as it reduces the amount they receive when they repatriate cash from weaker-currency countries.
Read: Why a surging U.S. dollar is about to become a problem for stock-market bulls
P&G had some positive news for its outlook, however.
Commodities are expected to create a tailwind of about $800 million after-tax in fiscal 2024, which is consistent with earlier guidance.
However, part of that guidance has changed, in that the company now expects relief on commodities like pulp, but a challenge from higher fuel costs.
“In addition to these impacts, we are also facing higher inflation and wages and benefits, and we expect higher year-on-year net interest expense of approximately $200 million after tax,” said Schulte.
P&G ‘s stock was up 2% after its earnings topped consensus estimates.
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