P&G Says Demand in Emerging Markets Remains Strong -- 2nd Update

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P&G Says Demand in Emerging Markets Remains Strong -- 2nd Update

By Paul Ziobro

Procter & Gamble Co. said demand in emerging markets remains strong, a counterpoint to concerns that have roiled investors this week and led rival Unilever PLC to warn of weak sales growth ahead.

The maker of Gillette razors and Pampers diapers said sales in countries such as China and Brazil grew 8% excluding currency movements in the quarter ended Dec. 31 and continue to grow at about that pace. Markets have slowed down a bit overall for the company, but P&G said developing countries aren't a particular problem.

"There continues to be very strong growth overall, between 7% and 8% in the quarter we just completed from a market standpoint, and we expect that to continue," P&G Chief Financial Officer Jon Moeller said on a conference call with analysts Friday.

P&G's tone, which came as it reported a 3% increase in core sales that pleased investors, contrasted sharply with that of Unilever. The European company blamed weakness in emerging-market currencies in September when it issued its first profit warning in almost a decade and warned earlier this week that weak conditions would persist in both developed and developing economies.

Unilever, which makes Axe deodorant and Dove soap, is much more tied to the fates of emerging markets than P&G. The company gets close to 60% of its sales from China, India and other emerging markets, compared with just 39% for P&G.

The two consumer-products giants spoke against a backdrop of concerns about the stability of emerging markets that has roiled investors this week. Currencies in countries such as Turkey and South Africa reached fresh lows Friday, and the Indian rupee fell as well. The Dow Jones Industrial Average closed down 318 point Friday -- its sharpest one-day decline since June 20 -- after falling 176 points Thursday.

Investors are jittery as the Federal Reserve backs away from the bond-buying program it has used to help stimulate the economy. Weak manufacturing data out of China this week inflamed those concerns.

Kimberly-Clark Corp. also said Friday that its emerging-markets business continues to grow strongly, with expectations that growth excluding acquisitions, divestitures and currencies will rise at a high-single-digit rate for the current year. The maker of Huggies diapers and Kleenex tissues said its profit more than doubled in the last quarter of 2013 compared with a year earlier, as organic sale rose 5%.

P&G's shares closed up 1.2% Friday at $79.20. Kimberly-Clark was up 2% at $107.44.

P&G reported a 16% drop in profit for the quarter ended Dec. 31, largely due to unfavorable exchange rates. A year earlier, P&G recorded a benefit from buying out a joint-venture partner in Europe. Stripping out those items, the company's earnings were in line with Wall Street's expectations, as was its 3% growth in sales excluding acquisitions, divestitures and currencies, a figure buoyed by the strong growth in emerging markets. The company also backed its outlook for the year.

The company did continue to struggle with its beauty business, the only one of its major lines not to post sales growth in the quarter. The company is battling with Unilever in the shampoo aisle, where this week each company accused the other of aggressive discounting.

Kimberly-Clark, meanwhile, suffered some slowdown in China. Diaper sales there rose in the low-20% range, down from around 35% on average last year. But Chief Executive Tom Falk said that growth rate is "still pretty healthy relative to everywhere else in the world."

In another area of the business world entirely, industrial conglomerate Honeywell International Inc. also addressed concerns about China on Friday after reporting its profit nearly quadrupled as sales rose 8.4% to $10.39 billion. Chief Executive David Cote cast doubt on the troubling industrial production data out of China, where the company posted organic sales growth of 13%.

"I'm not sure always how reliable all the statistics are," Mr. Cote said.

Kate Linebaugh and Anna Prior contributed to this article.

Write to Paul Ziobro at Paul.Ziobro@wsj.com

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