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P&G raises FY organic sales growth forecast after sales beat

Reuters

(Reuters) - Procter & Gamble Co <PG.N> reported better-than-expected quarterly sales, driven partly by strong organic sales in its beauty and health care businesses, and raised its fiscal 2017 forecast for organic sales growth.

Shares of the company, which makes Tide detergent and Pampers diapers, were up as much as 3.9 percent in afternoon trading on Friday.

P&G has been shedding unprofitable brands as it focuses on core brands, including Tide and Gillette, to boost sales. The company sold 41 of its brands last year, including Clairol and COVERGIRL, to Coty Inc <COTY.N> for $12.5 billion. (http://reut.rs/2jfL6nV)

The company's total organic sales, which excludes the impact of foreign exchange, mergers and acquisitions, rose 2 percent as pricing and product mix remained flat.

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P&G's health care unit, which sells Oral-B and Vicks, was its best performing business with organic sales jumping 7 percent.

Its beauty business, which houses brands like Head & Shoulders and Olay, rose 3 percent. The health care and beauty business together accounted for about 30 percent of P&G's total sales.

P&G said it now expects organic sales growth of 2 percent to 3 percent for the year, up from its prior forecast of a 2 percent increase. This is faster than the 1 percent organic sales growth P&G reported in 2016.

However, headwinds from foreign exchange and further pruning of its portfolio will reduce overall sales growth in 2017 by 2 to 3 percentage points, the Cincinnati, Ohio-based company said.

P&G's product pruning strategy, including the sale of its beauty brands to Coty, is proving effective, Argus Research Corp analyst John Staszak told Reuters.

Core earnings per share, which excludes restructuring charges and other items, was $1.08 in the second quarter ended Dec. 31.

Analysts expected a profit of $1.06 per share, according to Thomson Reuters I/B/E/S.

Net income attributable to the company rose to $7.88 billion, or $2.88 per share, from $3.21 billion, or $1.12 per share, a year earlier. The latest quarter included a gain from discontinued operations, including brands sold to Coty.

The company's net sales of $16.85 billion were largely flat and included a 2 percentage point foreign exchange impact. Still, those sales beat Wall Street's estimates of $16.77 billion.

Up to Thursday's close, P&G's shares had risen 11.7 percent in the past 12 months.

(Reporting by Jessica Kuruthukulangara and Ankur Banerjee in Bengaluru; Editing by Sayantani Ghosh and Martina D'Couto)