P&G; Issues Profit Warning for 1st Quarter

Procter & Gamble Co. on Wednesday warned of a shortfall in first-quarter profit as the consumer products giant promoted its chief operating officer to chief executive in a major reorganization.

The maker of Crest toothpaste and other well-known brands said in a statement that 55-year-old Durk Jager, now president and chief operating officer, will replace John Pepper, 60, on Jan. 1, 1999. Jager also will succeed Pepper as chairman of the board Sept. 1, once the previously announced reorganization was complete, it said.

In a conference call to give details about the reorganization, Clayt Daley, chief financial officer, said Procter’s first-quarter earnings will fall a bit short of the company’s forecasts, hitting the mid-single digits rather than the upper single digits, but it expects to meet analysts’ estimates for the full year.

P&G;’s stock fell $7.63 to close at $72 on the New York Stock Exchange.

P&G; earned $1.09 billion, or 73 cents a share fully diluted, on sales of $9.36 billion in the first quarter of 1997.

First Call Corp.’s most recent report has a mean earnings estimate for P&G; of 79 cents a share for the first quarter and $2.84 a share for the full fiscal year ending June 30, 1999.

In the reorganization plan, which was announced Sept. 2, P&G; said it will transform itself from four business units, based on geographic regions, into seven units based on product lines.

The restructuring is aimed at accelerating product development and introductions and boosting sales and earnings growth at the Cincinnati-based company.

P&G; also said it will establish eight market units to develop strategies for local markets such as new strategic alliances and distribution channels. “[This] will enable P&G; to achieve significant economies of scale, while improving overall quality and speed of these services,” it said.

It also will set up a global business service unit that will bring together a range of services such as accounting and payroll, which are currently spread throughout the organization.