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P&G set to cut more jobs, repurchase additional shares

Tide detergent, a Procter & Gamble product, is displayed on a shelf in a store in Alexandria, May 28, 2009. REUTERS/Molly Riley
Tide detergent, a Procter & Gamble product, is displayed on a shelf in a store in Alexandria, May 28, 2009. REUTERS/Molly Riley

By Jessica Wohl

CINCINNATI (Reuters) - Procter & Gamble plans to trim more non-manufacturing jobs through 2016, on top of cutting 10 percent of that workforce by the end of June, as the world's largest household-products maker tries to reinvigorate what has become a sluggish organization.

P&G also said it may increase stock repurchases to $6 billion from $4 billion, but said such additional buybacks should not have a big impact on earnings per share. The company maintained the forecasts for sales and earnings for the current quarter and the fiscal year it had given in late October.

P&G remains on track to eliminate about 5,700 non-manufacturing jobs by the end of this fiscal year, which will end in June. It now plans to reduce another 2 percent to 4 percent of its non-manufacturing jobs each year during fiscal 2014, 2015 and 2016.

"These are all continued steps in the right direction, but we wish they had taken bolder ones like even more aggressive cost-cutting," said Sanford Bernstein analyst Ali Dibadj, who attended P&G's bi-annual analyst meeting at the company's Cincinnati headquarters on Thursday.

Shares of P&G, a component of the Dow Jones industrial average <.DJI>, were down 0.2 percent at $66.38 in afternoon trading on the New York Stock Exchange.

CUTTING JOBS IN DEVELOPED MARKETS

The maker of Tide detergent and Pampers diapers has been working for months to improve its structure and cut costs. It has admitted that recent innovations were not as strong as successes from years past such as Swiffer and Crest Whitestrips.

"The reality is that the pace of our disruptive innovation has slowed over the past decade," said Jorge Mesquita, P&G's group president of new business creation and innovation and global pet care.

P&G did not outline exactly where it plans to cut jobs but it would like to trim more positions in developed markets than in developing ones, where it has "significant growth opportunity," Chief Financial Officer Jon Moeller told reporters after the meeting.

"We realize that we can't get the next round of productivity just from squeezing harder, we need to really look at our organization's design," he said, adding that P&G will maintain a strong presence in Cincinnati.

Competitors such as Kimberly-Clark Corp and Colgate-Palmolive Co are also trimming their ranks as the industry contends with weak economic conditions in major markets such as the United States and Western Europe.

Some industry watchers have suggested that P&G consider splitting up, separating its beauty businesses from mainstays such as diapers, paper goods and detergent. However, P&G contends that its scale, including more than two dozen brands that each generate more than $1 billion in annual sales, is an advantage.

During the meeting, P&G highlighted some success it has had in emerging markets, such as seeing the Indian diaper category increase fivefold since it started selling Pampers there five years ago. At the same time it is promoting lower-priced items, including Gain and Era detergents, to attract cost-conscious U.S. shoppers it has lost to rivals such as Church & Dwight Co Inc , known for its ARM & HAMMER products.

P&G has been under pressure to show improvement following the investment of activist investor William Ackman, who may want to see P&G Chairman and Chief Executive Bob McDonald pushed out of his job. Even before Ackman's involvement, P&G was proceeding with that $10 billion restructuring and other changes.

McDonald spoke only at the beginning and end of P&G's meeting on Thursday, allowing Moeller and 11 others to address the crowd, showcasing the company's strategy and its deep bench of long-time executives.

When P&G unveiled a plan to cut $10 billion in costs over five years back in February, it said $6 billion in savings would come from its cost of goods. Now, as it tweaks product formulations, works with local suppliers and takes other steps to trim costs, it should see more than $6 billion in such savings, said Global Product Supply Officer Yannis Skoufalos.

The company said it expects to deliver annual improvement of 5 percent in its manufacturing operations, measured by the number of cases of products produced per person, per year.

Back on October 25, a better-than-expected quarterly report drove P&G shares to their highest level in four years.

P&G stood by the forecasts that it gave at that time, calling for core earnings per share of $1.07 to $1.13 in the current second quarter and $3.80 to $4 this fiscal year. It still expects organic sales, which strip out the impact of acquisitions, divestitures and foreign exchange, to rise 1 to 3 percent this quarter and 2 to 4 percent this year.

On Wednesday, Ackman's Pershing Square Capital Management disclosed that it raised its combined stake in P&G by 27.4 percent to 27.9 million shares as of September 30, while Warren Buffett's Berkshire Hathaway reduced its holdings 11.4 percent to 52.79 million shares.

(Reporting by Jessica Wohl in Cincinnati; editing by John Wallace, Maureen Bavdek and Andrew Hay)

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