The company announced on Thursday that major currency devaluation in the Venezuelan market would hurt earnings for the current quarter, and bring down the company’s full-year results as well.
Here are the highlights of the impact to P&G’s results:
- A one-time charge of between $200 million and $275 million. P&G held about $1.3 billion in local currency assets as of the end of 2012. The company is taking a writedown charge on those assets as it revalues the balance sheet to reflect the impact of the currency’s dive.
- A $0.01 drag on this quarter’s core earnings. P&G adjusted its per-share forecast for this quarter’s earnings, dropping it to a range of between $0.90 and $0.96. The company had expected EPS to come in at between $0.91 and $0.97. P&G’s non-core earnings for the quarter, which also include the hit from the balance sheet writedown, are expected to be about $0.09 lower.
- A $0.03 hit to 2013’s core earnings. The impact on P&G’s full fiscal year should be about $0.03, knocking the company’s EPS target range down to between $3.94 and $4.04. With the one-time charge included, the total drag on this year’s earnings will be about $0.11 a share.
The hit that P&G took highlights the extra challenge that comes with doing business in countries that maintain currency controls. In addition to Venezuela, P&G lists China, India, and Argentina as markets that carry the same type of business risk. But it’s a threat that all major competitors face, too. For example, rival The Clorox Company (NYSE:CLX) will see an impact to its books. It had estimated that a possible Venezuela currency devaluation might subtract $0.05 to $0.10 from its full-year earnings. But that was just before the devaluation happened, so the estimate might change.
As for P&G, the company didn’t give any other updates on the business. But the roughly $0.01-a-share, per-quarter drag that the Venezuela currency devaluation will cause is minor. It shouldn’t have much impact at all on the company’s overall goal to grow global sales by between 3% and 4% this year.
The article Venezuela Bites Procter & Gamble originally appeared on Fool.com and is written by Demitrios Kalogeropoulos.
Fool contributor Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Procter & Gamble.
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