Dive Brief:
- Procter & Gamble expects a roughly $150 million after-tax earnings headwind in fiscal 2026 due in part to the Middle East conflict, the consumer goods giant reported Friday.
- CFO Andre Schulten pointed to a combination of factors behind the earnings pressure, including “commodity-linked cost inflation, feedstock exposures, and logistics disruptions resulting from the conflict in the Middle East.”
- "Almost all of these increased costs will be in the fiscal fourth quarter," he said during the company’s fiscal year 2026 third quarter earnings call. “Our teams are doing a tremendous job to protect supply continuity and to minimize cost impacts.”
Dive Insight:
The news from Procter & Gamble, the Cincinnati-based maker of consumer products such as Tide laundry detergent and Crest toothpaste, comes as S&P Global survey results released Thursday show U.S. business activity recovered only modestly in April after near-stagnation in March following the outbreak of war in the Middle East.
Services growth remained weak as demand cooled. New orders placed at service providers rose only marginally and at the slowest rate seen over the past two years. Lost sales were linked by survey respondents to the uncertainty and disruption caused by the war among other issues, the report said.
Amid the disruption, Schulten said Procter & Gamble is relying on data analytics and other tools for efforts such as rapid product reformulation and supplier diversification.
“With the timing of these cost impacts, there is little opportunity to create short-term offsets within cost of goods sold,” he said. “Likewise, we will protect our demand creation investments in the business to support our new innovation and maintain positive momentum.”
Schulten said some retailers increased inventory in March due in part to precautionary buying linked to potential price increases or supply chain disruptions tied to the Middle East conflict, alongside normal Easter-related seasonal patterns. As a result, the company expects fourth-quarter organic sales to be somewhat lower than the third quarter.
Responding to an analyst’s question, he said it was “too early” to assess how the conflict might impact the company’s supply chain operations. “If history is any indicator for what's to come, our supply chains are generally resilient... We've seen other players struggle, especially if it's long supply chains, especially if it's heavily contract manufactured supply chains,” he said.
Full-year guidance was maintained, though Schulten said geopolitical volatility has increased uncertainty around where results will land within the expected ranges.
He said the company would not issue fiscal 2027 guidance until July, but acknowledged investor concerns that a prolonged rise in oil prices or further supply disruptions tied to the Middle East conflict could affect costs next year. He said Brent crude at around $100 a barrel would raise annual costs by about $1 billion after tax compared with pre-conflict levels of roughly $65 a barrel.
The company said Thursday that it generated net sales of $21.2 billion during its third quarter ended March 31, a year-over-year increase of seven percent.
Meanwhile, Schulten said P&G is estimating about $150 million after tax in potential tariff refunds from the Trump administration, though he said it remains unclear how much of that amount the company will ultimately recover.
“We are following the process the U.S. administration is beginning to lay out,” Schulten said.
