P&g Flags $1 Billion Profit Hit in Fiscal 2027 From Higher Oil Prices

P&G warns of $1 billion profit hit in fiscal 2027 from higher oil prices

Procter & Gamble Faces Significant Cost Pressures Amid Rising Oil Prices

By Alexander Marrow and Juveria Tabassum

April 24 (Reuters) - U.S. consumer goods giant Procter & Gamble on Friday warned of a roughly $1 billion post-tax hit to its fiscal 2027 profit from surging oil prices, joining a host of global companies flagging significant cost pressures from the Iran war.

The Pampers and Tide maker's estimated profit hit is among the highest outside of airlines, which rely heavily on oil for fuel.

European rival Nestle has warned of higher costs due to the Strait of Hormuz blockade, while Nivea-maker Beiersdorf is considering price hikes later this year if commodity costs continue to rise.

Financial Leadership Responds to Commodity Exposure

"The noise, I would call it, from the commodity exposure is significant, as a billion dollars after tax is nothing to sneeze at from a headwind standpoint," said P&G finance chief Andre Schulten on a post-earnings call.

"We have a lot of work to do, to work through the supply chain side and the cost side."

Impact of Oil Prices on Profitability

The profit hit to P&G's fiscal year beginning July accounts for the impact of oil price jumping from $60 a barrel before the conflict to around $100 today on plastics and paper for packaging, as well as transportation charges, the company said.

Commodity Cost Pressure

Steep fuel charges are also weighing on an already-stressed lower-income U.S. consumer.

Inflation and Consumer Behavior

"Inflation across food, energy, healthcare, and many other areas of spending has taken a toll on consumers and how they assess value. Recent geopolitical events have elevated this to a new level of concern," Schulten said.

Cost of Goods Sold and Earnings Outlook

P&G, whose total cost of goods sold in 2025 was $40.85 billion, also flagged a $150 million impact for the fourth quarter due to commodity-linked cost inflation, feedstock exposure and logistics disruption from the Middle East conflict.

The company expects fiscal 2026 earnings per share to be at the lower end of its target range of flat to 4% up.

Investor Sentiment

"Investors are very aware of the commodity cost pressures companies like P&G face. Oil is ubiquitous and high oil prices seep into everything," said Brian Jacobsen, chief economic strategist at Annex Wealth Management.

"The CFO is realistic about these problems and investors seem to be pleased with how the company is managing through the situation."

Shares of P&G, which topped third-quarter estimates, were up about 4% in early trading.

Product Investments Pay Off

Segment Performance and Consumer Trends

Volumes rose in three of P&G's five reported segments in the third quarter, helped by new launches of products such as Pantene shampoo and Olay skin cream at higher prices in North America and Europe.

Wealthier consumers spent on nice-to-have items, even as lower-income households trade down to stretch budgets under stress from higher cost of living.

CEO Perspective on Investments

"We're increasing investments to accelerate momentum with consumers despite the challenging geopolitical and economic environment," said Shailesh Jejurikar, who took over as P&G's CEO at the start of the year.

Gross Margin and Revenue Growth Concerns

However, P&G's currency-neutral gross margin fell 100 basis points, sliding for the sixth straight quarter, partly due to tariffs and its ongoing investment in product innovation.

"The bigger concern is that much of that revenue growth was from price increases on those popular brands... they cannot continue to raise prices at this pace indefinitely," said Brian Mulberry, chief marketing strategist at Zacks Investment Management.

P&G's quarterly sales rose 7% from a year ago to $21.24 billion, topping estimates of $20.50 billion, while adjusted earnings per share of $1.59 beat expectations by three cents, according to data compiled by LSEG.

Tariff Refund

Tariff Impact and Refund Process

P&G maintained its expectation of a nearly $400 million hit from tariffs on fiscal 2026 profit. About half of that was from the tariffs imposed under the International Emergency Economic Powers Act, which were invalidated by the U.S. Supreme Court in February.

The company is planning to follow the process of applying for refunds, which was launched earlier this week.

Potential Refund Value

"We have about $150 million after tax in refunds available from the IEPA tariff. How much of that is recoverable or not? We'll find out," CEO Jejurikar said.

(Reporting by Juveria Tabassum in Bengaluru and Alexander Marrow in London; Editing by Arun Koyyur)