Venezuela Bites Procter & Gamble


Procter & Gamble just delivered an unwelcome Valentine's Day present to investors.

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 Clorox 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.

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Fool contributor Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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