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

[WASHINGTON] US consumer goods giant Procter & Gamble on Friday (Apr 24) warned of a roughly US$1 billion hit to its fiscal 2027 profit from surging oil prices, joining a host of global companies flagging significant cost pressures from the war in Iran.

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.

“A lot of our materials are petrol-based, so with oil at around US$100, there’s a significant impact in terms of input cost,” P&G finance chief Andre Schulten said on a media call.

“Geopolitical dynamics have thrown new challenges in front of us, but we will continue to fully support the business to maintain the momentum we’re creating.”

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

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

P&G, whose total cost of goods sold in 2025 was US$40.85 billion, also flagged a US$150 million impact from commodity costs 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 per cent up.

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“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.”

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.

“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.

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 per cent from a year ago to US$21.24 billion, topping estimates of US$20.50 billion, while adjusted earnings per share of US$1.59 beat expectations by three cents, according to data compiled by LSEG.

P&G maintained its expectation of a nearly US$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 US Supreme Court in February.

The company is planning to follow the process of applying for refunds, which was launched earlier this week, its spokesperson told Reuters, adding that there was no certainty as to when the refunds would be issued. REUTERS