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P&G CFO: Tariffs to create almost $100M in FY'19 costs

P&G CFO: Tariffs to create almost $100M in FY'19 costs

The cost of conflicts between the U.S. and its trading partners will cost The Procter & Gamble Co. nearly $100 million this year, the company's CFO said Feb. 21.

CFO and Vice Chairman Jon Moeller quantified the projected hit to the company's 2019 fiscal year profit while speaking in Boca Raton, Fla., at the Consumer Analyst Group of New York's annual conference, or CAGNY.

The $100 million in tariff-related costs is not the largest single expense that Moeller called out Feb. 21. Rising costs for pulp used to make paper as well as chemicals needed to produce plastics will contribute to $400 million in commodity cost increases during the year, the CFO told the audience at CAGNY. The declining values of some foreign currencies relative to the U.S. dollar, such as the Chinese yuan and the British pound, also are likely to ding P&G's sales abroad, Moeller added.

But tariffs Canada implemented in July 2018 have hit products that P&G manufactures in the U.S. and sells across the border. Products hit by the Canadian tariffs include Febreze air fresheners and Bounty paper towels.

In October 2018, the U.S. said P&G was exempt from tariffs on steel imported to the U.S. for use in razors that the company manufactures under its Gillette label. Tariffs on goods traded between the U.S. and China have had fewer effects on P&G as the company manufactures many products meant for sale in China locally.

During an earnings call in January, Moeller acknowledged that P&G would face costs from tariffs, but added that the Cincinnati-based company was more concerned about "the ability to ... import and export products freely across markets."

"That has an impact on our sales," he added.

Speaking at CAGNY, Moeller also highlighted a partnership with Los Angeles-based business incubator M13. Moeller said M13 will work with P&G's venture arm to develop consumer brands and products that can later be added into P&G's main business structure.

Broadly, the company is focusing on developing products that serve specific consumers, such as first-time mothers, and that expand the consumer goods market, Moeller said.

"I'm much more interested in that kind of [market] share growth" than competing with other consumer goods makers for existing sales, Moeller said.