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Signage outside Procter & Gamble's corporate headquarters, in Cincinnati, Ohio, on July 9, 2015.John Minchillo/The Associated Press

Procter & Gamble Co PG-N raised its full-year sales forecast on Wednesday as consumer demand for cleaning and personal care products remained stronger than expected despite higher prices, sending its shares up more than 2 per cent.

P&G’s sales growth is at its strongest in at least 15 years, according to analysts, but there are concerns that consumers will start to swap branded items for cheaper own-label products, as supply chain constraints and soaring commodity prices push inflation ever higher, squeezing household budgets.

P&G executives said, however, that for now consumers were switching to better-value premium products such as single-dose detergents or higher-priced diapers, adding they would focus marketing efforts on such offerings.

“We certainly have our eyes wide open and (will) watch for any change in terms of consumer behaviour,” said Chief Financial Officer Andre Schulten on a call with analysts. Executives also announced fresh price hikes in U.S. feminine, home and oral care from this summer, even though they expect consumer demand to soften as the higher prices feed through to shop shelves.

Sales in P&G’s fabric and home care unit, the company’s biggest segment, rose 7 per cent in its third quarter, as consumers stocked up on detergents and surface cleaning products such as Tide and Mr. Clean during the coronavirus’ Omicron wave early in the year.

Sales at the health care business, which includes brands like Oral-B and Pepto-Bismol, rose 13 per cent.

The consumer goods giant, however, warned that higher costs could dent its annual core earnings per share, which it now expects at the low-end of the 3 per cent to 6 per cent growth that was predicted in January.

P&G’s China business was hit by COVID-19 lockdowns which forced the company to shut plants and kept shoppers at home, which executives said had a “significant impact” on consumer demand.

Soaring commodity and freight costs, as well as a stronger dollar are expected to dent full-year profit by $3.2-billion, compared to a prior forecast of $2.8-billion.

P&G also took a hit of one penny per share in the third quarter due to the Russia-Ukraine war, Schulten said, which will rise to four cents in the fourth quarter.

The company is ending all new capital investments in Russia and “significantly reducing” its portfolio to focus on basic hygiene, health and personal care items.

Before the war, P&G’s business in Russia and Ukraine represented 1.5 per cent to 2 per cent of its net sales and global profit, Schulten said.

Net sales rose 7 per cent to $19.38-billion in the quarter ended March 31, compared to an average analyst estimate of $18.73-billion, according to Refinitiv data.

Total sales volumes rose 3 per cent despite price increases across most of P&G’s product range.

The company expects fiscal 2022 sales to rise 4 per cent to 5 per cent, compared with its prior forecast of a 3 per cent to 4 per cent increase.

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