P & G's net sales in the third quarter of fiscal 2018 were $16.3 billion, an increase of 4% compared with the same period last year, mainly due to the exchange rate change of 4%. 1% increase in organic sales is due to 1% increase in organic sales.
Organic sales in the infant, female and home care sectors fell 3%. Organic sales of baby care products fell by about 5% due to reduced inventories and promotions such as price cuts from competitors. Organic sales of women's care products have a low growth due to the strong innovation of the always / whisper brand. At the same time, due to the decrease of inventory, the increase of expenditure on commodity activities, and the influence of competitors' price reduction, the organic sales of home care products slightly decreased.
On April 19, P & G signed an agreement with Merck group, headquartered in Darmstadt, Germany, to acquire Merck group's consumer health business for about 3.4 billion euros (26.4 billion yuan). This initiative enables P & G to expand its successful OTC healthcare business by increasing differentiated, physician supported, multi regional brand portfolio of fast-selling products across a wide geographic range. It also provides P & G with strong healthcare business and supply capabilities, deep technical control and long-standing leadership in the consumer healthcare market, and will enrich and strengthen P & G's existing consumer healthcare businesses and brands, such as Vickers, metamucil and pepto Bismol.
According to the public information, Merck's consumer health department employs about 3800 employees, and has famous brands in 40 markets, including Bion children's vitamin series, Femibion Evian pregnant women's vitamin folic acid series, nasivin cold medicine, neurobian (neiluobi'an), sevenseas (qihaijianluo), with an annual income of more than US $1 billion. Among them, Bion children's vitamin series and Femibion pregnant women's folic acid are also popular with domestic consumers.
As part of the deal, P & G will acquire a majority stake in Merck, a German company, and then make a mandatory offer to minority shareholders. Merck said the deal did not include Merck's French consumer health business, and P & G made a binding offer.
Vincent Meunier, an analyst at Morgan Stanley, said the price of the deal still means 4.7 times higher than sales, or about 19 times the business profit (EBITDA), the industry's most recent big deal. This will help (Merck) focus on its pharmaceutical sector and revamp its channels.
P & G also announced that it will also terminate its joint venture with Teva pharmaceutical industries, PGT healthcare, on July 1, saying that P & G and Teva's strategies are no longer consistent. Merck said that the withdrawal of its consumer health business did not change its goal of maintaining existing prescription drug sales, such as Erbitux's anti-cancer and multiple sclerosis treatment Rebif, which is organically stable to 2022. It will reflect guidance on selling consumer healthcare businesses when it releases its financial results for the first quarter of 2018 on May 15. The deal is expected to close at the end of the fourth quarter of 2018, but regulatory approval and other customary closing conditions are still required. After the completion of the transaction, about 3300 Merck employees (mainly from the consumer medical department) may turn to P & G.
Procter & Gamble's acquisition of Merck group's consumer health business will improve the competitiveness of Procter & Gamble's OTC business in most of the global 15 markets in terms of geographical scope and brand category combination. 'We like the stable and broad growth of OTC healthcare market and are happy to add Merck's consumer health portfolio and employees to P & G,' added David Taylor, chairman, President and CEO of P & G.
As for P & G's old rivals, Kimberly's sales in the first quarter of 2018 were $4.7 billion, up 5% from the same period last year. Exchange rate changes helped sales grow by 3%. Among them, organic sales increased by 2%, sales increased by 3%, and net sales price decreased by 1%. In the North American market, organic sales of consumer goods increased by 3%, and sales of KC's commercial consumer goods department increased by 2%. Outside North America, organic sales grew by 2% in mature markets and 1% in developing and emerging markets.
Personal care sales rose 3% to $2.3 billion in the first quarter. Changes in the currency exchange rate and last year's acquisition of the company's joint venture in India boosted sales by 2% and 1%, respectively. Volume and product mix both rose 1%, while net selling prices fell 2%. First quarter operating profit was $470 million, down 3%. This comparison is affected by the increase of investment cost and the decrease of net selling price, but it is beneficial to this result in terms of cost saving, reduction of marketing, R & D and general expenditure, increase of sales volume and favorable currency exchange rate.
Sales in North America increased 1%. Sales rose 3%, but net selling prices fell 2%, including increased promotional spending in the infant and adult care businesses. Huggies' sales of curious diapers and adult care products have declined, while those in the children's care business have increased by nearly five points.
Sales in developing and emerging markets increased by 3%. The acquisition of the company's joint venture in India contributed to a 2% increase in sales and a 1% gain in the exchange rate. The optimization of the product mix led to an increase of 2%, a 1% increase in sales volume and a 3% decrease in net sales price. Production increased in Eastern Europe and Latin America, but declined in China.
Sales in developed markets outside North America (Australia, South Korea and Western / Central Europe) grew 6%, with eight of them benefiting from the exchange rate. Negative performance in South Korea led to a 4% drop in volume. The combined effect of net selling price and changes in product mix benefits sales by 2%.