By  on February 1, 2008

The Procter & Gamble Co. gracefully sidestepped consumers' proverbial belt tightening in the second quarter, posting a group profit gain of 14 percent.

During a conference call Thursday, the consumer products giant also said it plans to exit its $1.6 billion coffee business and establish a separate company called The Folgers Coffee Co. The new company will have its headquarters in Cincinnati, as does P&G, and will employ about 1,250 people at four sites in the U.S. P&G expects to determine the deal structure this spring and complete the transaction in the July to December period.

The firm's beauty segment posted net earnings that gained 10 percent to $883 million on a sales increase of 10 percent to $5.1 billion and organic sales growth of 5 percent.

The firm's net earnings for the quarter ended Dec. 31 climbed 14 percent to $3.3 billion, or 98 cents a diluted share, from $2.9 billion, or 84 cents, in the prior year on sales that gained 9 percent to $21.6 billion from $19.7 billion.

The company said its brands — ranging from Crest toothpaste to Bounty paper towels — are well positioned to weather an economic downturn and rising commodity and energy costs. To offset these rising costs, P&G said it has a number of price increases planned. The company will raise prices across 40 to 50 percent of its business, affecting mostly household items and a lower percentage of beauty products. It expects to reap the benefit of these increases this spring.

During a conference with analysts, chairman and chief executive officer A.G. Lafley said, "This is the third or fourth year in a row that we've had to increase prices," adding that rising oil prices is not a new challenge. "We almost always increase price with innovation as opposed to naked price increases."

Clayt Daley Jr., vice chair and chief financial officer, said the beauty businesses' organic sales were driven by the double-digit growth of prestige fragrances, including Hugo Boss and Dolce & Gabbana, and volume growth of Olay's Definity and Regenerist lines. Hair care volume was up in low-single digits. The firm said its restage of Pantene in the U.S. didn't gain as much traction as expected, but there were more innovations planned for later this year to boost the stalwart hair care brand. Lafley also expressed excitement for this month's launch of Nice 'n Easy Perfect 10, a 10-minute at-home hair color that he said marks the biggest innovation in the category in decades.

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