By Cliff Peale
The Cincinnati Enquirer

It's been 31 months since A.G. Lafley took over a Procter & Gamble Co. in turmoil; and, for perhaps the first time, the company is not looking back.

In unveiling its second-quarter earnings before the stock market opened Tuesday, P&G outlined a series of measures to sustain sales and profit growth for the next decade. That profit jumped 15 percent in the quarter ended Dec. 31 to $1.49 billion on sales of $11.01 billion, compared with profits of $1.3 billion on sales of $10.4 billion in the same period last year.

Investors liked the results, sending P&G's share price up $1.95 to $85.

"Going forward, what we need is more quarters like this," said Chuck Stutenroth, portfolio manager at Cincinnati's Fort Washington Investment Advisors, which manages more than $10 million in P&G shares. "We need to see this sustained, and that's the concern."

P&G's executives have heard plenty of those concerns, and they outlined programs including:

More lower-priced brands.

More sales in developing markets, including China and Russia.

An innovation program that puts products in the market for three years.

"These systemic improvements in innovation capability already are paying off," Lafley told investors. "In all of these cases, we're focusing on big ideas, on unmet consumer needs."

Never mentioned Tuesday were the June 2000 earnings shortfall and stock crash that brought Lafley into office, replacing Durk Jager.

Starting June 30, P&G will stop recording special restructuring charges, trying to prove again that it can sustain the sales and profit goals it has topped for six straight quarters.

The stars of the last quarter included Crest toothpaste, Dawn dishwashing liquid and Herbal Essences shampoo. Sunny Delight juice drinks lagged behind the overall P&G results. The results showed P&G's continuing shift into higher-margin health-care and beauty-care businesses.

Sales in health care increased 17 percent to $1.57 billion, with earnings up 47 percent to $253 million. In beauty care, sales jumped 10 percent to $3 billion, while earnings increased 15 percent to $507 million.

Fabric and home care was another bright spot, with sales up 5 percent to $3.1 billion and earnings up 18 percent to $514 million.

Lafley used the call to spotlight several growth initiatives, including:

Innovation: In a program called "Launch, grow and leverage," P&G is giving each of its new initiatives three years to perform. In the past three years, P&G products such as Swiffer and Whitestrips have helped create categories that have produced up to $2 billion in new retail sales in the U.S. alone, he said.

Lower-priced products: P&G already has some "mid-tier" brands, including Luvs diapers and Cheer detergent. But it will sell more as it develops low-cost manufacturing processes, Lafley said.

He said it would take two or three years to spread those models throughout the company.

"We have been leaving out some consumers because our brands and products were not affordable," he said.

Developing markets: In growing geographies such as China, P&G is conserving cash and selectively entering new businesses. Growing business in those countries could take most of the decade, Lafley said.

E-mail cpeale@enquirer.com