US consumer health and hygiene giant Procter & Gamble (PG:NYSE) delivered what initially looked like a positive set of second quarter results, beating revenue estimates and increasing its full year organic growth forecast.

However, P&G shares fell to two-month lows as investors were spooked by falling sales volumes and a continued rise in input costs.

Despite meeting Wall Street estimates with earnings per share of $1.59 and slightly beating sales forecasts, the firm revealed a 6% drop in second-quarter volumes driven by falling consumption and a big hit to margins from increased raw material costs and a negative product mix.

The firm also said given ‘continued significant cost headwinds from commodity and materials costs’ and foreign exchange impacts, it expected earnings per share to be towards the lower end of its guidance range for the current year.

The question investors will be asking is whether UK firms such as Unilever (ULVR) and Reckitt (RKT) can avoid the same pitfalls when they report in a couple of weeks’ time, and even if their results are good will the shares respond positively?

In October, Unilever posted a forecast-beating 10.3% increase in third-quarter sales due to record price increases and raised its full-year revenue growth guidance to ‘above 8%’, so that is the first figure investors will scrutinise when the firm reports its annual results on 9 February.

Price hikes came at the expense of unit sales, which declined 1.6% in the quarter, and the company braced the market to expect ‘more negative underlying volume growth’ in the final three months of the year.

Chief executive Alan Jope also maintained his target of a 16% operating margin and guided investors to expect the return on sales to rise further this year due to strong pricing, an improved product mix and cost savings, so the margin outlook will be just as important as the results.

Reckitt also delivered better than expected third quarter sales and predicted full year revenue growth would be at the top end of its 6% to 8% range of guidance.

Price and product mix improvements of 12% came at the expense of a 4.7% decline in volumes and meant overall revenue growth slowed sharply from the second quarter, although the continuing strength of the US dollar provided a further tailwind to sales when reported in sterling.

When Reckitt reports on 17 February, as well as the top line investors will be looking to see how much further costs have risen as the firm has repeatedly cautioned higher input prices will affect its profit margins.

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