Consumer goods giant Procter & Gamble (NYSE:PG) posted lower than expected earnings results this morning for its fiscal second quarter. Sales and profits were both swamped by big currency swings against the U.S. dollar. But the results also showed that P&G is suffering through a weak selling environment around the world.

P&G's major consumer brands. Source: P&G

Earnings clocked in at $1.06 per share, 8% below the prior year and under Wall Street's forecast of $1.13 per share. Second-quarter revenue of $20.2 billion was down 4%. The stock responded to the news by dropping 3% in early trading.

Wrecked by the ruble
CEO A.G. Lafley placed the blame for that dip in operating results squarely on foreign currency moves. "Virtually every currency in the world devalued versus the U.S. dollar, with the Russian Ruble leading the way," he said in a press release. The progress that P&G made in cutting costs and accelerating innovation in the quarter "was not enough to overcome foreign exchange," according to Lafley.

Organic sales growth, which strips out currency fluctuations, was 2%. While that's much better than the -4% reported revenue number, it's the same sluggish figure that P&G has managed in each of the prior two quarters. By comparison, the company booked 3% organic sales growth in its 2014 fiscal year and 4% as recently as 2011. This quarter's organic growth seems particularly weak in light of the fact that lower unemployment and gas prices in the U.S. should have helped boost sales. P&G doesn't break out results by region in its quarterly announcements, but investors will get more information on how developed markets performed in this morning's conference call.

In the meantime, it's clear from the results that P&G is dealing with soft overall demand. Only one of its five product segments, fabric and home care, saw positive organic volume in the quarter. Meanwhile, P&G's beauty, grooming, and health care divisions all booked lower volume while the baby and family care segment was flat. 

Cash and profits
Investors have yet to see a rebound in profitability from P&G's productivity initiatives, either. Manufacturing cost cuts contributed almost two percentage points in savings, but that was outweighed by other negative factors including higher commodity costs. Overall, profit margin ticked lower by 0.4 percentage points to 48% of sales. 

Meanwhile, cash generation was strong. P&G posted operating cash flow of $3.6 billion, up from $2 billion in the prior year. That improvement helped the company fund massive quarterly cash returns to shareholders to the tune of $3.7 billion, about evenly split between stock repurchases and dividend payments.

Running in place this year
Management updated their outlook for the full fiscal 2015. While organic sales growth guidance didn't change, P&G now sees net sales falling by as much as 4% thanks to the 5% headwind it is expecting from foreign currency exchange.

Those foreign exchange issues also mean that earnings will likely be lower this year than last. However, Lafley said that executives "are working to deliver core earnings per share as close as possible to those of last fiscal year."