01—Abstract
Summary
Summary of the 10-K filed August 8, 2012. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble (PG) for the fiscal year ending June 30, 2012, reported net sales of $83.7 billiona, a 3% increase year-over-year, driven by price increases that offset a slight decline in unit volume.
The company experienced a significant 20% decrease in net earnings from continuing operations to $9.3 billion, largely due to $1.6 billionb in goodwill and intangible asset impairment charges related to the Appliances and Salon Professional businesses, and $721 million in restructuring charges from a new productivity plan. Despite these charges, P&G demonstrated strong cash flow generation with $9.3 billion in free cash flow. The company continued its commitment to shareholders by increasing its dividend for the 56th consecutive year and repurchasing $4.0 billion in shares.
The company is strategically focusing on its top 40 core businesses, top 20 innovations, and top 10 developing markets to drive future growth. A significant cost-saving initiative of $10 billionc over five years was announced, aimed at streamlining operations and improving productivity. P&G's diverse product portfolio, with key segments including Fabric Care & Home Care, Baby Care & Family Care, Beauty, Health Care, and Grooming, positions it well in competitive global markets, though it faces challenges from commodity cost fluctuations and macroeconomic uncertainties.
02—Key points
Key Highlights
- Net sales increased by 3% to $83.7 billion, with organic sales also growing by 3%, primarily due to price increases.
- Net earnings attributable to Procter & Gamble decreased by 9% to $10.8 billion, reflecting significant impairment and restructuring charges.
- Diluted Earnings Per Share (EPS) decreased by 7% to $3.66, with continuing operations EPS down 19% to $3.12.
- The company generated strong free cash flow of $9.3 billion, with a free cash flow productivity of 85%.
- P&G announced a $10 billion productivity and cost savings plan over five years, targeting overhead reduction and efficiency improvements.
- The company completed the divestiture of its snacks business, contributing $1.4 billion in after-tax gain to discontinued operations.
- P&G raised its dividend for the 56th consecutive year, paying a total of $6.1 billion in dividends to shareholders.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Procter & Gamble Co kept $0.13.
- Revenue$82.01B100.0%
- Cost of revenue−$41.41B50.5%
- Gross profit$40.59B49.5%
- Operating costs−$27.56B33.6%
- Operating income$13.04B15.9%
- Interest, other & tax−$2.28B2.8%
- Net income$10.76B13.1%
Where FY2012 revenue went
$82.01B- Cost of revenue: $41.41B, 50% of revenue
- SG&A: $25.98B, 32% of revenue
- Net income: $10.76B, 13% of revenue
- R&D: $2.00B, 2.4% of revenue
- Interest, other & tax: $2.28B, 2.8% of revenue
Kept 13% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed August 8, 2012Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $82.01B$81.10B | +1.1% |
| Cost of Revenue | $41.41B$39.86B | +3.9% |
| Gross Profit | $40.59B$41.24B | −1.6% |
| R&D Expenses | $2.00B$2.00B | 0.0% |
| SG&A Expenses | $25.98B$25.75B | +0.9% |
| Operating Income | $13.04B$15.49B | −15.9% |
| Interest Expense | $769.00M$831.00M | −7.5% |
| Net Income | $10.76B$11.80B | −8.8% |
| EPS (Basic) | $3.82$4.12 | −7.3% |
| EPS (Diluted) | $3.66$3.93 | −6.9% |
| Shares Outstanding (Basic) | 2.75B2.80B | −1.9% |
| Shares Outstanding (Diluted) | 2.94B3.00B | −2.0% |
05—Questions
Frequently Asked Questions
What was the primary driver of P&G's net sales growth in fiscal year 2012?
The primary driver of P&G's net sales growth in fiscal year 2012 was price increases, which contributed 4% to net sales and offset a slight decline in unit volume. This pricing strategy was largely implemented to recover rising commodity costs and currency devaluations in certain developing markets.
What caused the significant decrease in net earnings from continuing operations?
The significant decrease in net earnings from continuing operations was primarily due to $1.6 billion in before-tax goodwill and intangible asset impairment charges related to the Appliances and Salon Professional businesses, and $721 million in before-tax incremental restructuring charges associated with the company's new productivity and cost savings plan. Higher commodity costs and unfavorable product mix also contributed to gross margin contraction.
How is P&G addressing cost pressures and improving efficiency?
P&G announced a $10 billion productivity and cost savings plan over five years. This plan aims to reduce overhead spending by approximately 5,700 non-manufacturing positions, achieve annual savings in cost of goods (raw materials, manufacturing, transportation), and generate efficiencies to allow marketing costs to grow slower than sales. The company expects this plan to deliver approximately $2 billion in before-tax annual savings.
What is the company's strategy for future growth?
P&G's strategy focuses on strengthening its core business by prioritizing resources on its top 40 country/category combinations, its top 20 innovations, and its top 10 developing markets. The company also aims to grow organic sales 1-2% faster than the market, deliver high single to low double-digit Core EPS growth, and generate free cash flow productivity of 90% or greater.
06—Continue