10-KPeriod: FY2012

PROCTER & GAMBLE Co Annual Report, Year Ended Jun 30, 2012

Filed August 8, 2012For Securities:PG

Summary

Procter & Gamble (PG) for the fiscal year ending June 30, 2012, reported net sales of $83.7 billion, 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 billion 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 billion 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.

Financial Highlights

56 data points
Beta

Revenue

$82.01B

49.5% Gross Margin

Net Income

$10.76B

13.1% Net Margin

EPS (Diluted)

$3.66

Total Assets

$132.24B

Cash & Equivalents

$4.44B

Free Cash Flow

$9.32B

Financial Statements
Beta
Revenue$82.01B
Cost of Revenue$41.41B
Gross Profit$40.59B
R&D Expenses$2.00B
SG&A Expenses$25.98B
Operating Income$13.04B
Interest Expense$769.00M
Net Income$10.76B
EPS (Basic)$3.82
EPS (Diluted)$3.66
Shares Outstanding (Basic)2.75B
Shares Outstanding (Diluted)2.94B

Key Highlights

  • 1Net sales increased by 3% to $83.7 billion, with organic sales also growing by 3%, primarily due to price increases.
  • 2Net earnings attributable to Procter & Gamble decreased by 9% to $10.8 billion, reflecting significant impairment and restructuring charges.
  • 3Diluted Earnings Per Share (EPS) decreased by 7% to $3.66, with continuing operations EPS down 19% to $3.12.
  • 4The company generated strong free cash flow of $9.3 billion, with a free cash flow productivity of 85%.
  • 5P&G announced a $10 billion productivity and cost savings plan over five years, targeting overhead reduction and efficiency improvements.
  • 6The company completed the divestiture of its snacks business, contributing $1.4 billion in after-tax gain to discontinued operations.
  • 7P&G raised its dividend for the 56th consecutive year, paying a total of $6.1 billion in dividends to shareholders.

Frequently Asked Questions

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.

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.

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.

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.