01—Abstract
Summary
Summary of the 10-K filed August 7, 2015. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble's (PG) fiscal year 2015 filing highlights a significant strategic shift towards portfolio simplification, with plans to divest approximately 100 non-strategic brands to focus on about 65 core brands.
This move is aimed at concentrating resources on higher-growth, higher-margin categories. The company faced challenges in FY15, including a 5% decrease in net sales primarily due to a substantial negative impact from foreign exchange (-6%) and a $2.1 billiona after-tax charge related to the deconsolidation of its Venezuelan operations. Despite these headwinds, organic sales grew by 1%, driven by price increases, and unit volume saw a slight decline.
The company continued its commitment to shareholder returns, increasing its dividend for the 59th consecutive year, showcasing its long-standing dedication to shareholder value. Key financial events during the year included the divestiture of the Pet Care business and significant impairment charges related to the Batteries business, which is slated for divestiture to Berkshire Hathaway. These strategic actions underscore P&G's effort to streamline its operations and improve focus on its most promising brands and categories.
Management emphasized productivity and cost-saving initiatives as crucial drivers for future performance and funding growth efforts. Investors should note the ongoing portfolio transformation and the company's efforts to navigate foreign exchange volatility and geopolitical uncertainties.
02—Key points
Key Highlights
- Net sales decreased 5% to $76.3 billion, impacted by a 6% unfavorable foreign exchange rate, though organic sales grew by 1%.
- The company deconsolidated its Venezuelan operations, resulting in a significant $2.1 billion after-tax charge.
- Significant divestitures were completed or announced, including Pet Care and the planned divestiture of 43 Beauty brands to Coty Inc., and the Batteries business to Berkshire Hathaway, as part of a strategy to streamline the portfolio to about 65 brands.
- Net earnings attributable to Procter & Gamble decreased 40% to $7.0 billion, primarily due to the Venezuelan deconsolidation charge and impairment charges in the Batteries business.
- Diluted net earnings per share decreased 39% to $2.44.
- Core EPS, which excludes certain charges, decreased slightly by 2% to $4.02.
- The company continued its consistent return of capital to shareholders, increasing its dividend for the 59th consecutive year.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Procter & Gamble Co kept $0.10.
- Revenue$70.75B100.0%
- Cost of revenue−$37.06B52.4%
- Gross profit$33.69B47.6%
- Operating costs−$22.64B32.0%
- Operating income$11.05B15.6%
- Interest, other & tax−$4.01B5.7%
- Net income$7.04B9.9%
Where FY2015 revenue went
$70.75B- Cost of revenue: $37.06B, 52% of revenue
- SG&A: $20.62B, 29% of revenue
- Net income: $7.04B, 9.9% of revenue
- R&D: $2.00B, 2.8% of revenue
- Interest, other & tax: $4.01B, 5.7% of revenue
Kept 9.9% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed August 7, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $70.75B$74.40B | −4.9% |
| Cost of Revenue | $37.06B$39.03B | −5.1% |
| Gross Profit | $33.69B$35.37B | −4.7% |
| R&D Expenses | $2.00B$1.90B | +5.3% |
| SG&A Expenses | $20.62B$21.46B | −3.9% |
| Operating Income | $11.05B$13.91B | −20.6% |
| Interest Expense | $626.00M$709.00M | −11.7% |
| Net Income | $7.04B$11.64B | −39.6% |
| EPS (Basic) | $2.50$4.19 | −40.3% |
| EPS (Diluted) | $2.44$4.01 | −39.2% |
| Shares Outstanding (Basic) | 2.71B2.72B | −0.3% |
| Shares Outstanding (Diluted) | 2.88B2.90B | −0.7% |
05—Questions
Frequently Asked Questions
What is the main strategic initiative P&G is pursuing?
P&G is undertaking a significant portfolio transformation, aiming to divest or discontinue approximately 100 non-strategic brands to focus on about 65 core brands. This strategy is designed to concentrate resources on leading brands in attractive categories where the company has a strong competitive advantage and the greatest potential for growth and profitability.
What major factors impacted P&G's financial performance in fiscal year 2015?
The primary factors impacting performance were a significant negative foreign exchange impact (6% reduction in net sales), a large one-time charge of $2.1 billion after-tax related to the deconsolidation of its Venezuelan subsidiaries, and impairment charges associated with the Batteries business pending divestiture. These factors led to a substantial decrease in reported net earnings and diluted EPS.
How is P&G managing costs and driving productivity?
P&G is executing a broad productivity and cost savings plan aimed at reducing costs across supply chain, marketing, and overhead expenses. These initiatives are designed to fund growth, offset cost challenges, and improve operating margins. The company reported significant savings from these efforts and is targeting further improvements in efficiency.
What is the outlook for shareholder returns?
P&G reiterated its commitment to delivering total shareholder returns in the top one-third of its peer group. This includes driving organic sales growth above market rates, achieving high single-digit core EPS growth, and maintaining strong adjusted free cash flow productivity. The company also continues its long history of returning capital through dividends and share repurchases, with dividends increased for the 59th consecutive year.
06—Continue