10-QPeriod: Q1 FY2010

PROCTER & GAMBLE Co Quarterly Report for Q1 Ended Sep 30, 2009

Filed October 29, 2009For Securities:PG

Summary

Procter & Gamble's (PG) fiscal first quarter ended September 30, 2009, saw a 6% decline in net sales to $19.8 billion, primarily due to unfavorable foreign exchange rates. However, organic sales grew by 2%, indicating underlying brand strength. Net earnings from continuing operations decreased by 3% to $3.03 billion, impacted by lower net sales and a decrease in gains from minor brand divestitures, though this was partially offset by an improved operating margin and lower interest expenses. Despite the top-line challenges, the company demonstrated strong operational execution. Diluted net earnings per share (EPS) rose by 3% to $1.06, outperforming net earnings growth due to share repurchase activity. Operating cash flow saw a significant 32% increase to $4.6 billion, with free cash flow productivity at a robust 121%. The company also announced the agreement to sell its global pharmaceuticals business for $3.1 billion, which is expected to be completed by year-end, and its results are now presented as discontinued operations.

Financial Highlights

50 data points
Beta

Revenue

$19.81B

52.6% Gross Margin

Net Income

$3.31B

16.7% Net Margin

EPS (Diluted)

$1.06

Total Assets

$138.38B

Cash & Equivalents

$6.29B

Free Cash Flow

$4.00B

Financial Statements
Beta
Revenue$19.81B
Cost of Revenue$9.40B
Gross Profit$10.41B
SG&A Expenses$5.96B
Operating Income$4.45B
Interest Expense$287.00M
Net Income$3.31B
EPS (Basic)$1.11
EPS (Diluted)$1.06
Shares Outstanding (Diluted)3.11B

Key Highlights

  • 1Net sales decreased by 6% to $19.8 billion, negatively impacted by foreign exchange, but organic sales grew 2%.
  • 2Diluted net earnings per share (EPS) increased by 3% to $1.06, exceeding net earnings growth due to share repurchases.
  • 3Operating cash flow significantly increased by 32% to $4.6 billion, showcasing strong cash generation capabilities.
  • 4Free cash flow productivity was strong at 121%, indicating efficient conversion of earnings into cash.
  • 5The company is divesting its global pharmaceuticals business for $3.1 billion, with results now categorized as discontinued operations.
  • 6Gross margin improved by 290 basis points to 52.6%, driven by pricing actions, lower commodity costs, and cost savings.
  • 7The company reported a 3% decline in net earnings from continuing operations to $3.03 billion, but a 1% decrease in total net earnings to $3.31 billion.

Frequently Asked Questions

The primary driver for the decrease in net sales was unfavorable foreign exchange rates, which reduced net sales by 7%. This was partially offset by price increases and a positive product mix.

Despite the decline in net sales, profitability was supported by an expansion in gross margin by 290 basis points to 52.6%, driven by pricing strategies, lower commodity and energy costs, and manufacturing cost savings. Diluted EPS also saw an increase due to share repurchases.

Procter & Gamble announced an agreement to sell its global pharmaceuticals business to Warner Chilcott plc for $3.1 billion in cash. The transaction is expected to close by the end of the 2009 calendar year, and the results of this business are now presented as discontinued operations.

The company demonstrated strong cash flow generation, with operating cash flow increasing by 32% to $4.6 billion. Free cash flow productivity was a robust 121%, indicating efficient management and conversion of earnings into cash, which is critical for dividends and investments.