01—Abstract
Summary
Summary of the 10-Q filed October 29, 2009. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble's (PG) fiscal first quarter ended September 30, 2009, saw a 6% decline in net sales to $19.8 billiona, 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 billionb, 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 $1.06c, 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.
02—Key points
Key Highlights
- Net sales decreased by 6% to $19.8 billion, negatively impacted by foreign exchange, but organic sales grew 2%.
- Diluted net earnings per share (EPS) increased by 3% to $1.06, exceeding net earnings growth due to share repurchases.
- Operating cash flow significantly increased by 32% to $4.6 billion, showcasing strong cash generation capabilities.
- Free cash flow productivity was strong at 121%, indicating efficient conversion of earnings into cash.
- The company is divesting its global pharmaceuticals business for $3.1 billion, with results now categorized as discontinued operations.
- Gross margin improved by 290 basis points to 52.6%, driven by pricing actions, lower commodity costs, and cost savings.
- The 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.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2010, Procter & Gamble Co kept $0.17.
- Revenue$19.81B100.0%
- Cost of revenue−$9.40B47.4%
- Gross profit$10.41B52.6%
- Operating costs−$5.96B30.1%
- Operating income$4.45B22.5%
- Interest, other & tax−$1.14B5.8%
- Net income$3.31B16.7%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2010filed October 29, 2009Financial Statements
Q1 FY2010 against Q1 FY2009
| Line item | Q1 FY2010Q1 FY2009 | Change |
|---|---|---|
| Revenue | $19.81B$20.98B | −5.6% |
| Cost of Revenue | $9.40B$10.56B | −11.0% |
| Gross Profit | $10.41B$10.43B | −0.2% |
| SG&A Expenses | $5.96B$6.04B | −1.3% |
| Operating Income | $4.45B$4.39B | +1.4% |
| Interest Expense | $287.00M$339.00M | −15.3% |
| Net Income | $3.31B$3.35B | −1.2% |
| EPS (Basic) | $1.11$1.10 | +0.9% |
| EPS (Diluted) | $1.06$1.03 | +2.9% |
| Shares Outstanding (Diluted) | 3.11B3.24B | −4.0% |
05—Questions
Frequently Asked Questions
What was the primary driver for the decrease in net sales?
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.
How did the company's profitability hold up despite declining sales?
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.
What significant divestiture is the company undertaking?
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.
What is the outlook for cash flow generation?
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.
06—Continue