01—Abstract
Summary
Summary of the 10-Q filed April 27, 2012. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble's (PG) Q3 FY12 filing shows a mixed financial performance.
While net sales saw a modest increase driven by price hikes and growth in developing markets, net earnings experienced a significant decline. This decrease was primarily attributed to substantial goodwill and intangible asset impairment charges totaling $1.6 billiona, largely affecting the Appliances and Salon Professional businesses, as well as incremental restructuring costs associated with a new productivity and cost savings plan. Despite these headwinds, the company continues to generate strong operating cash flow and maintain a healthy free cash flow productivity of 92%.
The company is actively managing its portfolio, evidenced by the agreement to divest its global snacks business. Investors should note the impact of rising commodity costs on gross margins and the company's ongoing efforts to offset these pressures through pricing and cost-saving initiatives.
02—Key points
Key Highlights
- Net sales increased by 2% for the quarter and 5% year-to-date, driven by price increases and growth in developing regions, though unit volume growth was modest.
- Net earnings attributable to Procter & Gamble decreased significantly by 16% for the quarter and 23% year-to-date.
- The company recorded substantial goodwill and intangible asset impairment charges of $1.6 billion, primarily impacting the Appliances and Salon Professional businesses.
- A new productivity and cost savings plan was announced, expecting to incur approximately $3.5 billion in restructuring costs over four years.
- Operating cash flow remained robust at $9.3 billion for the nine months ended March 31, 2012, with a free cash flow productivity of 92%.
- The agreement to divest the global snacks business to The Kellogg Company for $2.7 billion was announced, with the business reported as discontinued operations.
- Gross margin contracted by 150 basis points for the quarter and 190 basis points year-to-date, primarily due to higher commodity and energy costs.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2012, Procter & Gamble Co kept $0.12.
- Revenue$20.19B100.0%
- Cost of revenue−$10.24B50.7%
- Gross profit$9.96B49.3%
- Operating costs−$6.66B33.0%
- Operating income$3.30B16.3%
- Interest, other & tax−$888.0M4.4%
- Net income$2.41B11.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2012filed April 27, 2012Financial Statements
Q3 FY2012 against Q3 FY2011
| Line item | Q3 FY2012Q3 FY2011 | Change |
|---|---|---|
| Revenue | $20.19B$19.89B | +1.5% |
| Cost of Revenue | $10.24B$9.79B | +4.6% |
| Gross Profit | $9.96B$10.10B | −1.5% |
| SG&A Expenses | $6.64B$6.40B | +3.7% |
| Operating Income | $3.30B$3.71B | −11.0% |
| Interest Expense | $179.00M$202.00M | −11.4% |
| Net Income | $2.41B$2.87B | −16.1% |
| EPS (Basic) | $0.85$1.01 | −15.8% |
| EPS (Diluted) | $0.82$0.96 | −14.6% |
| Shares Outstanding (Diluted) | 2.94B3.00B | −2.1% |
05—Questions
Frequently Asked Questions
What is the primary reason for the significant decrease in net earnings?
The significant decrease in net earnings is primarily due to substantial goodwill and intangible asset impairment charges of $1.6 billion, largely related to the Appliances and Salon Professional businesses. Incremental restructuring charges from a new productivity and cost savings plan also contributed to the decline.
How is the company managing rising commodity costs?
Procter & Gamble is offsetting rising commodity and energy costs through price increases across its business segments and regions, as well as implementing manufacturing cost savings and productivity improvements. However, these efforts have not fully mitigated the impact on gross margins, which have contracted.
What is the impact of the divestiture of the snacks business?
The snacks business is now reported as discontinued operations, and its sales and earnings are excluded from the company's continuing operations. This strategic move aims to streamline the company's portfolio. The balance sheet positions of the snacks business are presented as assets held for sale.
What is the outlook for the company's performance given the current economic conditions?
The company faces ongoing challenges from a dynamic global economic environment, competitive pressures, and cost fluctuations. While net sales show some growth, the company is focused on managing these factors through pricing, cost savings initiatives, innovation, and portfolio management, as evidenced by the announced restructuring plan and the snacks business divestiture.
06—Continue