01—Abstract
Summary
Summary of the 10-Q filed October 25, 2012. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble's fiscal first quarter ending September 30, 2012, demonstrated resilience despite a 4% decline in net sales to $20.7 billiona, largely due to unfavorable foreign exchange impacts (6%).
The company achieved 2% organic sales growth, indicating underlying business strength through price increases, while unit volume remained flat year-over-year. Net earnings attributable to P&G decreased by 7% to $2.8 billionb, impacted by $292 million in incremental restructuring charges related to a new productivity and cost savings plan. The company is executing a significant productivity and cost savings plan, targeting $10 billion in savings over several years, with approximately $3.5 billion in restructuring costs expected through fiscal year 2015.
This plan aims to streamline operations and fund growth strategies. Despite the top-line sales dip, gross margins expanded slightly due to pricing and manufacturing efficiencies, though SG&A increased due to restructuring and legal charges. Investors should note the company's continued focus on cost management and innovation to navigate a competitive global market.
02—Key points
Key Highlights
- Net sales decreased 4% to $20.7 billion, primarily driven by a 6% negative impact from foreign exchange, while organic sales grew 2% due to price increases.
- Unit volume remained flat year-over-year, with growth in Baby Care and Family Care offset by declines in Beauty, Health Care, and Grooming segments.
- Net earnings attributable to Procter & Gamble decreased 7% to $2.8 billion, impacted by incremental restructuring charges of $292 million and a 60 basis point decline in operating margin.
- The company is implementing a significant productivity and cost savings plan, expecting approximately $3.5 billion in restructuring costs over four years to achieve substantial annual savings.
- Diluted net earnings per share from continuing operations decreased 5% to $0.96, while Core EPS (excluding restructuring and legal charges) increased 5% to $1.06.
- Operating cash flow increased by 28% to $2.8 billion, with free cash flow of $2.0 billion and free cash flow productivity of 69%.
- Significant goodwill and other intangible assets of over $85 billion highlight the value of P&G's brand portfolio.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2013, Procter & Gamble Co kept $0.14.
- Revenue$20.34B100.0%
- Cost of revenue−$10.35B50.9%
- Gross profit$9.99B49.1%
- Operating costs−$6.10B30.0%
- Operating income$3.89B19.1%
- Interest, other & tax−$1.07B5.3%
- Net income$2.81B13.8%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2013filed October 25, 2012Financial Statements
Q1 FY2013 against Q1 FY2012
| Line item | Q1 FY2013Q1 FY2012 | Change |
|---|---|---|
| Revenue | $20.34B$21.53B | −5.5% |
| Cost of Revenue | $10.35B$10.81B | −4.2% |
| Gross Profit | $9.99B$10.72B | −6.8% |
| SG&A Expenses | $6.44B$6.47B | −0.6% |
| Operating Income | $3.89B$4.25B | −8.5% |
| Interest Expense | $172.00M$207.00M | −16.9% |
| Net Income | $2.81B$3.02B | −6.9% |
| EPS (Basic) | $1.00$1.08 | −7.4% |
| EPS (Diluted) | $0.96$1.03 | −6.8% |
| Shares Outstanding (Diluted) | 2.93B2.95B | −0.5% |
05—Questions
Frequently Asked Questions
What is the main reason for the decrease in net sales?
The primary driver for the 4% decrease in net sales was an unfavorable foreign exchange impact of 6%. While the company experienced a 2% organic sales growth, driven by price increases, the weakening of foreign currencies against the U.S. dollar significantly impacted reported sales.
How is Procter & Gamble addressing cost pressures and aiming for future growth?
Procter & Gamble is actively implementing a substantial productivity and cost savings plan announced in February 2012. This plan aims to reduce costs across supply chain, R&D, marketing, and overheads, expecting to incur approximately $3.5 billion in restructuring costs over four years. The goal is to generate significant annual savings to fund the company's growth strategies and maintain competitiveness.
What is 'Core EPS' and why is it important?
Core EPS (Earnings Per Share) is a non-GAAP measure that excludes certain items not considered part of the company's sustainable results, such as incremental restructuring charges and charges related to pending European legal matters. It is provided to offer investors a clearer view of the underlying business trends and allows for a more comparable year-over-year earnings per share growth assessment.
How did the company perform across its different business segments?
Net sales declined across most segments, with Beauty and Grooming seeing the largest percentage drops (7%), largely due to foreign exchange and volume decreases. Fabric Care and Home Care and Baby Care and Family Care showed more resilience with smaller sales decreases (2%) and maintained or grew earnings from continuing operations. The 'Corporate' segment reported net sales and earnings reflecting unallocated corporate activities and restructuring costs.
06—Continue