10-QPeriod: Q1 FY2013

PROCTER & GAMBLE Co Quarterly Report for Q1 Ended Sep 30, 2012

Filed October 25, 2012For Securities:PG

Summary

Procter & Gamble's fiscal first quarter ending September 30, 2012, demonstrated resilience despite a 4% decline in net sales to $20.7 billion, 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 billion, 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.

Financial Highlights

52 data points
Beta

Revenue

$20.34B

49.1% Gross Margin

Net Income

$2.81B

13.8% Net Margin

EPS (Diluted)

$0.96

Total Assets

$135.89B

Cash & Equivalents

$5.30B

Free Cash Flow

$1.97B

Financial Statements
Beta
Revenue$20.34B
Cost of Revenue$10.35B
Gross Profit$9.99B
SG&A Expenses$6.44B
Operating Income$3.89B
Interest Expense$172.00M
Net Income$2.81B
EPS (Basic)$1.00
EPS (Diluted)$0.96
Shares Outstanding (Diluted)2.93B

Key Highlights

  • 1Net 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.
  • 2Unit volume remained flat year-over-year, with growth in Baby Care and Family Care offset by declines in Beauty, Health Care, and Grooming segments.
  • 3Net 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.
  • 4The 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.
  • 5Diluted 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.
  • 6Operating cash flow increased by 28% to $2.8 billion, with free cash flow of $2.0 billion and free cash flow productivity of 69%.
  • 7Significant goodwill and other intangible assets of over $85 billion highlight the value of P&G's brand portfolio.

Frequently Asked Questions

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.

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.

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.

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.