10-QPeriod: Q2 FY2013

PROCTER & GAMBLE Co Quarterly Report for Q2 Ended Dec 31, 2012

Filed January 25, 2013For Securities:PG

Summary

Procter & Gamble's (PG) Q2 2013 10-Q filing reveals a significant rebound in net earnings, largely driven by a lack of prior-year impairment charges and gains from divestitures and joint venture buyouts. For the three months ended December 31, 2012, Net Earnings Attributable to Procter & Gamble surged by 140% to $4.06 billion, or $1.39 per diluted share, compared to $1.69 billion, or $0.57 per diluted share, in the prior year. The six-month period saw a similar trend, with net earnings attributable to PG increasing by 46% to $6.87 billion. Despite a slight dip in reported net sales for the six-month period (-1% to $42.9 billion), the company achieved a 2% organic sales growth, indicating underlying business strength driven by price increases and stable unit volumes in key segments like Baby Care and Family Care, and Fabric Care and Home Care. The company is actively managing its portfolio through a substantial restructuring program, aiming for over $2 billion in annual savings, which involves significant cost reductions and personnel optimization. This strategic focus on cost savings and portfolio management, combined with operational execution, positions PG to navigate a competitive market.

Financial Highlights

52 data points
Beta

Revenue

$21.74B

49.9% Gross Margin

Net Income

$4.06B

18.7% Net Margin

EPS (Diluted)

$1.39

Total Assets

$139.90B

Cash & Equivalents

$6.64B

Free Cash Flow

$3.13B

Financial Statements
Beta
Revenue$21.74B
Cost of Revenue$10.88B
Gross Profit$10.86B
SG&A Expenses$6.80B
Operating Income$4.43B
Interest Expense$169.00M
Net Income$4.06B
EPS (Basic)$1.46
EPS (Diluted)$1.39
Shares Outstanding (Diluted)2.92B

Key Highlights

  • 1Net earnings attributable to Procter & Gamble increased significantly by 140% for the quarter and 46% for the six-month period, primarily due to the absence of prior-year impairment charges and gains from business transactions.
  • 2Organic sales grew by 2% for the six-month period, indicating underlying sales strength driven by price increases and stable unit volumes across core segments.
  • 3The company is executing a significant restructuring program, aiming for over $2 billion in annual pre-tax savings, which involves streamlining operations and workforce optimization.
  • 4Unit volume increased by 1% for the six-month period, with positive growth in Baby Care and Family Care, and Fabric Care and Home Care segments.
  • 5Diluted Net Earnings Per Share (EPS) from continuing operations saw a substantial increase of 148% for the quarter and 50% for the six-month period.
  • 6The company repurchased approximately 20.2 million shares of common stock during the quarter, demonstrating a commitment to returning capital to shareholders.
  • 7Despite a slight decrease in reported net sales, the company's focus on pricing and cost efficiencies is driving improved profitability.

Frequently Asked Questions

The substantial increase in net earnings was primarily driven by the absence of significant goodwill and intangible asset impairment charges recorded in the prior year period ($1.5 billion pre-tax). Additionally, the company recognized a $631 million holding gain from purchasing the remaining interest in its Baby Care and Feminine Care joint venture in Iberia and a $247 million gain from the divestiture of its Italy bleach business in the current period.

Procter & Gamble is executing an incremental restructuring program aimed at accelerating cost reductions and improving productivity. This program is expected to incur over $3.5 billion in pre-tax costs over five years and deliver in excess of $2 billion in annual pre-tax savings. Key initiatives include streamlining management decision-making, manufacturing, and work processes, and a planned reduction of approximately 5,700 non-manufacturing overhead personnel by the end of fiscal year 2013.

Reported net sales saw a slight decrease of 1% for the six-month period to $42.9 billion. However, organic sales, which exclude the impact of foreign exchange, acquisitions, and divestitures, grew by 2% for the same period. This indicates underlying sales momentum driven by price increases and stable unit volumes in key segments, despite unfavorable foreign exchange impacts.

The Baby Care and Family Care segment and the Fabric Care and Home Care segment showed the strongest sales growth, increasing 4% and 3% respectively for the quarter. The Beauty segment's net earnings increased by 9% for the quarter, while Fabric Care and Home Care saw a 21% increase in net earnings for the same period. The Grooming and Health Care segments experienced slight sales declines but managed to maintain or slightly improve earnings margins through cost management.