Summary
Procter & Gamble's (PG) third-quarter fiscal year 2016 results show a mixed performance driven by ongoing portfolio transformation and foreign exchange headwinds. While net sales decreased by 7% year-over-year to $15.8 billion, this was largely attributed to a 5% unfavorable foreign exchange impact and a 3% reduction from minor brand divestitures and the Venezuela deconsolidation, with organic sales showing a modest 1% increase. The company reported a net loss from discontinued operations of $213 million in the prior year, which was significantly improved by a $446 million net gain in the current period, largely due to a $422 million after-tax gain on the sale of the Batteries business. This contributed to a substantial 28% increase in net earnings attributable to Procter & Gamble, reaching $2.8 billion. However, net earnings from continuing operations saw a slight decrease of 3% to $2.3 billion, impacted by lower net sales and an increased effective tax rate. Management highlighted progress in productivity savings and cost management, with gross margin improving by 250 basis points due to manufacturing cost savings and lower commodity costs. Despite topline challenges, the company continues to focus on its portfolio optimization strategy and brand innovation, as evidenced by ongoing divestitures and focus on core strengths.
Financial Highlights
53 data points| Revenue | $15.76B |
| Cost of Revenue | $7.92B |
| Gross Profit | $7.84B |
| SG&A Expenses | $4.52B |
| Operating Income | $3.32B |
| Interest Expense | $146.00M |
| Net Income | $2.75B |
| EPS (Basic) | $1.00 |
| EPS (Diluted) | $0.97 |
| Shares Outstanding (Basic) | 2.69B |
| Shares Outstanding (Diluted) | 2.83B |
Key Highlights
- 1Net sales for the quarter decreased by 7% to $15.8 billion, primarily due to a 5% unfavorable foreign exchange impact and 3% from divestitures/deconsolidation. Organic sales saw a modest 1% increase.
- 2Net earnings attributable to Procter & Gamble increased significantly by 28% to $2.8 billion, largely driven by an improvement in results from discontinued operations, including a $422 million gain from the Batteries business sale.
- 3Net earnings from continuing operations decreased slightly by 3% to $2.3 billion, impacted by lower net sales and a higher effective tax rate.
- 4Gross margin improved by 250 basis points to 49.8%, benefiting from manufacturing cost savings and lower commodity costs.
- 5The company reported a substantial gain from discontinued operations, improving from a net loss of $213 million in the prior year to a net gain of $446 million in the current period.
- 6Diluted earnings per share (EPS) increased by 29% to $0.97, reflecting the strong performance in discontinued operations.
- 7The Beauty Brands divestiture to Coty is progressing, with an expected closing in the second half of calendar year 2016.