Summary
Procter & Gamble (PG) reported solid results for the fiscal second quarter and first half of fiscal year 2019, ending December 31, 2018. The company demonstrated resilience with net sales remaining flat year-over-year for both periods, driven by a 2% increase in unit volume and a 1% positive impact from mix, which was partially offset by a 4% negative impact from foreign exchange. Net earnings saw a significant increase, rising 26% for the quarter and 18% for the half-year, largely attributable to favorable impacts from the U.S. Tax Act and a gain from the dissolution of the PGT Healthcare partnership. Diluted EPS also showed strong growth. The company's strategic focus on productivity and cost savings is evident, with gross margins improving due to manufacturing cost savings and pricing actions, though offset by higher commodity costs and unfavorable mix in some segments. The acquisition of Merck KGaA's OTC healthcare business was completed in November 2018, adding to the Health Care segment, though its immediate impact on overall financials was noted as not material.
Financial Highlights
53 data points| Revenue | $17.44B |
| Cost of Revenue | $8.92B |
| Gross Profit | $8.52B |
| SG&A Expenses | $4.62B |
| Operating Income | $3.90B |
| Interest Expense | $138.00M |
| Net Income | $3.19B |
| EPS (Basic) | $1.25 |
| EPS (Diluted) | $1.22 |
| Shares Outstanding (Basic) | 2.50B |
| Shares Outstanding (Diluted) | 2.62B |
Key Highlights
- 1Net sales remained flat at $17.4 billion for the three months ended December 31, 2018, and $34.1 billion for the six months ended December 31, 2018, against the prior year periods.
- 2Net earnings increased significantly by 26% to $3.2 billion for the quarter and 18% to $6.4 billion for the six months, largely driven by tax benefits and a gain on partnership dissolution.
- 3Diluted Earnings Per Share (EPS) increased by 31% to $1.22 for the quarter and 22% to $2.44 for the six months, benefiting from higher net earnings and a reduction in shares outstanding.
- 4Gross margin decreased slightly for the quarter (48.9% vs. 49.9%) and six months (49.0% vs. 50.1%), impacted by higher commodity costs and unfavorable mix, despite manufacturing cost savings and pricing benefits.
- 5The company completed the acquisition of Merck KGaA's OTC healthcare business for $3.7 billion in November 2018, which was allocated to the Health Care segment.
- 6Organic sales grew by 4% for both the three and six-month periods, indicating underlying business strength despite foreign exchange headwinds.
- 7Operating cash flow was strong at $7.6 billion for the six-month period, with adjusted free cash flow of $6.0 billion and 99% adjusted free cash flow productivity.