01—Abstract
Summary
Summary of the 10-Q filed October 22, 2019. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble reported strong top-line growth in the first quarter of fiscal year 2020, with net sales increasing by 7% to $17.8 billiona compared to the prior year.
This growth was primarily driven by a robust 5% increase in unit volume, with the Health Care and Beauty segments showing particularly strong performance. Net earnings also saw a healthy increase of 13% to $3.6 billionb, benefiting from higher sales, improved operating margins, and a reduced effective tax rate. The company also reported solid operating cash flow generation and healthy adjusted free cash flow productivity, indicating strong operational efficiency.
02—Key points
Key Highlights
- Net sales increased by 7% to $17.8 billion, driven by a 5% increase in unit volume and a 1% favorable pricing impact, along with a 2% positive mix impact.
- Net earnings attributable to P&G increased by 12% to $3.6 billion, with diluted EPS rising 11% to $1.36.
- Operating income grew by 21% to $4.3 billion, reflecting improved gross margins (up 180 basis points) and a 100 basis point reduction in SG&A as a percentage of net sales.
- The Health Care segment was a key driver of growth, with net sales up 20% and net earnings up 21%. Organic sales in this segment increased by 9%.
- The Beauty segment also demonstrated strong performance, with net sales up 8% and net earnings up 15%. Organic sales in this segment increased by 10%.
- The company generated $4.2 billion in cash from operating activities and reported adjusted free cash flow productivity of 91%.
- P&G repurchased approximately $3.0 billion of treasury stock during the quarter, indicating a commitment to returning capital to shareholders.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2020, Procter & Gamble Co kept $0.20.
- Revenue$17.80B100.0%
- Cost of revenue−$8.72B49.0%
- Gross profit$9.07B51.0%
- Operating costs−$4.79B26.9%
- Operating income$4.29B24.1%
- Interest, other & tax−$697.0M3.9%
- Net income$3.59B20.2%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2020filed October 22, 2019Financial Statements
Q1 FY2020 against Q1 FY2019
| Line item | Q1 FY2020Q1 FY2019 | Change |
|---|---|---|
| Revenue | $17.80B$16.69B | +6.6% |
| Cost of Revenue | $8.72B$8.48B | +2.8% |
| Gross Profit | $9.07B$8.21B | +10.6% |
| SG&A Expenses | $4.79B$4.65B | +2.9% |
| Operating Income | $4.29B$3.55B | +20.7% |
| Interest Expense | $108.00M$129.00M | −16.3% |
| Net Income | $3.59B$3.20B | +12.3% |
| EPS (Basic) | $1.41$1.26 | +11.9% |
| EPS (Diluted) | $1.36$1.22 | +11.5% |
| Shares Outstanding (Basic) | 2.50B2.50B | +0.3% |
| Shares Outstanding (Diluted) | 2.65B2.61B | +1.4% |
05—Questions
Frequently Asked Questions
What was the primary driver of the net sales increase in the reported quarter?
The primary driver of the net sales increase was a robust 5% growth in unit volume, supplemented by a 1% favorable pricing impact and a 2% positive mix effect. Strong performance in key segments like Health Care and Beauty contributed significantly to this top-line growth.
How did the company's profitability fare in this quarter?
Profitability improved significantly. Gross margin increased by 180 basis points to 51.0%, driven by manufacturing cost savings, positive pricing impacts, and lower commodity costs. Selling, General, and Administrative (SG&A) expenses decreased by 100 basis points as a percentage of net sales, leading to a 21% increase in operating income and a 13% increase in net earnings.
What is the outlook for capital returns to shareholders?
The company continues its commitment to returning capital to shareholders. In the reported quarter, P&G used $3.0 billion for treasury stock purchases and $1.9 billion for dividends. The company also expects to reduce outstanding shares through direct share repurchases valued at $6 to $8 billion in fiscal year 2020.
Were there any significant impacts from acquisitions or divestitures in this report?
The acquisition of the Merck OTC consumer healthcare business, completed in November 2018, continues to contribute to growth, particularly in the Health Care segment. While the report notes the ongoing analysis for final purchase price allocation, the results of Merck OTC are integrated and contributing to segment performance.
06—Continue