Summary
Procter & Gamble reported strong top-line growth in the first quarter of fiscal year 2020, with net sales increasing by 7% to $17.8 billion 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 billion, 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.
Financial Highlights
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Financial Statements
Beta
| Revenue | $17.80B |
| Cost of Revenue | $8.72B |
| Gross Profit | $9.07B |
| SG&A Expenses | $4.79B |
| Operating Income | $4.29B |
| Interest Expense | $108.00M |
| Net Income | $3.59B |
| EPS (Basic) | $1.41 |
| EPS (Diluted) | $1.36 |
| Shares Outstanding (Basic) | 2.50B |
| Shares Outstanding (Diluted) | 2.65B |
Key Highlights
- 1Net 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.
- 2Net earnings attributable to P&G increased by 12% to $3.6 billion, with diluted EPS rising 11% to $1.36.
- 3Operating 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.
- 4The 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%.
- 5The Beauty segment also demonstrated strong performance, with net sales up 8% and net earnings up 15%. Organic sales in this segment increased by 10%.
- 6The company generated $4.2 billion in cash from operating activities and reported adjusted free cash flow productivity of 91%.
- 7P&G repurchased approximately $3.0 billion of treasury stock during the quarter, indicating a commitment to returning capital to shareholders.
Frequently Asked Questions
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.
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.
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.
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.