10-QPeriod: Q3 FY2020

PROCTER & GAMBLE Co Quarterly Report for Q3 Ended Mar 31, 2020

Filed April 20, 2020For Securities:PG

Summary

Procter & Gamble (PG) reported a solid third quarter for fiscal year 2020, with net sales increasing by 5% year-over-year to $17.2 billion. This growth was primarily driven by a 6% increase in unit volume, indicating strong consumer demand for its essential products. Diluted earnings per share also saw a healthy increase of 8% to $1.12. The company's performance was resilient despite the emerging challenges of the COVID-19 pandemic. While certain segments like Beauty and Grooming experienced modest declines, essential categories such as Health Care, Fabric & Home Care, and Baby, Feminine & Family Care showed robust growth, partly boosted by increased consumer pantry stocking and a focus on hygiene and cleaning products. The company's diversified portfolio and strong market positions in key segments have allowed it to navigate the evolving economic landscape effectively.

Financial Highlights

54 data points
Beta

Revenue

$17.21B

49.4% Gross Margin

Net Income

$2.92B

16.9% Net Margin

EPS (Diluted)

$1.12

Total Assets

$118.56B

Cash & Equivalents

$15.39B

Free Cash Flow

$3.33B

Financial Statements
Beta
Revenue$17.21B
Cost of Revenue$8.72B
Gross Profit$8.50B
SG&A Expenses$5.04B
Operating Income$3.45B
Interest Expense$100.00M
Net Income$2.92B
EPS (Basic)$1.15
EPS (Diluted)$1.12
Shares Outstanding (Basic)2.48B
Shares Outstanding (Diluted)2.61B

Key Highlights

  • 1Net sales grew 5% to $17.2 billion for the third quarter, driven by a 6% increase in unit volume.
  • 2Diluted EPS rose 8% to $1.12, demonstrating improved profitability.
  • 3The Health Care, Fabric & Home Care, and Baby, Feminine & Family Care segments showed strong performance, with net sales increasing by 7%, 8%, and 6% respectively, driven by increased demand for essential products.
  • 4The company generated $12.6 billion in operating cash flow for the nine-month period, indicating strong cash generation capabilities.
  • 5Despite initial concerns, the company reported that the COVID-19 pandemic had not yet had a material net impact on its consolidated operating results for the quarter, with increased demand in some categories offsetting declines in others.
  • 6The company maintained a strong balance sheet with $15.4 billion in cash and cash equivalents at the end of the period.

Frequently Asked Questions

Procter & Gamble stated that the COVID-19 pandemic had not yet had a material net impact on its consolidated operating results for the quarter ended March 31, 2020. While some categories, particularly health, hygiene, and cleaning products, saw increased demand and consumption, others, like certain beauty and grooming products, experienced declines. The company noted increased volume in North America and Europe driven partly by pantry loading.

The company's essential product categories, such as Health Care, Fabric & Home Care, and Baby, Feminine & Family Care, demonstrated strong growth and resilience, driven by sustained consumer demand. While segments like Beauty and Grooming experienced some pressures, the overall diversified portfolio provides a buffer. Management anticipates continued strong demand for products delivering essential health, hygiene, and cleaning benefits in the long term.

For the nine months ended March 31, 2020, Procter & Gamble generated $12.6 billion in operating cash flow and $10.4 billion in adjusted free cash flow, with 101% adjusted free cash flow productivity. The company returned significant capital to shareholders through $5.8 billion in dividends and $7.4 billion in treasury stock purchases during the nine-month period. The company also noted its strong debt ratings provide access to capital markets.

The company highlighted several risk factors, including global economic volatility, foreign currency fluctuations, supply chain disruptions, cost pressures (commodities, labor, transportation), competitive landscape, and the ongoing impacts of the COVID-19 pandemic. Specific concerns were noted regarding potential future impairment charges for the Shave Care reporting unit and the Gillette indefinite-lived intangible asset due to market conditions and the pandemic's duration and severity.