01—Abstract
Summary
Summary of the 10-Q filed January 20, 2021. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble (PG) reported strong results for the six months ended December 31, 2020, with net sales increasing by 8% to $39.1 billiona and net earnings rising by 11% to $8.2 billion.
This growth was driven by broad-based strength across its segments, particularly Fabric & Home Care and Health Care, which saw double-digit increases. The company highlighted a 9% increase in organic sales, underscoring its ability to grow underlying business performance. Diluted EPS saw a substantial 12% increase to $3.10b, reflecting improved profitability.
The company also demonstrated robust cash flow generation, with operating cash flow of $10.2 billionc and adjusted free cash flow of $9.0 billion, resulting in an impressive adjusted free cash flow productivity of 104%. This strong financial performance enabled significant returns to shareholders, with $5.0 billion used for treasury stock purchases and $4.1 billion distributed as dividends during the period. The company's focus on productivity and cost savings, alongside favorable market demand for its essential products amplified by the COVID-19 pandemic, contributed to these positive results.
02—Key points
Key Highlights
- Net sales increased 8% year-over-year to $39.1 billion for the six months ended December 31, 2020, driven by strong performance across key segments.
- Organic sales grew 9%, indicating robust underlying business growth excluding currency fluctuations and divestitures.
- Net earnings rose 11% to $8.2 billion, with diluted EPS increasing 12% to $3.10.
- Fabric & Home Care and Health Care segments showed particularly strong performance with double-digit sales increases.
- Operating cash flow was $10.2 billion, and adjusted free cash flow was $9.0 billion, with high productivity of 104%.
- The company returned $9.1 billion to shareholders through dividends and share repurchases during the period.
- The COVID-19 pandemic positively impacted demand for certain product categories, contributing to sales growth, although some regions and product lines experienced declines.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2021, Procter & Gamble Co kept $0.20.
- Revenue$19.75B100.0%
- Cost of revenue−$9.25B46.9%
- Gross profit$10.49B53.1%
- Operating costs−$5.11B25.9%
- Operating income$5.38B27.2%
- Interest, other & tax−$1.49B7.6%
- Net income$3.89B19.7%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2021filed January 20, 2021Financial Statements
Q2 FY2021 against Q2 FY2020
| Line item | Q2 FY2021Q2 FY2020 | Change |
|---|---|---|
| Revenue | $19.75B$18.24B | +8.3% |
| Cost of Revenue | $9.25B$8.87B | +4.3% |
| Gross Profit | $10.49B$9.37B | +12.0% |
| SG&A Expenses | $5.11B$4.89B | +4.6% |
| Operating Income | $5.38B$4.48B | +20.0% |
| Interest Expense | $143.00M$100.00M | +43.0% |
| Net Income | $3.89B$3.72B | +4.6% |
| EPS (Basic) | $1.53$1.47 | +4.1% |
| EPS (Diluted) | $1.47$1.41 | +4.3% |
| Shares Outstanding (Basic) | 2.48B2.49B | −0.5% |
| Shares Outstanding (Diluted) | 2.62B2.63B | −0.6% |
05—Questions
Frequently Asked Questions
What were the main drivers of the sales growth in the reported period?
Sales growth was driven by a combination of factors including increased unit volume (6% increase year-over-year for the six-month period), higher pricing (1% positive impact), and favorable mix (2% positive impact). The COVID-19 pandemic also contributed positively by increasing demand for certain essential product categories like fabric, home cleaning, and personal hygiene products, particularly in North America and Europe.
How did the company manage costs and profitability?
Procter & Gamble improved its gross margin by 170 basis points for the six-month period, benefiting from manufacturing cost savings, higher pricing, and lower commodity costs. Selling, general, and administrative (SG&A) expenses as a percentage of net sales decreased by 120 basis points, attributed to reductions in marketing and overhead costs as a percentage of sales, driven by productivity savings and the positive scale impact of increased net sales.
What is the company's approach to capital allocation and shareholder returns?
The company actively returns capital to shareholders. For the six months ended December 31, 2020, it spent $5.0 billion on treasury stock purchases and $4.1 billion on dividends, totaling $9.1 billion in shareholder returns. This is supported by strong operating cash flow generation.
Are there any significant risks or uncertainties highlighted in the filing?
The company operates in a dynamic global environment and faces risks including foreign currency fluctuations, economic volatility, supply chain disruptions, commodity price changes, and evolving government policies. The COVID-19 pandemic continues to present uncertainties regarding demand recovery in certain markets and potential supply chain disruptions. Additionally, the company noted that the Gillette indefinite-lived intangible asset is most susceptible to future impairment risk due to ongoing uncertainties related to the pandemic's impact.
06—Continue