10-QPeriod: Q2 FY2021

PROCTER & GAMBLE Co Quarterly Report for Q2 Ended Dec 31, 2020

Filed January 20, 2021For Securities:PG

Summary

Procter & Gamble (PG) reported strong results for the six months ended December 31, 2020, with net sales increasing by 8% to $39.1 billion 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 $3.10, reflecting improved profitability. The company also demonstrated robust cash flow generation, with operating cash flow of $10.2 billion 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.

Financial Highlights

53 data points
Beta

Revenue

$19.75B

53.1% Gross Margin

Net Income

$3.89B

19.7% Net Margin

EPS (Diluted)

$1.47

Total Assets

$120.11B

Cash & Equivalents

$11.94B

Free Cash Flow

$4.86B

Financial Statements
Beta
Revenue$19.75B
Cost of Revenue$9.25B
Gross Profit$10.49B
SG&A Expenses$5.11B
Operating Income$5.38B
Interest Expense$143.00M
Net Income$3.89B
EPS (Basic)$1.53
EPS (Diluted)$1.47
Shares Outstanding (Basic)2.48B
Shares Outstanding (Diluted)2.62B

Key Highlights

  • 1Net 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.
  • 2Organic sales grew 9%, indicating robust underlying business growth excluding currency fluctuations and divestitures.
  • 3Net earnings rose 11% to $8.2 billion, with diluted EPS increasing 12% to $3.10.
  • 4Fabric & Home Care and Health Care segments showed particularly strong performance with double-digit sales increases.
  • 5Operating cash flow was $10.2 billion, and adjusted free cash flow was $9.0 billion, with high productivity of 104%.
  • 6The company returned $9.1 billion to shareholders through dividends and share repurchases during the period.
  • 7The COVID-19 pandemic positively impacted demand for certain product categories, contributing to sales growth, although some regions and product lines experienced declines.

Frequently Asked Questions

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.

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.

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.

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.