01—Abstract
Summary
Summary of the 10-Q filed April 20, 2021. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble Co. (PG) reported solid financial results for the third quarter and the first nine months of fiscal year 2021.
For the three months ended March 31, 2021, net sales increased by 5% to $18.1 billiona, and net earnings attributable to P&G rose by 12% to $3.3 billion, translating to a 13% increase in diluted EPS to $1.26. The nine-month period showed similar strength, with net sales up 7% to $57.2 billion and net earnings attributable to P&G increasing 11% to $11.4 billion, leading to a 12% rise in diluted EPS to $4.37. The company demonstrated strong operational execution with improvements in gross margin and effective management of SG&A expenses.
The Fabric & Home Care and Beauty segments were key drivers of growth. Despite some headwinds from foreign exchange and commodity costs, P&G managed these pressures through pricing actions and cost-saving initiatives. The company also highlighted strong operating cash flow generation and a high adjusted free cash flow productivity of 104%b for the nine-month period, underscoring its financial resilience and ability to return capital to shareholders through dividends and share repurchases.
02—Key points
Key Highlights
- Net sales for the third quarter increased by 5% to $18.1 billion, driven by a 4% organic sales growth, supported by pricing and favorable mix.
- Net earnings attributable to P&G for the third quarter rose by 12% to $3.3 billion, with diluted EPS increasing by 13% to $1.26.
- For the nine months ended March 31, 2021, net sales grew 7% to $57.2 billion, and net earnings attributable to P&G increased 11% to $11.4 billion, with diluted EPS up 12% to $4.37.
- The Fabric & Home Care segment showed strong performance with an 8% increase in net sales for the quarter and 11% for the nine-month period.
- Gross margin improved by 130 basis points to 50.7% in the third quarter and 160 basis points to 52.2% for the nine-month period.
- Operating cash flow for the nine months was a robust $14.3 billion, and adjusted free cash flow productivity reached 104%.
- The company continued its share repurchase program, with approximately $23.1 million shares repurchased during the third quarter.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2021, Procter & Gamble Co kept $0.18.
- Revenue$18.11B100.0%
- Cost of revenue−$8.92B49.3%
- Gross profit$9.19B50.7%
- Operating costs−$5.40B29.8%
- Operating income$3.79B20.9%
- Interest, other & tax−$536.0M3.0%
- Net income$3.25B17.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2021filed April 20, 2021Financial Statements
Q3 FY2021 against Q3 FY2020
| Line item | Q3 FY2021Q3 FY2020 | Change |
|---|---|---|
| Revenue | $18.11B$17.21B | +5.2% |
| Cost of Revenue | $8.92B$8.72B | +2.4% |
| Gross Profit | $9.19B$8.50B | +8.1% |
| SG&A Expenses | $5.40B$5.04B | +7.1% |
| Operating Income | $3.79B$3.45B | +9.6% |
| Interest Expense | $106.00M$100.00M | +6.0% |
| Net Income | $3.25B$2.92B | +11.4% |
| EPS (Basic) | $1.30$1.15 | +13.0% |
| EPS (Diluted) | $1.26$1.12 | +12.5% |
| Shares Outstanding (Basic) | 2.46B2.48B | −0.7% |
| Shares Outstanding (Diluted) | 2.59B2.61B | −0.9% |
05—Questions
Frequently Asked Questions
What were the main drivers of sales growth in the third quarter?
Sales growth in the third quarter was driven by a combination of increased pricing (2% positive impact), favorable product mix (2% positive impact), and foreign exchange (1% positive impact). Organic sales, excluding currency and M&A impacts, increased by 4%.
How did the COVID-19 pandemic impact P&G's results?
The pandemic had mixed impacts. It led to increased demand and consumption for fabric, home cleaning, and personal health products, boosting sales in these categories. However, it also caused decreased sales in certain regions due to economic slowdowns and reduced consumer movement, particularly impacting beauty and grooming products. The company highlighted that essential products saw increased demand, while some discretionary categories faced challenges.
What is the company's outlook regarding goodwill and intangible assets, particularly the Shave Care segment?
The company noted that while most goodwill reporting units have significant fair value cushions, the Shave Care reporting unit and the related Gillette intangible asset are more susceptible to future impairment risk. Management is closely monitoring assumptions like growth rates and discount rates, especially considering the ongoing uncertainty from the COVID-19 pandemic, which could impact future valuations.
What is the significance of 'Core Net Earnings' and 'Adjusted Free Cash Flow'?
Core Net Earnings and Adjusted Free Cash Flow are non-GAAP measures used by management to provide a clearer view of ongoing business performance by excluding items such as incremental restructuring charges and early debt extinguishment costs. 'Core EPS' excludes these items to better reflect underlying profitability, while 'Adjusted Free Cash Flow' and 'Adjusted Free Cash Flow Productivity' (104% for the nine-month period) measure the company's ability to generate cash after capital expenditures, demonstrating strong financial health and capital allocation capabilities.
06—Continue