01—Abstract
Summary
Summary of the 10-Q filed October 19, 2022. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble (PG) reported its first-quarter fiscal year 2023 results, showing a modest 1% increase in net sales to $20.6 billiona, driven by a significant 9% increase in pricing and a 1% favorable mix, which more than offset a 3% decrease in unit volume and a 6% headwind from foreign exchange.
Despite the top-line growth, net earnings attributable to P&G decreased by 4% to $3.9 billionb, resulting in a 2% decline in diluted EPS to $1.57. This earnings decline was primarily attributed to a lower operating margin, impacted by a substantial 510 basis-point increase in commodity and input material costs, alongside other cost pressures.
While pricing actions and productivity savings provided some offset, they were not enough to fully counter the rising costs. The company continues to navigate a challenging economic environment marked by inflation, foreign exchange volatility, and supply chain disruptions, with specific impacts noted from the Russia-Ukraine war.
02—Key points
Key Highlights
- Net sales increased 1% to $20.6 billion, driven by a 9% price increase and 1% favorable mix, despite a 3% volume decline and 6% foreign exchange headwind.
- Diluted EPS decreased 2% to $1.57, impacted by a decline in net earnings.
- Gross margin declined 160 basis points to 47.4% primarily due to a 510 basis-point increase in commodity and input material costs.
- Organic sales grew 7%, indicating underlying demand strength that was masked by foreign exchange and volume decreases.
- The Health Care segment showed robust growth with net sales up 3% and net earnings up 17%, driven by strong performance in Personal Health Care.
- The company continued its share repurchase program, buying back $4.0 billion in treasury stock during the quarter.
- Significant risks related to foreign currency fluctuations, inflation, commodity costs, and geopolitical events like the Russia-Ukraine war continue to impact the business.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2023, Procter & Gamble Co kept $0.19.
- Revenue$20.61B100.0%
- Cost of revenue−$10.85B52.6%
- Gross profit$9.77B47.4%
- Operating costs−$4.83B23.4%
- Operating income$4.94B24.0%
- Interest, other & tax−$1.00B4.9%
- Net income$3.94B19.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2023filed October 19, 2022Financial Statements
Q1 FY2023 against Q1 FY2022
| Line item | Q1 FY2023Q1 FY2022 | Change |
|---|---|---|
| Revenue | $20.61B$20.34B | +1.3% |
| Cost of Revenue | $10.85B$10.37B | +4.6% |
| Gross Profit | $9.77B$9.97B | −2.1% |
| SG&A Expenses | $4.83B$4.95B | −2.5% |
| Operating Income | $4.94B$5.02B | −1.7% |
| Interest Expense | $123.00M$109.00M | +12.8% |
| Net Income | $3.94B$4.11B | −4.2% |
| EPS (Basic) | $1.62$1.66 | −2.4% |
| EPS (Diluted) | $1.57$1.61 | −2.5% |
| Shares Outstanding (Basic) | 2.39B2.43B | −1.8% |
| Shares Outstanding (Diluted) | 2.50B2.56B | −2.2% |
05—Questions
Frequently Asked Questions
What was the primary driver of net sales growth in the quarter?
Net sales growth was primarily driven by higher pricing, which increased by 9%, and a favorable product and geographic mix, which contributed 1%. These increases more than offset a 3% decrease in unit volume and a 6% headwind from unfavorable foreign exchange.
Why did net earnings decrease despite higher net sales?
Net earnings decreased by 4% due to a reduction in operating margin. This was largely caused by significant increases in commodity and input material costs (up 510 basis points), transportation costs, and unfavorable foreign exchange impacts, which were not fully offset by the 9% price increases and manufacturing productivity savings.
How is the company managing the impact of inflation and rising costs?
Procter & Gamble is employing several strategies, including raising prices, implementing manufacturing productivity savings, and optimizing its supply chain. However, the company noted that these measures were not entirely sufficient to counteract the full impact of commodity and input material cost increases during this quarter.
What is the outlook for the Grooming segment, given its sales decline?
The Grooming segment experienced a 4% decrease in net sales, mainly due to unfavorable foreign exchange and a less favorable mix, partially offset by higher pricing. While unit volume remained unchanged, the segment's net earnings also saw a slight decrease. The company is focused on organic sales growth in this segment, which was 5% for the quarter.
06—Continue