10-QPeriod: Q1 FY2023

PROCTER & GAMBLE Co Quarterly Report for Q1 Ended Sep 30, 2022

Filed October 19, 2022For Securities:PG

Summary

Procter & Gamble (PG) reported its first-quarter fiscal year 2023 results, showing a modest 1% increase in net sales to $20.6 billion, 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 billion, 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.

Financial Highlights

52 data points
Beta

Revenue

$20.61B

47.4% Gross Margin

Net Income

$3.94B

19.1% Net Margin

EPS (Diluted)

$1.57

Total Assets

$116.28B

Cash & Equivalents

$6.71B

Free Cash Flow

$3.18B

Financial Statements
Beta
Revenue$20.61B
Cost of Revenue$10.85B
Gross Profit$9.77B
SG&A Expenses$4.83B
Operating Income$4.94B
Interest Expense$123.00M
Net Income$3.94B
EPS (Basic)$1.62
EPS (Diluted)$1.57
Shares Outstanding (Basic)2.39B
Shares Outstanding (Diluted)2.50B

Key Highlights

  • 1Net 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.
  • 2Diluted EPS decreased 2% to $1.57, impacted by a decline in net earnings.
  • 3Gross margin declined 160 basis points to 47.4% primarily due to a 510 basis-point increase in commodity and input material costs.
  • 4Organic sales grew 7%, indicating underlying demand strength that was masked by foreign exchange and volume decreases.
  • 5The Health Care segment showed robust growth with net sales up 3% and net earnings up 17%, driven by strong performance in Personal Health Care.
  • 6The company continued its share repurchase program, buying back $4.0 billion in treasury stock during the quarter.
  • 7Significant risks related to foreign currency fluctuations, inflation, commodity costs, and geopolitical events like the Russia-Ukraine war continue to impact the business.

Frequently Asked Questions

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.

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.

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.

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.