01—Abstract
Summary
Summary of the 10-Q filed January 19, 2023. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble's fiscal second quarter ended December 30, 2022, saw a slight dip in net sales, down 1% to $20.8 billiona, primarily due to unfavorable foreign exchange rates and a decline in unit volume, which were partially offset by increased pricing.
Despite the top-line pressure, the company demonstrated strong pricing power and effective cost management, leading to a 7% decrease in operating income and net earnings, largely driven by cost pressures from commodities and input materials, as well as negative foreign exchange impacts. Diluted Earnings Per Share (EPS) also saw a decline of 4% to $1.59b. However, organic sales, excluding foreign exchange, grew by 5%, indicating underlying business resilience.
For the first six months of the fiscal year, net sales remained flat at $41.4 billionc, with organic sales growing a more robust 6%. Net earnings and diluted EPS experienced a decline of 5% and 3%, respectively, reflecting similar pressures as the quarterly results.
The company's commitment to returning capital to shareholders remains evident, with significant treasury stock purchases and dividend payments. Management continues to navigate a challenging macroeconomic environment characterized by inflation, currency fluctuations, and geopolitical instability.
02—Key points
Key Highlights
- Net sales for the quarter decreased by 1% to $20.8 billion, driven by unfavorable foreign exchange and lower unit volume, though offset by higher pricing.
- Organic sales, a key measure excluding currency impacts, grew by 5% for the quarter and 6% for the six-month period, demonstrating underlying business strength.
- Gross margin declined by 160 basis points for both the quarter and the six-month period, primarily due to increased commodity and input material costs, and unfavorable product mix, partially offset by higher pricing.
- Net earnings attributable to Procter & Gamble decreased by 7% for the quarter and 6% for the six-month period, impacted by reduced operating income and foreign exchange headwinds.
- Diluted Earnings Per Share (EPS) declined by 4% for the quarter to $1.59 and by 3% for the six-month period to $3.16.
- The company returned significant capital to shareholders through $6.0 billion in treasury stock purchases and $4.5 billion in dividends for the six-month period.
- The Grooming segment experienced a notable sales decline of 9% for the quarter, while Health Care and Fabric & Home Care segments showed modest sales growth.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2023, Procter & Gamble Co kept $0.19.
- Revenue$20.77B100.0%
- Cost of revenue−$10.90B52.5%
- Gross profit$9.88B47.5%
- Operating costs−$5.09B24.5%
- Operating income$4.79B23.0%
- Interest, other & tax−$852.0M4.1%
- Net income$3.93B18.9%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2023filed January 19, 2023Financial Statements
Q2 FY2023 against Q2 FY2022
| Line item | Q2 FY2023Q2 FY2022 | Change |
|---|---|---|
| Revenue | $20.77B$20.95B | −0.9% |
| Cost of Revenue | $10.90B$10.66B | +2.2% |
| Gross Profit | $9.88B$10.29B | −4.0% |
| SG&A Expenses | $5.09B$5.12B | −0.6% |
| Operating Income | $4.79B$5.17B | −7.4% |
| Interest Expense | $171.00M$106.00M | +61.3% |
| Net Income | $3.93B$4.22B | −6.9% |
| EPS (Basic) | $1.63$1.72 | −5.2% |
| EPS (Diluted) | $1.59$1.66 | −4.2% |
| Shares Outstanding (Basic) | 2.37B2.41B | −2.0% |
| Shares Outstanding (Diluted) | 2.48B2.54B | −2.5% |
05—Questions
Frequently Asked Questions
What drove the decrease in net sales for the quarter?
The decrease in net sales for the quarter was primarily driven by unfavorable foreign exchange rates (a 6% negative impact) and a decrease in unit volume (down 6%). These factors were partially offset by higher pricing (up 10%) and a favorable mix (up 1%).
How did cost pressures affect profitability?
Increased commodity and input material costs, along with unfavorable product mix, significantly impacted gross margin, leading to a 160 basis-point decrease for both the quarter and the six-month period. These pressures, combined with foreign exchange impacts, contributed to the decline in net earnings.
What is the outlook for organic sales growth?
Organic sales growth, which excludes the impact of foreign exchange and acquisitions/divestitures, showed resilience. For the second quarter, it increased by 5%, and for the six months ended December 31, 2022, it grew by 6%, indicating positive underlying business performance.
How is P&G returning capital to shareholders?
P&G continues to return capital to shareholders through share repurchases and dividend payments. For the six months ended December 31, 2022, the company spent $6.0 billion on treasury stock purchases and $4.5 billion on dividends.
06—Continue