01—Abstract
Summary
Summary of the 10-Q filed April 21, 2023. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble (PG) reported solid performance for the third quarter of fiscal year 2023, with net sales increasing 4% to $20.1 billiona.
This growth was primarily driven by a 10% increase in pricing, a 1% favorable mix, and a 3% increase in unit volume, which partially offset a 4% negative impact from foreign exchange. Diluted Earnings Per Share (EPS) saw a 3% increase to $1.37b. For the nine-month period, net sales grew 1% to $61.5 billion, with organic sales up 7%.
While net earnings for the nine months decreased by 3% to $11.3 billionc, the company demonstrated strong operating cash flow of $11.5 billion and maintained robust free cash flow productivity of 83%. The company continued its commitment to returning capital to shareholders through dividends and share repurchases, highlighting a stable financial position despite ongoing economic uncertainties and cost pressures.
02—Key points
Key Highlights
- Net sales for the third quarter increased by 4% year-over-year to $20.1 billion, driven by strong pricing (10%) and favorable mix (1%), partially offsetting a 3% decline in unit volume and a 4% unfavorable foreign exchange impact.
- Diluted Earnings Per Share (EPS) for the quarter rose by 3% to $1.37, reflecting improved profitability and efficient capital management.
- For the nine-month period, net sales grew 1% to $61.5 billion, with organic sales increasing a strong 7%, indicating underlying business momentum.
- Despite a 3% decrease in net earnings for the nine months ($11.3 billion), the company generated $11.5 billion in operating cash flow, demonstrating its ability to convert sales into cash.
- Adjusted free cash flow productivity remained high at 83% for the nine-month period, underscoring efficient cash generation and management.
- The company is actively managing costs, with gross margin improving by 150 basis points in the quarter due to pricing and productivity savings, though offset by increased commodity costs and unfavorable foreign exchange.
- Shareholders continue to benefit from capital return programs, with significant amounts allocated to dividends and share repurchases during the nine-month period.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2023, Procter & Gamble Co kept $0.17.
- Revenue$20.07B100.0%
- Cost of revenue−$10.40B51.8%
- Gross profit$9.66B48.2%
- Operating costs−$5.42B27.0%
- Operating income$4.25B21.2%
- Interest, other & tax−$851.0M4.2%
- Net income$3.40B16.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2023filed April 21, 2023Financial Statements
Q3 FY2023 against Q3 FY2022
| Line item | Q3 FY2023Q3 FY2022 | Change |
|---|---|---|
| Revenue | $20.07B$19.38B | +3.5% |
| Cost of Revenue | $10.40B$10.33B | +0.8% |
| Gross Profit | $9.66B$9.05B | +6.7% |
| SG&A Expenses | $5.42B$5.03B | +7.7% |
| Operating Income | $4.25B$4.02B | +5.6% |
| Interest Expense | $222.00M$109.00M | +103.7% |
| Net Income | $3.40B$3.35B | +1.3% |
| EPS (Basic) | $1.41$1.37 | +2.9% |
| EPS (Diluted) | $1.37$1.33 | +3.0% |
| Shares Outstanding (Basic) | 2.36B2.40B | −1.7% |
| Shares Outstanding (Diluted) | 2.47B2.53B | −2.3% |
05—Questions
Frequently Asked Questions
What were the key drivers of the net sales increase in the third quarter?
The 4% increase in net sales to $20.1 billion was primarily driven by a 10% increase in pricing and a 1% favorable mix. This was partially offset by a 3% decrease in unit volume and a 4% unfavorable impact from foreign exchange.
How did the company's profitability fare in the third quarter and year-to-date?
For the third quarter, net earnings increased 2% to $3.4 billion, and diluted EPS rose 3% to $1.37. For the nine-month period, net earnings decreased 3% to $11.3 billion, while diluted EPS decreased 1% to $4.53. The year-to-date decrease was influenced by factors such as increased commodity costs and unfavorable foreign exchange, which impacted gross margins.
What is the company's cash flow generation like?
Procter & Gamble generated $11.5 billion in operating cash flow for the nine months ended March 31, 2023, a decrease from the prior year but still substantial. The company reported strong adjusted free cash flow productivity of 83% for the same period, indicating efficient conversion of earnings into cash.
Are there any significant risks or concerns mentioned in the filing?
The company noted potential risks including global economic volatility, foreign exchange fluctuations, changes in commodity costs, supply chain disruptions, and the ongoing geopolitical situation (Russia-Ukraine War). Specifically, the Gillette indefinite-lived intangible asset is highlighted as susceptible to future impairment risk due to potential adverse changes in business or macroeconomic environments.
06—Continue