01—Abstract
Summary
Summary of the 10-Q filed October 18, 2023. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble (PG) reported a strong first quarter for fiscal year 2024, with net sales increasing by 6% year-over-year to $21.9 billiona.
This growth was primarily driven by a 7% increase in pricing, partially offset by a 1% decrease in unit volume and a 1% unfavorable foreign exchange impact. Organic sales, excluding these factors, grew by 7%. Net earnings saw a significant increase of 15% to $4.6 billionb, resulting in a 17% rise in diluted Earnings Per Share (EPS) to $1.83, reflecting improved operating income and a reduced share count.
The company demonstrated robust operational efficiency, with gross margin expanding by 460 basis points due to higher pricing, lower commodity costs, and manufacturing productivity savings. Despite increased marketing and overhead spending, leading to a higher SG&A as a percentage of net sales, the company managed to improve its overall operating margin.
Strong performance was observed across most segments, with Health Care, Fabric & Home Care, and Baby, Feminine & Family Care showing double-digit net sales growth. The company also generated substantial operating cash flow of $4.9 billionc and maintained a strong adjusted free cash flow productivity of 97%.
02—Key points
Key Highlights
- Net sales increased 6% to $21.9 billion, driven by a 7% increase in pricing and a 7% organic sales growth.
- Net earnings rose 15% to $4.6 billion, with diluted EPS up 17% to $1.83, benefiting from higher sales and improved operating margins.
- Gross margin improved significantly by 460 basis points to 52.0%, attributed to pricing, lower commodity costs, and productivity gains.
- Health Care, Fabric & Home Care, and Baby, Feminine & Family Care segments reported double-digit net sales growth.
- Operating cash flow was strong at $4.9 billion, with adjusted free cash flow productivity at 97%, indicating efficient cash generation.
- The company continues its commitment to returning capital to shareholders, with significant treasury stock purchases and dividend payments.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Procter & Gamble Co kept $0.21.
- Revenue$21.87B100.0%
- Cost of revenue−$10.50B48.0%
- Gross profit$11.37B52.0%
- Operating costs−$5.60B25.6%
- Operating income$5.77B26.4%
- Interest, other & tax−$1.25B5.7%
- Net income$4.52B20.7%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed October 18, 2023Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $21.87B$20.61B | +6.1% |
| Cost of Revenue | $10.50B$10.85B | −3.2% |
| Gross Profit | $11.37B$9.77B | +16.4% |
| SG&A Expenses | $5.60B$4.83B | +16.1% |
| Operating Income | $5.77B$4.94B | +16.8% |
| Interest Expense | $225.00M$123.00M | +82.9% |
| Net Income | $4.52B$3.94B | +14.8% |
| EPS (Basic) | $1.89$1.62 | +16.7% |
| EPS (Diluted) | $1.83$1.57 | +16.6% |
| Shares Outstanding (Basic) | 2.36B2.39B | −1.1% |
| Shares Outstanding (Diluted) | 2.48B2.50B | −1.1% |
05—Questions
Frequently Asked Questions
What drove the increase in net sales for Procter & Gamble?
Net sales increased by 6% to $21.9 billion, primarily driven by a 7% increase in pricing. While unit volume decreased by 1% and foreign exchange had a 1% unfavorable impact, organic sales grew by 7%, indicating strong underlying demand for P&G's products.
How did the company manage its costs and margins?
Procter & Gamble improved its gross margin by 460 basis points to 52.0%. This was achieved through a combination of higher pricing (330 basis points), lower commodity costs (160 basis points), and manufacturing productivity savings (150 basis points). While SG&A expenses increased as a percentage of net sales due to higher marketing and overhead costs, the overall operating income and net earnings still saw substantial growth.
Which business segments performed the strongest?
The Health Care segment saw an 11% increase in net sales, Fabric & Home Care increased by 8%, and Baby, Feminine & Family Care grew by 5%. Notably, within these segments, Fabric & Home Care and Baby, Feminine & Family Care reported particularly strong net earnings growth of 34%.
What is the outlook for capital allocation and shareholder returns?
The company generated strong operating cash flow of $4.9 billion and maintained high adjusted free cash flow productivity of 97%. P&G continues to return capital to shareholders through dividends and share repurchases, with plans to repurchase $5 to $6 billion in fiscal year 2024.
06—Continue