10-QPeriod: Q2 FY2024

PROCTER & GAMBLE Co Quarterly Report for Q2 Ended Dec 31, 2023

Filed January 23, 2024For Securities:PG

Summary

Procter & Gamble's (PG) fiscal second quarter 2024 report reveals a 3% increase in net sales to $21.4 billion, driven by a 4% increase in pricing, partially offset by a 1% unfavorable foreign exchange impact. While overall net sales grew, diluted earnings per share (EPS) saw a 12% decrease to $1.40, primarily impacted by a significant $1.3 billion (pre-tax) impairment charge on the Gillette intangible asset. However, the company reported strong operational performance, with gross margin improving by 520 basis points due to manufacturing productivity, lower commodity costs, and higher pricing. Furthermore, Core EPS, which excludes the impairment charge and incremental restructuring costs, increased by a robust 16% to $1.84, highlighting the underlying strength of the business. For the first six months of the fiscal year, net sales increased by 5% to $43.3 billion, and net earnings rose by 2% to $8.0 billion. Core EPS for the six-month period surged by 16% to $3.66. The company also demonstrated strong cash flow generation, with operating cash flow at $10.0 billion and adjusted free cash flow at $8.7 billion for the first half of the fiscal year, resulting in an impressive adjusted free cash flow productivity of 96%. The company continues its share repurchase program, returning capital to shareholders.

Financial Highlights

54 data points
Beta

Revenue

$21.44B

52.7% Gross Margin

Net Income

$3.47B

16.2% Net Margin

EPS (Diluted)

$1.40

Total Assets

$120.71B

Cash & Equivalents

$7.89B

Free Cash Flow

$4.28B

Financial Statements
Beta
Revenue$21.44B
Cost of Revenue$10.14B
Gross Profit$11.30B
SG&A Expenses$5.52B
Operating Income$4.43B
Interest Expense$248.00M
Net Income$3.47B
EPS (Basic)$1.44
EPS (Diluted)$1.40
Shares Outstanding (Basic)2.36B
Shares Outstanding (Diluted)2.47B

Key Highlights

  • 1Net sales increased by 3% to $21.4 billion for the quarter, driven by a 4% price increase, though unit volume was flat.
  • 2Diluted EPS decreased by 12% to $1.40 due to a significant $1.3 billion pre-tax impairment charge on the Gillette intangible asset.
  • 3Core EPS (excluding impairment and restructuring charges) increased by 16% to $1.84 for the quarter, indicating underlying business strength.
  • 4Gross margin improved by 520 basis points to 52.7% driven by manufacturing productivity, lower commodity costs, and higher pricing.
  • 5For the six months ended December 31, 2023, net sales increased 5% to $43.3 billion and net earnings increased 2% to $8.0 billion.
  • 6Operating cash flow for the six months was $10.0 billion, with adjusted free cash flow at $8.7 billion and productivity at 96%.

Frequently Asked Questions

The primary driver for the decrease in net earnings and diluted EPS was a $1.3 billion pre-tax (approximately $1.0 billion after-tax) non-cash impairment charge recorded on the Gillette indefinite-lived intangible asset. This charge arose due to a higher discount rate, weakening currencies, and the impact of a new restructuring program in certain markets.

The underlying business performance remains strong, as evidenced by the 16% increase in Core EPS to $1.84 for the quarter and $3.66 for the six-month period. Core EPS excludes the impact of the Gillette intangible asset impairment and incremental restructuring charges, providing a clearer view of operational performance.

The gross margin improved significantly by 520 basis points due to a combination of factors: 240 basis points from manufacturing productivity savings, 200 basis points from lower commodity costs, and 190 basis points from higher pricing. These improvements were partially offset by unfavorable foreign exchange and product/packaging investments.

The company generated strong operating cash flow of $10.0 billion and adjusted free cash flow of $8.7 billion for the first six months of fiscal year 2024, with productivity at 96%. The company continues to return capital to shareholders through dividends and its ongoing share repurchase program, with plans to repurchase $5 to $6 billion in fiscal year 2024.