01—Abstract
Summary
Summary of the 10-Q filed April 19, 2024. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble Co. (PG) reported solid financial results for the third quarter and nine months ended March 31, 2024.
Net sales saw a modest increase of 1%a for the quarter and 3% for the nine-month period, driven by strategic pricing initiatives that offset some foreign exchange headwinds and flat unit volumes. The company demonstrated strong operational execution, evidenced by significant improvements in gross margin, primarily due to manufacturing productivity savings and lower commodity costs. Profitability showed a healthy upward trend, with net earnings attributable to Procter & Gamble increasing by 11% for the quarter and 4% for the nine-month period.
Diluted Earnings Per Share (EPS) also saw substantial growth. The company continued its commitment to returning value to shareholders through share repurchases and dividends, supported by robust operating cash flow of $14.1 billionb for the nine months. A key event impacting earnings was a $1.3 billion pre-tax impairment charge on the Gillette intangible asset, which was noted as a non-recurring item impacting the nine-month results.
Management highlighted the strength across several business segments, with Fabric & Home Care and Baby, Feminine & Family Care showing particularly strong earnings growth for the nine-month period. The company remains focused on productivity, pricing, and innovation to navigate the complex global economic landscape, which includes managing currency fluctuations and cost pressures. Overall, PG presented a picture of resilience and continued strategic focus on driving profitable growth.
02—Key points
Key Highlights
- Net sales for the third quarter increased 1% to $20.2 billion, with organic sales up 3%, driven by pricing.
- Net earnings attributable to Procter & Gamble rose 11% to $3.75 billion for the quarter, and Diluted EPS increased 11% to $1.52.
- Gross margin improved significantly by 300 basis points to 51.2% in the quarter, benefiting from manufacturing productivity and lower commodity costs.
- Operating cash flow for the nine months was strong at $14.1 billion, contributing to an adjusted free cash flow of $12.0 billion.
- A $1.3 billion pre-tax impairment charge on the Gillette intangible asset negatively impacted nine-month earnings.
- Key segments like Fabric & Home Care and Baby, Feminine & Family Care showed robust net earnings growth of 11% and 8% respectively for the quarter.
- The company repurchased $6.3 billion in shares during the first three months of the calendar year, signaling a commitment to shareholder returns.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Procter & Gamble Co kept $0.19.
- Revenue$20.20B100.0%
- Cost of revenue−$9.86B48.8%
- Gross profit$10.34B51.2%
- Operating costs−$5.88B29.1%
- Operating income$4.46B22.1%
- Interest, other & tax−$706.0M3.5%
- Net income$3.75B18.6%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed April 19, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $20.20B$20.07B | +0.6% |
| Cost of Revenue | $9.86B$10.40B | −5.3% |
| Gross Profit | $10.34B$9.66B | +7.0% |
| SG&A Expenses | $5.88B$5.42B | +8.6% |
| Operating Income | $4.46B$4.25B | +5.0% |
| Interest Expense | $233.00M$222.00M | +5.0% |
| Net Income | $3.75B$3.40B | +10.5% |
| EPS (Basic) | $1.56$1.41 | +10.6% |
| EPS (Diluted) | $1.52$1.37 | +10.9% |
| Shares Outstanding (Basic) | 2.36B2.36B | +0.1% |
| Shares Outstanding (Diluted) | 2.47B2.47B | 0.0% |
05—Questions
Frequently Asked Questions
How did Procter & Gamble's net sales perform in the third quarter?
For the three months ended March 31, 2024, Procter & Gamble reported net sales of $20.2 billion, a 1% increase compared to the prior year period. This growth was primarily driven by a 3% increase in pricing, which offset a 2% unfavorable foreign exchange impact. Unit volume and mix had a neutral impact. Organic sales, excluding foreign exchange, acquisitions, and divestitures, increased by 3%.
What was the impact of the Gillette intangible asset impairment on the company's financial results?
During the three months ended December 31, 2023 (recognized within the nine-month reporting period), Procter & Gamble recorded a non-cash impairment charge of $1.3 billion before tax ($1.0 billion after tax) on the Gillette indefinite-lived intangible asset. This charge negatively impacted the nine-month net earnings and diluted EPS. Management considers this an irregular item and excludes it when calculating Core EPS.
How has the company's gross margin trended?
Procter & Gamble demonstrated strong gross margin performance. For the three months ended March 31, 2024, gross margin increased 300 basis points to 51.2% of net sales. This improvement was attributed to manufacturing productivity savings (260 basis points), lower commodity costs (130 basis points), and higher pricing (130 basis points), partially offset by unfavorable product mix and foreign exchange.
What is the outlook for cash flow and shareholder returns?
The company generated $14.1 billion in operating cash flow for the nine months ended March 31, 2024. Adjusted free cash flow was $12.0 billion, with an adjusted free cash flow productivity of 93%. P&G continues to return capital to shareholders, repurchasing approximately $6.3 billion in shares during the quarter and intending to reduce outstanding shares by $5 to $6 billion in fiscal year 2024.
06—Continue