01—Abstract
Summary
Summary of the 8-K filed January 7, 2004. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble filed an 8-K under Regulation FD on January 7, 2004 to pre-announce an upward revision to its October-December 2003 quarter (fiscal 2003/04 Q2) results.
The company said organic volume growth for the quarter was about 9%, above the top end of its prior 7-8% guidance range. Earnings per share are now expected to beat current Wall Street consensus by $0.02 to $0.04a per share. The upside was driven by two factors.
Health care volume rose sharply because of an unexpectedly early and severe cold and flu season in North America. Developing markets also outperformed, with all regions growing at mid-teens percentages or better. Management cautioned that the respiratory boost is not fully incremental to the fiscal year, since the cold and flu season was already fading and some volume is shifting between quarters.
It also warned that negative price/mix effects could be slightly worse than previously expected because of the strong developing-market growth. Full details on the quarter and the outlook for the balance of the fiscal year are deferred to the regular earnings release scheduled for January 28, 2004.
Investors should treat this as a positive but partly timing-driven pre-announcement, and the forward guidance and margin commentary in that release will matter more for the year ahead. The filing also reiterates standard forward-looking risk factors, including integration of the Wella acquisition and the potential divestiture of the juice business.
02—Key points
Key Highlights
- Q2 FY2003/04 EPS expected to beat Wall Street consensus by $0.02 to $0.04 per share.
- Organic volume growth of about 9% for the October-December 2003 quarter, above the prior guidance range of 7-8%.
- Health care volume strength was driven by an unexpectedly early and severe North American cold and flu season.
- Developing markets grew at mid-teens percentages or better in all regions, beating expectations.
- Management says part of the respiratory volume benefit is timing-related and will not be fully incremental to the fiscal year.
- Negative price/mix impacts may be slightly higher than previously expected due to strong developing-market growth.
- Full quarterly results and fiscal-year outlook will be released on January 28, 2004.
03—Questions
Frequently Asked Questions
Why is P&G raising its earnings outlook for the quarter?
Organic volume growth came in at about 9%, above the previous 7-8% guidance range. The beat was driven mainly by health care products, boosted by an early and severe North American cold and flu season, and by stronger-than-expected developing-market sales.
Is the earnings upside sustainable for the full fiscal year?
Only partially. Management said the extra respiratory volume is shifting between quarters rather than being fully incremental to the year, since cold and flu incidence was already declining in North America. The EPS benefit is also expected to be only partially incremental to the fiscal year.
What are the main risks to margins highlighted in the filing?
Strong developing-market growth may bring slightly higher negative price/mix impacts than previously expected. Raw material cost increases and currency and interest rate exposures are also flagged as risk factors in the forward-looking statements.
When will investors get more detail on the quarter and the outlook?
P&G plans to provide more details on the October-December results and its expectations for the balance of the fiscal year in its regular earnings release scheduled for January 28, 2004.
04—Continue