Procter & Gamble Posts Strong Growth

Procter & Gamble (PG, Financial) is one of the largest and among the fastest-growing consumer goods companies across the world with its presence felt in more than 180 countries. The company deals in consumer-packaged goods. Across the world, PG serves around 4.8 billion people. The company operates in 5 segments – Health Care, Beauty, Family Care, Grooming and Home Care.

PG is one of the world's most thoroughly integrated multinationals. Over the past years, the Ohio-based consumer goods company has returned good proceeds to shareholders. Globally, PG is one of the most reputed brands.

Hiccups recently

There has been a currency devaluation across the world. There has been a decline as a result of this in the earnings of PG. The company posted a weak second quarter results. This was due to the strong U.S. dollar. It reported second-quarter fiscal year 2015 core earnings per share of $1.06 versus $1.15 the prior year.

"The October-December 2014 quarter was a challenging one with unprecedented currency devaluations," said Chairman, President and Chief Executive Officer A.G. Lafley. "Virtually every currency in the world devalued versus the U.S. dollar, with the Russian Ruble leading the way. While we continue to make steady progress on the strategic transformation of the company – which focuses P&G on about a dozen core categories and 70 to 80 brands, on leading brand growth, on accelerating meaningful product innovation and increasing productivity savings – the considerable business portfolio, product innovation and productivity progress was not enough to overcome foreign exchange."

Strong first quarter results

PG reported first quarter fiscal year 2015 core earnings per share of $1.07, an increase of two percent versus the prior year. On a currency-neutral basis, core earnings per share increased 9 percent. Diluted net earnings per share were $0.69, including non-core items of $0.38 per share.

Organic sales grew two percent for the quarter. Reported net sales were $20.8 billion, unchanged versus the prior year, including a negative two percentage point impact from the combination of foreign exchange and minor divestitures.

P&G generated operating cash flow of $3.6 billion and free cash flow of $2.8 billion for the quarter.

Adjusted free cash flow productivity was 96%. P&G returned $4.2 billion in cash to shareholders, including $1.8 billion in dividends and $2.4 billion of common stock repurchases. “P&G’s first quarter results were in line with our expectations, despite a very difficult operating environment,” said Chairman, President and Chief Executive Officer A.G. Lafley. “This keeps us on track to deliver our fiscal year commitments.”

“We continue to accelerate and increase productivity savings, sharpen our strategies and strengthen our portfolio by focusing on our biggest opportunities. The pet care divestiture and exit of the battery business will allow us to further focus these efforts.”

Non-GAAP Measures – Core operating profit margin decreased 20 basis points as a 20 basis point improvement in core gross margin was more than offset by a 30 basis point increase in core SG&A as a percentage of net sales. Reported operating profit margin decreased 570 basis points primarily due to the impairment charges. Reported gross margin was unchanged as manufacturing savings of 140 basis points were offset by foreign exchange, higher commodity costs, incremental restructuring charges and innovation and capacity expansion investments. Reported SG&A as a percentage of sales increased 90 basis points as productivity savings of 70 basis points from overhead and 50 basis points of marketing efficiencies were more than offset by foreign exchange impacts, including a non-core charge for adjustments to remeasure certain balances in Venezuela. Total productivity savings in cost of goods sold and SG&A were 260 basis points.

Goodwill and intangible impairment

During the quarter the company took a non-cash charge of $932 million after-tax, or $0.32 per share, to adjust the carrying values of goodwill and indefinite-lived intangible assets in its Duracell battery business. The company said it is writing down the asset value of its battery business to be more reflective of the value it will receive from the recently announced sale of its interest in a China-based battery joint venture.

To end

PG is currently facing headwinds due to appreciation in the U.S. dollar. The company will go back to normalcy once the currency stabilizes. Being a leader in the personal products industry, PG is known for its solid dividend payouts. The company has paid dividends since 1944. It has a track record of distributing dividends for 58 consecutive years. Over the past decade, annual dividends have increased by 10.80%.

PG is one of the world's most thoroughly integrated multinationals. Over the past years, the Ohio-based consumer goods company has returned good proceeds to shareholders. Globally, PG is one of the most reputed brands. The best thing about the company is that it has a vast array of products to offer at different affordable prices. The company is currently focusing on efficiency, and this is going to fuel its future growth. It is constantly concentrating on the emerging markets, where it has tremendous potential in store.