Procter & Gamble (PG, Financial), one of the largest branded consumer products companies in the world (with products in more than 180 countries) reported fourth quarter and fiscal year 2011 results on Friday. Since a large number of CPG companies had already reported earnings in the past couple of weeks, the expectations were quite clear: decent growth in emerging markets, along with slow growth in developed markets and margin pressure due to cost inflation and competition. As it turns out, that’s pretty much what we got: For the year, developing markets grew about 8% but developed markets grew only about 1% on a value basis (as noted by CEO Bob McDonald, “I don't think there's any question that consumers, particularly in developed markets, are under pressure”).
Net sales increased 10% in the quarter to $20.9 billion, bringing the total for the year to $82.6 billion, up 5% compared to 2010. Organic sales, which exclude acquisitions, divestitures and foreign exchange, grew 5% in the quarter and 4% for the year. As noted by CFO Jon Moeller, “The growth was broad-based with increases in 5 of 6 reporting segments, 21 of 24 billion-dollar brands and 15 of our top 17 countries.”
Every segment saw a year-over-year sales increase, with the slowest growth coming from Snacks & Pet Care at 1%. On the other end of the spectrum, Baby Care and Family Care was the fastest grower in the year, adding 6% in 2011 to cross $15.6 billion in annual sales and nearly 19% of company-wide sales. This growth was driven by developing markets, such as Greater China, India, the Philippines, and Brazil, all which had volume growth in excess of 25%
In comparison to the 5% sales increase for the year, SG&A only grew 4% (down 130 basis points as a percentage of sales), which suggests effective cost controls to mitigate 8% growth in COGS for the year. Despite these efforts, gross margins decreased 140 basis points for the year to 50.6%. Management noted that they expect similar commodity pressures in the coming year as they saw in 2011; for the year, they were a $1.8 billion headwind, about $1 billion higher than management had expected at the start of 2011.
Diluted net EPS for the quarter and the full year was $0.84 and $3.93, respectively; for the year, earnings increased 11%, strong growth considering the many challenges facing companies like Procter & Gamble in this environment.
The company returned nearly $13 billion to shareholders in the year, repurchasing $7 billion of P&G stock and paying $5.8 billion in dividends to shareholders; this marked the 55th consecutive year of a dividend increase and the 121st consecutive year in which Procter & Gamble paid a dividend. Over the past three years, P&G has returned over $35 billion to shareholders through dividends and share repurchases.
Procter & Gamble understands their strengths, and uses their economies of scale to their full advantage. For the year, they invested $9.3 billion in advertising (11.3% of sales); advertising spending has increased each of the last 2 years, and is now $1.8 billion or 24% the level in 2009. Management understands the importance of building brand equity during tough economic environment; as such, they are positioning themselves for “share of mind” amongst the rising middle class in emerging markets and tight-fisted consumers in developed markets (whom have a compelling offering in private label).
They’ve also continued their history of innovation, another driver of sales and profits. As noted by CEO Robert McDonald, “In calendar year 2010, P&G launched 4 of the top 10 and 8 of the 25 most successful new products in the consumer products industry in North America as measured by Symphony IRI. In the past 16 years, P&G has had 132 products on the top 25 Pacesetter list. That's more than our 6 largest competitors combined.”
As such, the company is now reaching roughly 4.4 billion consumers, an increase of about 200 million from last year and 400 million since 2009. Global household penetration of P&G products is approximately 63%, up 5% over the last two years.
For 2012, the company expects organic sales growth in the range of 3% to 6%, along with 2-3 percent of positive foreign exchange impacts, bringing overall sales growth guidance to a range of 5% to 9%. On the bottom line, they expect earnings per share in the range of $4.17 to $4.33, equal to 6%-10% year-over-year growth versus 2011 core EPS of $3.95. To date, analysts are expecting earnings of $4.29 per share on revenue of $87 billion (up 5%) in fiscal 2012.
Net sales increased 10% in the quarter to $20.9 billion, bringing the total for the year to $82.6 billion, up 5% compared to 2010. Organic sales, which exclude acquisitions, divestitures and foreign exchange, grew 5% in the quarter and 4% for the year. As noted by CFO Jon Moeller, “The growth was broad-based with increases in 5 of 6 reporting segments, 21 of 24 billion-dollar brands and 15 of our top 17 countries.”
Every segment saw a year-over-year sales increase, with the slowest growth coming from Snacks & Pet Care at 1%. On the other end of the spectrum, Baby Care and Family Care was the fastest grower in the year, adding 6% in 2011 to cross $15.6 billion in annual sales and nearly 19% of company-wide sales. This growth was driven by developing markets, such as Greater China, India, the Philippines, and Brazil, all which had volume growth in excess of 25%
In comparison to the 5% sales increase for the year, SG&A only grew 4% (down 130 basis points as a percentage of sales), which suggests effective cost controls to mitigate 8% growth in COGS for the year. Despite these efforts, gross margins decreased 140 basis points for the year to 50.6%. Management noted that they expect similar commodity pressures in the coming year as they saw in 2011; for the year, they were a $1.8 billion headwind, about $1 billion higher than management had expected at the start of 2011.
Diluted net EPS for the quarter and the full year was $0.84 and $3.93, respectively; for the year, earnings increased 11%, strong growth considering the many challenges facing companies like Procter & Gamble in this environment.
The company returned nearly $13 billion to shareholders in the year, repurchasing $7 billion of P&G stock and paying $5.8 billion in dividends to shareholders; this marked the 55th consecutive year of a dividend increase and the 121st consecutive year in which Procter & Gamble paid a dividend. Over the past three years, P&G has returned over $35 billion to shareholders through dividends and share repurchases.
Procter & Gamble understands their strengths, and uses their economies of scale to their full advantage. For the year, they invested $9.3 billion in advertising (11.3% of sales); advertising spending has increased each of the last 2 years, and is now $1.8 billion or 24% the level in 2009. Management understands the importance of building brand equity during tough economic environment; as such, they are positioning themselves for “share of mind” amongst the rising middle class in emerging markets and tight-fisted consumers in developed markets (whom have a compelling offering in private label).
They’ve also continued their history of innovation, another driver of sales and profits. As noted by CEO Robert McDonald, “In calendar year 2010, P&G launched 4 of the top 10 and 8 of the 25 most successful new products in the consumer products industry in North America as measured by Symphony IRI. In the past 16 years, P&G has had 132 products on the top 25 Pacesetter list. That's more than our 6 largest competitors combined.”
As such, the company is now reaching roughly 4.4 billion consumers, an increase of about 200 million from last year and 400 million since 2009. Global household penetration of P&G products is approximately 63%, up 5% over the last two years.
For 2012, the company expects organic sales growth in the range of 3% to 6%, along with 2-3 percent of positive foreign exchange impacts, bringing overall sales growth guidance to a range of 5% to 9%. On the bottom line, they expect earnings per share in the range of $4.17 to $4.33, equal to 6%-10% year-over-year growth versus 2011 core EPS of $3.95. To date, analysts are expecting earnings of $4.29 per share on revenue of $87 billion (up 5%) in fiscal 2012.
