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.
Currency Devaluation
There has been currency devaluation across the world. There has been a decline as a result of this in the earnings of PG. The company posted 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. Diluted net earnings per share were $0.82, including non-core items which reduced diluted EPS by $0.24 per share. Organic sales grew two percent for the quarter. Reported net sales were $20.2 billion, a decrease of four percent versus the prior year, including a negative five percentage point impact from foreign exchange.
"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."
"The outlook for the year will remain challenging. Foreign exchange will reduce fiscal 2015 sales by 5% and net earnings by12%, or at least $1.4 billion after tax. We have and will continue to offset as much of this currency impact as we can through productivity driven cost savings. And we will continue to invest in our businesses, brands and product innovation, because it is the right thing to do for the mid- and long-term, while we deliver another year of strong cash returns to shareowners.”
Beauty, Hair and Personal Care segment organic sales decreased one percent driven primarily by declines in the Prestige and Skin and Personal Care categories. This was partially offset by innovation-driven sales growth in the Salon Professional and Antiperspirant & Deodorant businesses.
As a result of the previously announced divestiture of its Duracell battery business to Berkshire Hathaway (BRK.B, Financial), expected to close in the second half of calendar year 2015, and in accordance with the applicable accounting guidance, the results of the batteries business are presented as discontinued operations. During the quarter, the Company took a non-cash charge of $740 million after-tax, or $0.26 per share, included in discontinued operations to adjust the carrying values of the batteries business to reflect the value it expects to receive. During the first quarter of fiscal year 2015, the Company previously took a write down in the asset value of its battery business to be more reflective of the value it expected to receive from the sale of its interest in a China-based battery joint venture, which closed as expected during the second quarter.
Fiscal Year 2015 Guidance
PG maintained its organic sales growth and currency-neutral core earnings per share growth guidance ranges for fiscal year 2015. The Company expects significant negative sales and earnings impacts from foreign exchange in the second half of its fiscal year.
The Company maintained its guidance for organic sales growth in the low-to-mid single digit range. Net sales growth is now expected to be lower versus the prior fiscal year in the range of -3% to -4%, including a negative five point headwind from foreign exchange and a one point impact from minor brand divestitures.
PG maintained its outlook for currency-neutral core earnings per share growth in the double-digits. Including currency impacts, Core EPS is now expected to be in the range of in-line to down low-single digits versus prior year Core EPS of $4.09. All-in GAAP diluted net earnings per share are now expected to be down in the mid-teens range versus the prior year. This includes approximately $0.67 per share of non-core charges, primarily from $0.20 per share of non-core restructuring charges and $0.58 of impairment charges, which are partially offset by approximately $0.14 of earnings from discontinued Batteries and Pet Care operations.
To End
PG is currently facing headwinds due to appreciation in 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.
