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 five 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.
Financials
Fourth Quarter Results:
Currency neutral core earnings per share growth were 11% compared to the prior year period.
Core earnings per share decreased by 2% from the prior year period and were $4.02.
Diluted net earnings per share were $2.44.
Organic sales grew 1%.
For the April-June 2015 quarter, core earnings per share were $1.00 (which marked an increase of eight% when compared to the prior year period).
Excluding the impact of foreign exchange, currency-neutral core earnings per share increased by 22%.
Diluted net earnings per share were $0.18 including the one-time Venezuela charge of $0.71 per share and non-core restructuring costs of $0.07 per share.
Organic sales were unchanged for the quarter as a three percentage point benefit from pricing and mix was offset by lower shipment volume. Net sales were $17.8 billion (which marked a decrease of nine% as compared to the prior year period) driven by a negative nine percentage point impact from foreign exchange.
Fiscal 2015 Results:
Net sales decreased were $76.3 billion (a decrease of 5%).
Organic sales grew by 1%.
Beauty, Hair and Personal Care segment organic sales declined by 1%.
Grooming segment organic sales increased 1%.
Health Care segment organic sales increased by 4%.
Fabric Care and Home Care segment organic sales increased by 2%.
Baby, Feminine and Family Care segment organic sales increased by 3%.
Core earnings per share were $4.02 (which marked a decrease of 2% from the prior year).
Diluted net earnings per share from continuing operations (decreased by 21%) and was $3.06 including the one-time $0.71 per share impact from the Venezuela charge.
Diluted net earnings per share were $2.44, (a decrease of 39%) from the prior year including the Venezuela charge and a $0.62 per share loss from discontinued operations.
Reported gross margin decreased 10 basis points, including 30 basis points of non-core restructuring charges. Core gross margin improved 30 basis points, including 40 basis points of negative foreign exchange impacts.
Selling, general and administrative expense (SG&A) increased 10 basis points on a reported basis from the prior year.
Reported operating profit margin decreased 280 bps.
Operating cash flow was $14.6 billion for the year. Adjusted free cash flow productivity was 102%.
The company repurchased $4.6 billion of common stock and returned $7.3 billion of cash to shareholders as dividends.
2016 projections
The company expects the following for 2016:
- The company said it expects core earnings per share to be slightly below to up mid-single digits versus fiscal 2015 restated core EPS of $3.77.
- P&G said it expects all-in GAAP EPS to be up 53% to 63% versus fiscal year 2015 all-in GAAP EPS of $2.44 (including the impacts of non-core restructuring costs and discontinued operations).
- Strong operating profit growth is expected to be largely offset by a six to seven percentage point core EPS growth headwind from lower non-operating income and a higher core effective tax rate.
- Foreign exchange is estimated to be a three to four percent negative impact on core EPS growth, with the vast majority of this impact affecting the first-half of fiscal 2016.
- P&G said it expects fiscal year 2015 core EPS, which is based on earnings from continuing operations, to be restated from the $4.02 level reported above to approximately $3.77 per share.
Dividend
declared a quarterly dividend of $0.6629 per share on the Common Stock and on the Series A and Series B ESOP Convertible Class A Preferred Stock of the Company, payable on or after August 17, 2015, to Common Stock shareholders of record at the close of business on July 24, 2015, and to Series A and Series B Preferred Stock shareholders of record at the start of business on July 24, 2015.
P&G has been paying a dividend for 125 consecutive years since its incorporation in 1890 and has increased its dividend for 59 consecutive years.
Management
The company recently announced David S. Taylor, group president of Global Beauty, Grooming and Health Care, will succeed A.G. Lafley as Procter & Gamble’s president and chief executive officer, effective November 1, 2015. Taylor has been appointed to the company’s board of directors. On November 1, 2015, A.G. Lafley will become Procter & Gamble’s executive chairman. In this role, Lafley will lead the Board of Directors, and provide advice and counsel to the CEO and P&G leadership on company and business strategies, portfolio choices and organization decisions.
Taylor is a proven leader who has the experience and track record of delivering results. He has a broad understanding of P&G’s business, having worked on several categories in multiple regions around the world. He has helped build many of the company’s most successful brands and businesses.
Recent news
The company recently entered into a definitive agreement to merge 43 of its beauty brands (RMT Brands) with Coty Inc. in a Reverse Morris Trust transaction. The transaction includes P&G’s global salon professional hair care and color, retail hair color, cosmetics and fine fragrance businesses, along with select hair styling brands.
Based on Coty’s current stock price and outstanding shares and equity grants, the value of the transaction is approximately $15 billion. This is a significant step forward in the work to focus PG’s portfolio on 10 categories and 65 brands that best leverage P&G’s core competencies.
(Source: Company’s Website)
Strong Attributes in 2015
The company achieved the following:
- Strong, double-digit constant currency core EPS growth.
- Very good free cash flow productivity of over 100% on modest organic sales growth.
- Significant productivity gains.
Focus at the moment
- Continued strong cost savings.
- Free cash flow productivity.
- Product innovation.
- Improvement in top-line growth.
- Operating profit margin expansion.
- Sales growth.
- P&G is targeting to pay dividends and retire shares worth up to $70 billion over a four year period from fiscal years 2016 to 2019 through a combination of shares eliminated via RMT Brands transaction and the previously announced Duracell transaction, ongoing discretionary share repurchase and continuing its strong history of dividend payments.
On a concluding note
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%.
The company is now organized into four industry-based sectors with a focused portfolio of 10 categories and 65 brands that play to P&G’s strengths. Productivity results are strong and sustainable. Stronger category business and product innovation plans are in place.
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.
