Procter & Gamble Co. Reports 4 Percent Quarterly Sales Growth

The Procter & Gamble Co. delivered 4 percent sales growth to $22.1 billion for the October – December quarter. Growth was driven by higher volume and pricing actions, partially offset by geographic and product mix. The company continued to deliver broad-based organic sales growth, with all six business segments up versus the prior year. Diluted net earnings per share were $0.57 per share, reflecting non-core charges of $0.53 per share. The non-core items included a $0.50 per share non-cash impairment charge associated with the appliances and salon professional businesses. Core net earnings per share were $1.10, toward the high end of the company’s expectations for the quarter.

“We continue to make progress against our key business priorities in a difficult macroeconomic environment,” said Bob McDonald, chairman of the board, president and chief executive officer in a prepared statement. “We delivered solid top-line growth and continued to accelerate productivity improvements to drive down costs. With the easing of commodity cost comparisons over the next two quarters, continued solid top-line growth and cost savings progress, we expect operating profit growth to accelerate in the second half of the fiscal year.”

Net sales increased four percent to $22.1 billion in the October-December quarter. Organic sales also grew four percent. Volume increased one percent behind overall market growth, initiatives and continued market expansions. Volume grew at high single-digit rates in developing regions. This growth was partially offset by a mid-single-digit decrease in developed regions. Broad-based price increases across all segments and geographies, designed to recover higher commodity costs and devaluing developing market currencies, increased net sales by four percent. Geographic and product mix reduced net sales by one percent.

Diluted net earnings per share were $0.57, a decrease of 49 percent primarily due to non-core charges of $0.53 per share which include a $0.50 per share non-cash impairment charge. Gross margin contracted 210 basis points due mainly to higher commodity costs, partially offset by pricing and manufacturing cost savings. Selling, general and administrative expenses (SG&A) as a percentage of net sales improved 150 basis points behind net sales leverage, a reduction in overhead spending and lower charges for non-core items. Including the impact of non-core items, operating margin declined 760 basis points.

Excluding the non-core items, core net earnings per share were $1.10, and core operating margin declined 160 basis points.

Operating cash flow was $3.3 billion for the quarter and free cash flow was $2.4 billion. The company repurchased $0.5 billion of shares during the quarter and returned $1.5 billion of cash to shareholders as dividends.

Snacks and pet care net sales and organic sales increased three percent to $824 million on a two percent increase in unit volume. Pricing increased net sales by three percent. Mix reduced net sales by two percent due to unfavorable product and geographic mix. Snacks volume increased mid-single digits mainly due to increased distribution and market growth in developing regions. Pet care volume decreased low single digits due to customer inventory adjustments and market contraction. Net earnings decreased nine percent to $61 million as operating margin contraction and a higher effective tax rate more than offset net sales growth. Operating margin decreased primarily due to a decline in gross margin, partially offset by a decrease in overhead spending as a percentage of net sales. Gross margin decreased behind an increase in commodities, partially offset by price increases and manufacturing cost savings.