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P&G's Baby Care organic sales go up

31 Oct '12

4 min read

The Procter & Gamble Company (P&G) increased core earnings per share by five percent to $1.06 for the July-September quarter. Diluted net earnings per share from continuing operations were $0.96, a decrease of five percent due to non-core charges of $0.10. Organic sales grew two percent. Net sales were $20.7 billion, a decrease of four percent versus the prior year period including a negative six percent impact from foreign exchange. The Company continued to deliver broad-based organic sales growth, with four of five business segments increasing versus the prior year.

P&G said it held or grew market share in businesses representing over 45% of sales in the July - September quarter, as measured on a constant currency value basis. In the U.S. market, P&G held or grew value share in businesses representing nearly 60% of sales.

“Our first quarter results put us on track to deliver our commitments for the fiscal year. Results were at the high end of expectations on the top line and ahead of plan on operating profit, earnings per share and cash,” said Chairman, President and Chief Executive Officer, Bob McDonald.

“We are continuing to focus on executing our growth and productivity strategy – maintaining momentum in developing markets, strengthening our core developed market business, building a strong innovation pipeline, and aggressively driving cost savings and productivity improvements. We're confident that this strategy will enable P&G to generate superior levels of shareholder return in both the short- and long-term.”

Executive Summary

• Organic sales increased two percent for the quarter at the top end of the guidance range.
• Organic sales growth was broad-based, with four of five business segments increasing organic sales.
• Core net earnings per share increased by five percent to $1.06.
• Core gross margin increased 80 basis points due to the impact of higher pricing and manufacturing cost savings, partially offset by unfavorable geographic and product mix. Reported gross margin, including restructuring, increased 30 basis points.
• Core selling, general and administrative expenses (SG&A) as a percentage of net sales decreased 10 basis points. Including incremental restructuring and other non-core charges, reported SG&A increased 90 basis points.
• Core operating profit increased one percent. Reported operating profit, including non-core charges, decreased seven percent.
• Operating cash flow was $2.8 billion for the quarter. The Company repurchased $2.6 billion of shares during the quarter and returned $1.6 billion of cash to shareholders as dividends.

P&G maintained its organic sales growth guidance in the range of two percent to four percent for the fiscal year. Foreign exchange is expected to reduce sales growth by two percent to three percent, resulting in guidance for all-in net sales growth of in-line to up one percent versus the prior year.

The Company also maintained its core earnings per share guidance in the range of $3.80 to $4.00, down one percent to up four percent versus prior year core EPS of $3.85. P&G raised its all-in GAAP earnings per share guidance by $0.17 per share to a range of $3.78 to $4.02, equating to growth of three percent to 10% versus prior year GAAP EPS of $3.66. The $0.17 per share increase is the estimated non-core holding gain resulting from P&G's purchase of the balance of P&G's Baby Care and Feminine Care joint venture in Iberia, which was completed on October 22, 2012.

The transaction is expected to be roughly neutral to core EPS results this fiscal year as the ongoing benefits from full ownership of the business will be offset by one-time transitional costs. The all-in EPS range also includes non-core restructuring investments of $0.15 to $0.19 per share, consistent with the Company's prior outlook.

Baby Care organic sales grew as higher pricing and strong growth in developing markets were partially offset by market contraction in developed regions. Baby Care all-in net sales were down due to a significant foreign exchange impact. Family Care all-in and organic sales increased behind new innovations on Charmin and Bounty.

The Procter & Gamble Company (P&G)