Procter & Gamble: April-June (AMJ) ’17
P&G announced results from its AMJ ‘17 quarter, delivering profit and sales ahead of Wall Street estimates. These results represent the fourth quarter of P&G’s 2017 fiscal year (FY). P&G saw organic sales growth of +2% behind shipment volume with organic volume growth across all 5 operating segments. The Beauty (+5% organic sales growth) and Fabric & Home Care (+5% organic sales growth) segments led the way during the quarter from an organic sales perspective. The bottom line, or net income attributable to the company, excluding items, rose 85 cents per shares vs. analysts’ estimates of 78 cents per share.
Some key highlights for the quarter:
- Organic Sales Growth – While ‘net’ sales growth was flat for the quarter, ‘organic’ sales growth increased +2%. Organic sales growth takes net sales growth and excludes the impacts from foreign exchange and acquisitions and divestitures (A&D), which better defines growth generated within the company. Organic sales growth for FY ‘17 was also +2%. P&G had guided its FY ’17 organic sales growth to a range of +2-3% and is guiding its FY ‘18 organic sales growth target to a range of +2-3%.
- Operating Segments – P&G is divided into 5 operating segments: Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine and Family Care. Organic volume and organic sales numbers for the quarter are:
Fabric & Home Care
Baby, Feminine & Family Care
Organic sales in Beauty were up largely behind high single digit increases in Skin & Personal Care. Grooming sales declined primarily behind reduced pricing in Shave Care. Health Care sales decreased as lower Oral Care sales due to competitive activity and lower Personal Health Care sales were only partially offset by continued success in product innovation. Fabric Care and Home Care organic sales both increased mid-single digits due to increased volume from product innovation. Baby, Feminine & Family Care organic sales were flat as decreases in Baby Care from competitive activity were offset by modest increases in Feminine Care and Family Care.
- Continued Cash Focus – P&G reiterated its cash friendly position with regards to shareholders. For the fiscal year, the company paid out nearly $22 billion to investors in the form of dividends ($7.2 billion), direct share buybacks (~$5 billion) and share buybacks through the Coty exchange ($9.4 billion).
- Strategically Focused – P&G is now a 10-category, 65-brand company after the most recent round of brand divestitures. It is committed to competing in the 10 largest, most structurally attractive categories where P&G holds market leading positions. Their focus is not just on growing their market share, but rather growing the market as a whole. They intend to do this while focusing on the balance sheet (inventory days, days payable, etc.) as well as the profit and loss (P&L) statement (net sales, gross margins, etc.). They have also stated they will not compete in the lowest priced tiers where products are easily commoditized, but they will rather offer smaller pack sizes to cash strapped consumers, providing a win for the company and the end user.
P&G said it is projecting organic sales growth in the range of two to three percent for fiscal year 2018. Among various areas it is looking to see improvements in are the US male Blades & Razors category behind recent price reductions and the Chinese diaper category behind supply chain improvements. Provided their efforts to grow the topline, reduce costs and remain a company that puts the needs and wants of the consumer first, the renewed focus and efforts they have underway should play out in their favor.
P&G is an example of the type of stock that we use to build The HCM Dividend Growth Portfolio™. This portfolio provides the opportunity for appreciation that comes from equity exposure, while giving investors a growing stream of income through market cycles.
If you want to walk through this together or just talk about P&G, feel free to reach out to me at [email protected].
Date Posted: 7/27/2017 Information provided in this article is meant for educational purposes only and financial education is important to us. This article should not be taken as advice to buy, sell, or hold P&G stock. Before making decisions regarding your personal financial situation, please consult an advisor or conduct your own due diligence. If you would like to discuss your P&G Retirement Income Plan with an HCM Wealth Advisor, please give us a call – 513-598-5120. Located in Cincinnati, Ohio, we serve clients in 23 states, and we’d love to help.