P&G Announces Fiscal Year 2024 Third Quarter Results
Net Sales +1%; Organic Sales +3%
Diluted EPS and Core EPS $1.52, each +11%
MAINTAINS FISCAL YEAR SALES AND CASH RETURN GUIDANCE
RAISES EPS GROWTH GUIDANCE
CINCINNATI--(BUSINESS WIRE)--April 19, 2024--
The Procter & Gamble Company (NYSE:PG) reported third quarter fiscal year 2024 net sales of $20.2 billion, an increase of one percent versus the prior year. Organic sales, which excludes the impacts of foreign exchange and acquisitions and divestitures, increased three percent. Diluted net earnings per share were $1.52, an increase of 11% versus prior year.
Operating cash flow was $4.1 billion, and net earnings were $3.8 billion for the quarter. Adjusted free cash flow productivity was 87%, which is calculated as operating cash flow excluding capital spending, as a percentage of net earnings. The Company returned $3.3 billion of cash to shareowners via approximately $2.3 billion of dividend payments and $1 billion of share repurchases. The dividend increase declared earlier this month marks the 68th consecutive year that P&G has increased its dividend and the 134th consecutive year that P&G has paid a dividend since its incorporation in 1890.
Third Quarter ($ billions, except EPS)
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GAAP 2024 2023 % Change Non-GAAP* 2024 2023 % Change
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Organic
Net Sales 20.2 20.1 1% Sales n/a n/a 3%
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Diluted
EPS 1.52 1.37 11% Core EPS 1.52 1.37 11%
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*Please refer to Exhibit 1 - Non-GAAP Measures for the definition and
reconciliation of these measures to the related GAAP measures.
“We delivered solid sales and strong earnings growth in the third quarter despite multiple headwinds, enabling us to raise our EPS growth guidance and maintain our top-line outlook for the fiscal year,” said Jon Moeller, Chairman of the Board, President and Chief Executive Officer. “We remain committed to our integrated strategy of a focused product portfolio of daily use categories where performance drives brand choice, superiority — across product performance, packaging, brand communication, retail execution and consumer and customer value — productivity, constructive disruption and an agile and accountable organization. We are increasing investments in superiority to drive market growth and sustain strong momentum. We have confidence this remains the right strategy to deliver balanced growth and value creation.”
January – March Quarter Discussion
Net sales in the third quarter of fiscal year 2024 were $20.2 billion, a one percent increase versus the prior year. Organic sales, which exclude the impacts of foreign exchange and acquisitions and divestitures, increased three percent. The organic sales increase was driven by a three percent increase from higher pricing. Mix and volume had a neutral impact on sales for the quarter.
January -
March
2024
--------- ------ -------- ----- ---- -------- -------- ------- -------
Net Sales
Drivers Foreign Other Net Organic Organic
(1) Volume Exchange Price Mix (2) Sales Volume Sales
--------- ------ -------- ----- ---- -------- -------- ------- -------
Beauty 1% (3)% 4% (1)% 1% 2% 1% 3%
Grooming 2% (7)% 10% (1)% (1)% 3% 2% 10%
Health
Care (4)% (1)% 4% 3% --% 2% (4)% 2%
Fabric &
Home
Care 1% (1)% 2% --% --% 2% 1% 3%
Baby,
Feminine
& Family
Care (3)% (2)% 2% 1% --% (2)% (3)% --%
--------- ------ -------- ----- ---- -------- -------- ------- -------
Total
P&G --% (2)% 3% --% --% 1% --% 3%
--------- ------ -------- ----- ---- -------- -------- ------- -------
(1) Net sales percentage changes are approximations based on quantitative
formulas that are consistently applied.
(2) Other includes the sales mix impact from acquisitions and divestitures
and rounding impacts necessary to reconcile volume to net sales.
-- Beauty segment organic sales increased three percent versus year ago.
Skin and Personal Care organic sales declined low single digits due to
lower sales of the super-premium SK-II brand, partially offset by volume
growth from innovation in Personal Care. Hair Care organic sales
increased high single digits driven by increased pricing in Latin America,
Europe and North America.
-- Grooming segment organic sales increased ten percent versus year ago
driven primarily by higher pricing in Latin America and Europe. Volume
growth was partially offset by unfavorable product mix.
-- Health Care segment organic sales increased two percent versus year
ago. Oral Care organic sales increased mid-single digits due to premium
product mix, partially offset by volume declines mainly in Asia Pacific
and North America. Personal Health Care organic sales increased low
single digits driven by increased pricing, partially offset by volume
declines due to lower incidence of cough and cold.
-- Fabric and Home Care segment organic sales increased three percent
versus year ago. Fabric Care organic sales increased low single digits
due to increased pricing and favorable geographic mix due to growth in
North America and Europe. Home Care organic sales increased high single
digits due to increased pricing and volume growth from innovation.
-- Baby, Feminine and Family Care segment organic sales were unchanged
versus year ago. Baby Care organic sales decreased mid-single digits due
primarily to pricing-related volume declines, partially offset by
favorable product mix and devaluation-related price increases. Feminine
Care organic sales increased low single digits driven by increased
pricing and favorable product mix, partially offset by pricing-related
volume declines. Family Care organic sales increased low single digits
due to volume growth, partially offset by unfavorable product mix.
Diluted net earnings per share increased by 11% to $1.52, driven by an increase in net sales and an increase in core operating margin. Currency-neutral EPS were up 18% versus the prior year EPS.
Reported gross margin for the quarter increased 300 basis points versus the prior year. Core gross margin for quarter increased 310 basis points and 400 basis points on a currency-neutral basis. The increase was driven by benefits of 260 basis points from gross productivity savings, 130 basis points of favorable commodity costs and 130 basis points from increased pricing. These were partially offset by 100 basis points of unfavorable gross margin product mix and 20 basis points of product reinvestments and other impacts.
Selling, general and administrative expense (SG&A) as a percentage of sales increased 210 basis points versus year ago and 170 basis points on a currency-neutral basis. The increase was driven by 330 basis points of reinvestments, partially offset by 60 basis points of productivity savings and 100 basis points of net sales growth leverage and other impacts.
Operating margin for the quarter increased 90 basis points versus the prior year, 220 basis points on a currency-neutral basis. Operating margin included gross productivity savings of 320 basis points.
Fiscal Year 2024 Guidance
P&G maintained its guidance range for fiscal 2024 all-in sales growth to be in the range of two to four percent versus the prior year. Foreign exchange is expected to be a headwind of approximately one to two percentage points to all-in sales growth. The Company also maintained its outlook for organic sales growth in the range of four to five percent.
P&G raised its fiscal 2024 diluted net earnings per share growth from a range of -1% to inline to a range of one to two percent versus fiscal 2023 EPS of $5.90. P&G also raised its fiscal 2024 core net earnings per share growth from a range of eight to nine percent to a range of 10% to 11% versus fiscal 2023 EPS.
P&G now expects unfavorable foreign exchange rates will be a headwind of approximately $600 million after tax. The Company expects the net impact of interest expense and interest income to be a headwind of approximately $100 million after tax. The Company now expects a benefit of approximately $900 million after tax from favorable commodity costs for fiscal year 2024.
The Company is unable to reconcile its forward-looking non-GAAP cash flow and tax rate measures without unreasonable efforts given the unpredictability of the timing and amounts of discrete items, such as acquisitions, divestitures, or impairments, which could significantly impact GAAP results.
P&G now expects a core effective tax rate of 20% to 21% in fiscal 2024.
Capital spending is estimated to be approximately 4% of fiscal 2024 net sales.
P&G continues to expect adjusted free cash flow productivity of 90% and expects to pay more than $9 billion in dividends and to repurchase $5 to $6 billion of common shares in fiscal 2024.