The Procter
& Gamble Company (NYSE:PG) increased core earnings per share by 12 percent
to $1.22 for the October – December quarter. Diluted net earnings per share
were $1.39, an increase of 144 percent. Non-core items include restructuring
charges of $0.05 per share and a $0.21 per share 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.
Organic sales
grew three percent. Net sales were $22.2 billion, an increase of two percent
versus the prior year period including a negative one percent impact from
foreign exchange. The Company delivered broad-based organic sales growth, with
all business segments increasing organic sales by two percent or more versus
the prior year.
P&G held or
grew market share in businesses representing nearly 50 percent of sales in the
October - December 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 percent of sales.
“Our second
quarter results were at the high end of our expectations on the top-line and
well ahead of forecast on operating profit, earnings per share and cash flow,”
said Chairman, President, and Chief Executive Officer, Bob McDonald. “Global
market share trends improved as we continued to implement our growth strategy
and made very good progress against our productivity and cost savings goals.
Our strong first half results have enabled us to raise our sales, earnings and
share repurchase outlook for the fiscal year, while we strengthen investments
in our innovation and marketing programs.”
Executive
Summary
- Organic sales increased three percent for the quarter, at the top end of the guidance range.
- Organic sales growth was broad-based, with all business segments increasing by two percent or more versus the prior year.
- Core net earnings per share increased by 12 percent to $1.22.
- Core gross margin increased 110 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 non-core restructuring charges, increased 80 basis points.
- Core and reported selling, general and administrative expenses (SG&A) as a percentage of net sales was unchanged, as enrollment reductions and productivity savings were offset by higher pension and employee benefit costs. Non-core charges in SG&A were in line with the prior year level.
- Core operating profit increased seven percent. Reported operating profit, including non-core charges, increased 68 percent.
- Operating cash flow was $3.8 billion for the quarter. The Company repurchased $1.4 billion of shares during the quarter and returned $1.6 billion of cash to shareholders as dividends.
Fiscal Year 2013
Guidance
P&G
increased its core earnings per share guidance for the year to $3.97 to $4.07,
up three percent to up six percent versus prior year core EPS of $3.85, behind
strong productivity improvement and resulting cost savings. P&G also raised
its all-in GAAP earnings per share guidance to a range of $4.04 to $4.14,
equating to growth of 10 percent to 13 percent versus prior year GAAP EPS of
$3.66. The increase reflects higher core earnings and an increase in the
non-core holding gain resulting from P&G’s purchase of the balance of our
Baby Care and Feminine Care joint venture in Iberia. The all-in EPS range also
includes non-core restructuring charges of $0.15.
The Company is
increasing its organic sales growth guidance to a range of three percent to
four percent for the fiscal year from a previous range of two percent to four
percent. Foreign exchange is expected to reduce sales growth by two percent,
resulting in guidance for all-in net sales growth of up one percent to two
percent versus the prior year.
The Company also
increased its outlook for share repurchase to $5 to $6 billion, up from a prior
range of $4 to $6 billion.
January – March
2013 Quarter Guidance
P&G is
estimating net and organic sales growth in the range of three percent to four
percent for the January – March quarter. Foreign exchange is expected to be
neutral to sales growth.
The Company
expects March quarter core EPS in the range of $0.91 to $0.97, down three
percent to up three percent compared to prior year core EPS of $0.94. On an
all-in basis, P&G is forecasting earnings per share in the range of $0.90
to $0.96, an increase of 10 percent to 17 percent versus prior year diluted EPS
of $0.82. Prior year all-in results included $0.13 of non-core costs, primarily
related to restructuring charges. Current year all-in EPS guidance includes
non-core restructuring charges of $0.01 per share.
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