Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Procter & Gamble Co (PG, Financial) achieved 4% organic sales growth for the fiscal year, marking the sixth consecutive year of 4% or better growth.
- Core earnings per share (EPS) increased by 12% to $6.59, with core gross margin improving by 360 basis points.
- E-commerce sales grew by 9%, now representing 18% of total company sales.
- The company returned over $14 billion to shareholders through dividends and share repurchases.
- Procter & Gamble Co (PG) saw broad-based growth across most product categories and regions, with 9 out of 10 product categories growing in Q4.
Negative Points
- Greater China organic sales declined by 9% for the fiscal year, driven by soft market conditions and brand-specific headwinds.
- Volume trends in some Europe enterprise and Asia Pacific, Middle East Africa countries remained soft.
- Global aggregate market share was down by 30 basis points as the company annualized strong growth in European focus markets.
- Core operating margin decreased by 100 basis points in Q4, despite strong productivity improvements.
- The company faces ongoing headwinds from input costs, currencies, and geopolitical challenges, which are expected to persist into fiscal 2025.
Q & A Highlights
Q: The question that we feel that a few times this morning and if you could touch on this a bit, just in the last couple of quarters, it seems like organic sales have come in maybe slower or lower than expected than you were expecting at the start of each quarter. So maybe if you could touch a little bit on just what's developed, especially in the fourth quarter on maybe different than what you were expecting. And then if you can add to that also, just Is that true for the market? So what I'd add 2% organic sales for this quarter are we above below or in line with market growth? Thanks.
A: Morning, Brian. I'll start and then John, I'm sure, will add some perspective as well. I'll step back where we kind of start of the prepared remarks. I think we delivered a year where we exceeded or met all of our ongoing guidance metrics. Now the year wasn't linear as you highlight. And I distinguish two parts of the business, 85% of the business is performing right in line with expectations and right in line with what we would have expected throughout the year. We have strong growth in North America, 4% in the quarter, up 4% volume growth in the quarter. Europe focus markets growing volumes, that 3%, Europe enterprise markets growing volumes at 6%, LA normalizing to about 8% organic sales growth. So that part of the business where the trajectory of not impacted by significant external events, I think is moving right along. We expected the normalization and price mix contribution as we have talked throughout the quarters. If you look at the headwinds that we started to communicate in December, they are really still with us in throughout the second half. And that's what's driving the volatility in the top line results. Those headwinds have accelerated in part and honesty in Q4. Some of them developed late in the quarter. So when you think about China and SK2 were heavily impacted by a 618, weaker consumption period in China. And overall market sentiment in China has not improved throughout H2. We had highlighted that we expect the China recovery to be slow and to take time, and I think that's playing out in the results we see in the second half. The Middle East situation has not really improved. So we continue to see developing stronger impact on Western retailers in some of these markets. And while the team has implemented many interventions, the execution in store has been limited by some of these headwinds in the Middle East. The last element, we saw a softening in Q4 on the Argentina volumes, driven by the general circumstances in the market, strong hyperinflation pricing in Argentina. So that was a soft the contribution on organic sales growth in Q4 than we've seen in quarter three. If you step back though, the performance of the business and the way we set up for 25 I think is very strong. 85 of the business is developing right in line with what we would have expected. Going share in North America, the balance of the markets are growing volume, which is really the shift we needed to see. Our gross margin is at record levels of productivity is very strong. That has enabled us to remain fully invested from a media perspective and from an innovation perspective. And so going into the year, we feel all the structural elements of the business are strong. Now what is important to understand? And we mentioned it in the prepared remarks. Those headwinds that we have experienced in H2 will still be with us in H1 of this fiscal year. So we expect this year not to be linear, and we have to accelerate sales growth throughout the quarters as some of these headwinds annualize and we return to growth. But overall, I think we're well set up to deliver against the guidance metrics we just communicated.
Jon Moeller - Procter & Gamble Co - Chairman of the Board, President, Chief Executive Officer: I agree with everything that Andre just said. I will remind you relevance of performing versus our own expectations precisely because of the volatility of the world that we all live and operate in, we don't provide quarterly guidance. We only provide annual guidance. And as Andre said, we met or beat each of those numbers that we've provided. There been two kind of primary questions that have been -- that we've all been working through. One is can we reaccelerate volume? And as Andre said, that that is broadly happening and impressively so. So if we look at North America, over the course of the fiscal year, plus three, plus three, plus four, plus three. If we look at Europe plus two plus three plus four plus two. Andre gave the figures for some of the other regions on. But broadly, that question of can volume we accelerated some is answered with an emphatic yes. The second question that at least we've been working through is can that happen in the context of continued margin expansion? If you look at the fiscal year numbers top line to bottom line, that's definitely happened. If you look at gross margin in the quarter within two year high, we're certainly able to continue to reaccelerate volume growth while holding our building on margins. So like Andre, I approached next year and a realistic fashion and realizing with the first couple of quarters are going to look a little bit more like the one that we just completed. But with overall, I believe that the fundamentals of the business are very strong shape. And then as we bring the innovation that's planned to markets throughout the fiscal year, we're going to be happy with the results in line with the guidance that that he's provided. One other element of the strength and health of the business. Fundamentally, if you look at the last fiscal year and a brand level, 21 and 25 brands were growing. 11 of those 25 brands were growing at high single digit or higher rates. So again, from a breadth standpoint, I think we're positioned very well and the team's doing a great job.
Q: On the three to five for organic sales growth guidance for fiscal 25, can you just parse out a bit more detail in terms of how you're thinking about the balance between pricing and volume? You may want to be exact. But how you're thinking about that in the three to five, 4% category growth assumption? Do you think there's good visibility there given the slowing pricing? And then acute philosophy with the Part B is just how do you think about earnings flex relative to top line given some of the top line volatility? Obviously, significant year-over-year growth margin expansion in fiscal 24 attached anticipating the boost in marketing a lot. And you've got strong productivity. As you mentioned, there's a lot going on sort of in the margin line items. So just how do you think about earnings flex next year relative to top-line growth given some of this volatility? Thanks.
A: Thanks, Dara. I'm going to turn it over to Andre to take us through some of the details and then I'll round out the answer. But go ahead, Andre. Yes, thanks for the question. Dara, the volume versus price mix contribution is expected to be broadly balanced. We expected markets to return to more sustainable growth rate of 3% to 4%. That
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
