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P&G announces financial results

P&G

The Procter & Gamble Company announced fourth quarter and fiscal year 2021 results.

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David Taylor, Chairman, President and Chief Executive Officer said, “We delivered another year of strong results with balanced top and bottom-line growth and strong cash generation, exceeding each of our in-going targets. We built strong momentum prior to the pandemic and have strengthened our position further. As we look forward to fiscal 2022, we expect to continue to grow top-line and bottom-line and to deliver another year of strong cash return to shareholders despite a challenging cost and operating environment.”

The Company reported fiscal year 2021 net sales of US$76.1 billion, an increase of seven percent versus the prior year. Excluding the impacts of foreign exchange, acquisitions and divestitures, organic sales increased six percent, driven by a three percent increase in organic volume, a two percent impact from positive mix and one percent from increased pricing. Diluted net earnings per share were US$5.50, an increase of 11 percent versus the prior year primarily due to the increase in net sales and an increase in operating margin. Core earnings per share and currency-neutral core EPS both increased 11 percent versus the prior year to US$5.66.

The Company generated US$18.4 billion of operating cash flow in fiscal 2021 with adjusted free cash flow productivity of 107 percent. The Company returned US$19.3 billion of value to shareholders in fiscal 2021 through US$8.3 billion in dividend payments and US$11 billion of share repurchases.

The Company reported fourth quarter fiscal year 2021 from April to June net sales of US$18.9 billion, an increase of seven percent versus the prior year. Excluding the impacts of foreign exchange, acquisitions and divestitures, organic sales increased four percent. Diluted net earnings per share were US$1.13, an increase of six percent versus the prior year reported EPS and a decrease of three percent versus the prior year Core earnings per share. Operating cash flow was US$4.1 billion for the quarter. Free cash flow productivity was 117 percent.

Net sales in the fourth quarter of fiscal year 2021 were US$18.9 billion, an increase of seven percent versus the prior year. Favorable foreign exchange had a three percentage point positive impact on sales for the quarter.

Excluding the impacts of foreign exchange, acquisitions and divestitures, organic sales increased four percent driven by a one percent increase in shipment volume, a one percent increase in pricing and positive mix impact of one percent. Positive mix was driven by the disproportionate growth of the Health Care segment and the Skin and Personal Care category, both of which have higher than company-average selling prices. The volume increase was driven by strong innovation, partially offset by the higher base period in certain markets and categories due to pandemic-related consumption increases.

Beauty segment organic sales increased six percent versus year ago. Skin and Personal Care organic sales increased double digits primarily driven by innovation, increased pricing and positive mix impact from the disproportionate growth of the super-premium SK-II brand, due to pandemic-related travel disruptions in the base period.

Hair Care organic sales increased low single digits primarily due to increased pricing, partially offset by negative mix from growth in emerging markets. Higher current year volumes in certain markets due to pandemic related shutdowns in the base period were offset by lower volumes in North America due to the impact of pandemic-related inventory restocking in the base period.

Grooming segment organic sales increased six percent versus year ago. Shave Care organic sales increased mid-single digits due to innovation, pricing and increased volume versus a base period that was negatively impacted by pandemic-related consumption decreases.

Appliances organic sales increased mid-single digits due to the positive mix impact from the launch of premium products and increased pricing partially offset by lower volumes due to a pandemic-related consumption increase in the base period.

Health Care segment organic sales increased 14% for the quarter. Oral Care organic sales increased mid-teens, primarily due to innovation, increased pricing, positive mix impacts from the disproportionate growth of premium products and, to a lesser extent, lower volumes in the base period due to pandemic related shutdowns.

Personal Health Care organic sales increased mid-teens primarily due to innovation and price increases in some markets, partially offset by negative product mix due to the lower relative volumes of premium respiratory products.

Fabric and Home Care segment organic sales increased two percent for the quarter. Fabric Care organic sales increased mid-single digits driven by innovation and positive mix from the disproportionate growth of premium forms like fabric enhancer beads and laundry unit dose.

Home Care organic sales decreased low single digits primarily due to unfavorable mix due to volume growth in emerging markets and lower volumes in North America and Western Europe due to pandemic-related consumption increases in the base period.

Baby, Feminine and Family Care segment organic sales decreased one percent versus year ago. Baby Care organic sales increased mid-single digits driven by positive mix impact from the disproportionate growth of premium diaper pant products, higher volumes due to pandemic-related consumption decreases in the base period and devaluation-related price increases.

Feminine Care organic sales increased mid-single digits primarily driven by innovation, pandemic related shutdowns in certain regions in the base period and positive mix impact due to the disproportionate growth of premium products including adult incontinence. Family Care organic sales decreased double digits primarily due to lower volumes driven by pandemic-related consumption increases in the base period.

Diluted net earnings per share were US$1.13 for the quarter, a six percent increase versus the prior year reported EPS due to a 4 percent increase in net earnings and a reduction in shares outstanding. The increase in net earnings was primarily driven by the increase in net sales partially offset by a reduction in operating margin. Diluted net EPS decreased three percent versus the prior year Core EPS due to a decrease in operating margin and incremental non-core restructuring charges in the base period, partially offset by the increase in net sales and the reduction in shares outstanding. Currency-neutral net EPS decreased four percent versus the prior year Core EPS.

Reported gross margin decreased 120 basis points versus prior year reported gross margin. Reported gross margin decreased 260 basis points versus the prior year core gross margin due to 140 basis points of non-core restructuring charges in the base period.

Foreign exchange had no impact to gross margin. The decrease in gross margin versus the prior year core gross margin was driven by 210 basis points of unfavorable mix, 140 basis points of commodity cost increases, 80 basis points of higher freight costs and 60 basis points of reinvestments and other impacts. These higher costs were partially offset by 180 basis points of productivity savings (100 basis points net of freight cost increases) and 50 basis points of pricing benefit.

Selling, general and administrative expense (SG&A) as a percentage of sales decreased 20 basis points on a reported basis versus the prior year. SG&A as a percentage of sales decreased 30 basis points versus the prior year core SG&A due to approximately 10 basis points of lower non-core restructuring charges in the base period. Foreign exchange increased SG&A by approximately 20 basis points.

On a currency-neutral basis, reported SG&A as a percentage of sales decreased approximately 60 basis points versus prior year core SG&A driven by 140 basis points of savings from overhead and marketing expenses, 100 basis points of cost leverage benefit from increased sales and 40 basis points of other benefits. These decreases were partially offset by 170 basis points of increased marketing investments, and 50 basis points of wage inflation, increased incentive compensation and other impacts.

Operating profit margin decreased 100 basis points versus the base period reported operating margin. Reported operating profit margin decreased 230 basis points versus the base period core operating margin due to approximately 130 basis points of non-core restructuring charges in the base period.

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Unfavorable foreign exchange negatively impacted operating margin by approximately 20 basis points. On a currency-neutral basis, reported operating margin decreased 210 basis points versus the prior year core operating margin. Operating margin included productivity cost savings of 320 basis points (240 basis points net of freight cost increases).