• Organic Sales Growth: 3% for the quarter.
• Core Earnings Per Share (EPS): $1.88, up 2% versus prior year.
• Core Gross Margin: Down 30 basis points.
• Core Operating Margin: Declined 80 basis points.
• Adjusted Free Cash Flow Productivity: 84%.
• Cash Returned to Shareowners: Over $4.9 billion, including $2.4 billion in dividends and $2.5 billion in share repurchase.
• North America Organic Sales Growth: 4%, driven by 4 points of volume growth.
• Europe Focused Markets Organic Sales Growth: 4%, driven by 4 points of volume growth.
• Greater China Organic Sales Decline: 3%.
• Currency Neutral Core EPS Increase: 3%.
• Productivity Improvement: 260 basis points.

• Warning! GuruFocus has detected 7 Warning Sign with SFNC.

Release Date: January 22, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Procter & Gamble Co (NYSE:PG) reported a 3% growth in organic sales for the quarter, with volume contributing 2 points and mix contributing 1 point.
• The company achieved broad-based growth across 10 product categories, with family care experiencing double-digit growth.
• North America and Europe focused markets both reported 4% organic sales growth, driven by volume increases.
• Procter & Gamble Co (NYSE:PG) returned over $4.9 billion of cash to shareholders this quarter, including $2.4 billion in dividends and $2.5 billion in share repurchases.
• The company has delivered 26 consecutive quarters of 2% or better organic sales growth, averaging 5.5% over the past 6.5 years.

Negative Points

• Greater China organic sales declined by 3%, although this was an improvement from a 15% decline in the previous quarter.
• Core gross margin was down 30 basis points, and core operating margin declined 80 basis points.
• The company faces a $300 million after-tax headwind from foreign exchange rates, equating to a $0.12 per share impact for fiscal '25.
• Procter & Gamble Co (NYSE:PG) anticipates a commodity cost headwind of approximately $200 million after tax for fiscal '25.
• The Asia, Middle East, and Africa region experienced a low single-digit decline in organic sales.

Q & A Highlights

Q: Can you provide an update on the performance in fiscal Q2 and expectations for organic sales growth in the back half of the year? A: Andre Schulten, CFO, explained that 85% of the business, including the US, Europe, and Latin America, continues to grow at around 4%. The remaining 15%, mainly Asia, Middle East, and Africa, showed significant improvement, particularly in Greater China, which improved from a 15% decline in Q1 to a 3% decline in Q2. The expectation is for continued recovery in these markets, with potential for organic sales growth to reach the midpoint or higher of the guidance range.

Q: What are you seeing in terms of consumer behavior and dynamics in the US and Europe? A: Andre Schulten, CFO, described the consumer environment in their categories as stable. In Europe, market growth is around 4%, with inflation down to about 2%. In the US, consumption was volatile but stable overall, with market growth around 4%. Jon Moeller, CEO, added that private label shares are flat to declining, indicating a stable consumer environment.

Q: Can you discuss the impact of foreign exchange rates and the productivity and pricing levers available to offset these dynamics? A: Andre Schulten, CFO, stated that they are forecasting at spot rates and expect the FX impact to hit mostly in the second half. They are confident in their productivity guidance and will use pricing levers, particularly in Enterprise Markets, to offset FX impacts. Jon Moeller, CEO, emphasized that innovation is the primary enabler of modest pricing increases.

Q: How did Chinese New Year impact the 3% decline in Greater China, and are there strategic opportunities in the changing market? A: Andre Schulten, CFO, noted that the results were not heavily impacted by phasing, and they are seeing progress in China with innovations in hair care and fabric care. Jon Moeller, CEO, highlighted strategic changes, such as aligning distributor compensation by category and moving operations closer to the US model, to take advantage of market changes.

Q: What is your perspective on the input cost environment and its impact on the full-year guidance? A: Andre Schulten, CFO, explained that most input cost variations will not impact the current year due to contract structures, with any major deviations affecting the first half of the next fiscal year. They are focusing on managing FX volatility and preparing for potential input cost changes in the future.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.