OREANDA-NEWS. The Procter & Gamble Company (NYSE:PG) reported fiscal year 2015 currency neutral core earnings per share growth of 11% versus the prior year. Core earnings per share were $4.02, a decrease of two percent. Diluted net earnings per share were $2.44, including a one-time charge of $2.1 billion, or $0.71 per share, for a change in the method of accounting for its Venezuelan operations from consolidation to the cost method, discussed later in this press release. Organic sales grew one percent as a two percent pricing benefit more than offset a one percent reduction in shipment volume. Net sales were $76.3 billion, a decrease of five percent versus the prior year, including a negative six percentage point impact from foreign exchange.

For the April - June 2015 quarter, core earnings per share were $1.00, an increase of eight percent versus the prior year period. Core EPS results included a $0.09 per share benefit versus the prior year from non-operating income, primarily minor brand divestiture gains. Excluding the impact of foreign exchange, currency-neutral core earnings per share increased 22%. Diluted net earnings per share were $0.18 including the one-time Venezuela charge of $0.71 per share and non-core restructuring costs of $0.07 per share. Organic sales were unchanged for the quarter as a three percentage point benefit from pricing and mix was offset by lower shipment volume. Net sales were $17.8 billion, a decrease of nine percent versus the prior year period driven by a negative nine percentage point impact from foreign exchange.

“In fiscal 2015, P&G delivered strong, double-digit constant currency core EPS growth and very good free cash flow productivity of over 100% on modest organic sales growth,” said Chairman, President, and Chief Executive Officer A.G. Lafley. “We made significant productivity gains and have largely executed the reshaping of our business portfolio. Going forward, our objective is to deliver balanced results across the three main drivers of operating total shareholder return - sales growth, operating profit margin expansion and free cash flow generation. We expect continued strong cost savings and free cash flow productivity, and we are investing behind product innovation to support an improvement in top-line growth.”

Fiscal Year Discussion

In fiscal year 2015 net sales decreased five percent to $76.3 billion, including a negative six percentage point impact from foreign exchange. Organic sales grew one percent. Organic sales were above year ago levels in four of five business segments. Volume declined one percent. Pricing increased sales by two percent with higher pricing in all five business segments.

Fiscal 2015 Net Sales Drivers

  

Volume

  

Foreign
Exchange

  

Price

  

Mix

  

Other*

  

Net
Sales

          

Organic
Volume

  

Organic
Sales
Beauty, Hair and Personal Care   (4)%   (5)%   2%   0%   0%   (7)%           (3)%   (1)%
Grooming   (3)%   (8)%   4%   0%   0%   (7)%           (3)%   1%
Health Care   (1)%   (5)%   2%   3%   0%   (1)%           (1)%   4%
Fabric Care and Home Care   1%   (6)%   1%   0%   (1)%   (5)%           1%   2%
Baby, Feminine and Family Care   (1)%   (6)%   2%   2%   0%   (3)%           (1)%   3%
Total P&G   (1)%   (6)%   2%   0%   0%   (5)%           (1)%   1%

* Other includes the sales mix impact of acquisitions/divestitures and rounding impacts necessary to reconcile volume to net sales.

  • Beauty, Hair and Personal Care segment organic sales declined one percent as pricing benefits only partially offset lower volume. Innovation-driven sales growth in Cosmetics and Salon Professional was offset by a sales decline in Skin and Personal Care due to competition and decreased sales in Prestige due to lower levels of innovation. Hair Care organic sales were unchanged as modest growth from pricing in developing markets was offset by lower volume in developing regions due to competitive activity.
  • Grooming segment organic sales increased one percent due to higher pricing and innovation on Blades & Razors and Appliances, which was partially offset by lower volume mainly due to a combination of continued decline in consumer shaving incidents and customer inventory reductions.
  • Health Care segment organic sales increased four percent due to favorable mix and pricing in both Oral Care and Personal Health Care, more than offsetting lower volume due to competitive activity.
  • Fabric Care and Home Care segment organic sales increased two percent with growth across each business. Fabric Care sales grew behind volume increases from product innovation and pricing while Home Care sales benefited from favorable product mix. Sales also increased in P&G Professional due to higher volume from increased distribution.
  • Baby, Feminine and Family Care segment organic sales increased three percent driven by pricing, mainly in Baby Care and Feminine Care, positive product mix from Baby Care premium products and the Feminine Care adult incontinence launch, and favorable geographic mix in all businesses. These gains were slightly offset by a modest decline in Family Care from reduced distribution in Latin America and reduced pricing in North America.

Core earnings per share were $4.02, a decrease of two percent versus the prior year. This excludes losses from discontinued operations driven by non-cash impairment charges related to the batteries business, the Venezuela charge, non-core restructuring charges, charges for European legal matters and balance sheet devaluation charges resulting from foreign exchange policy changes in Venezuela prior to the change in accounting. Excluding the impact of foreign exchange, currency-neutral core earnings per share increased 11% for the year. Diluted net earnings per share from continuing operations decreased 21% to $3.06 including the one-time $0.71 per share impact from the Venezuela charge. Diluted net earnings per share were $2.44, a decrease of 39% versus the prior year including the Venezuela charge and a $0.62 per share loss from discontinued operations.

Reported gross margin decreased 10 basis points, including 30 basis points of non-core restructuring charges. Core gross margin improved 30 basis points, including 40 basis points of negative foreign exchange impacts. On a currency-neutral basis, core gross margin increased 80 basis points, driven by 200 basis points of productivity cost savings and a 90 basis point benefit from pricing, which more than offset headwinds from 140 basis points of mix, 40 basis points from innovation and capacity investments and 20 basis points from higher commodity costs.

Selling, general and administrative expense (SG&A) increased 10 basis points on a reported basis versus the prior year, including a 30 basis point net benefit from a year-on-year decline in non-core Venezuelan balance sheet re-measurement charges, which was partially offset by a 10 basis point increase in non-core restructuring charges. Core SG&A as a percentage of sales increased 30 basis points, including 90 basis points of foreign exchange impacts. On a currency-neutral basis, core SG&A decreased 60 basis points versus the prior year driven by 130 basis points of productivity savings from overhead and marketing costs, which were partially offset by 70 basis points of organization capability investments and other operating items.

Reported operating profit margin decreased 280 basis points driven by the impact of the non-core Venezuela charge. Core operating profit margin was unchanged versus the prior year, including 130 basis points of foreign exchange impacts. On a currency-neutral basis, core operating profit margin increased 130 basis points, including 330 basis points of productivity cost savings.

Operating cash flow was $14.6 billion for the year. Adjusted free cash flow productivity was 102%. The Company repurchased $4.6 billion of common stock and returned $7.3 billion of cash to shareholders as dividends. P&G announced an increase to the quarterly dividend in April, making this the 59th consecutive year of dividend increases.