Chairman, president and chief execu- tive A.G. Lafley told shareholders at the company’s annual meeting that P&G “delivered results ahead of growth objectives in fiscal 2003—one of the better years in P&G history.”
For fiscal 2002/2003, P&G’s sales rose 8%, volume rose 8% and net earnings and net earning a share each were up 19%. Core net earnings, which exclude restructuring charges, were up 13%. Core diluted net earnings a share, which exclude restructuring charges, were up 14%.
“We’ve generated nearly $17 billion in free cash flow since fiscal 2000—two and half times the amount generated in the prior three years,” said Mr. Lafley. “P&G is performing like a leading company again.”
Mr. Lafley pointed out that in fiscal 2000, P&G brands were growing share in categories representing less than 40% of company sales. During the last six months of fiscal year 2003, shares grew in categories accounting for nearly 90% of sales.
“Building global share at this level is unprecedented in P&G history,” Mr. Lafley said. “It confirms that P&G’s business strategies are working and P&G people around the world are executing with excellence. P&G men and women are distinguishing themselves as one of the strongest generations of leaders in P&G history.”
Mr. Lafley pointed out that 100% of the company’s 2002/2003 growth was organic, coming from core, established businesses. “Acquisitions are part of P&G’s overall growth strategy,” he said. “We’ll continue to make acquisitions when they fit P&G’s sustainable growth strategy and core capabilities. Some of these acquisitions have been and will be substantial—like Wella and Clairol—but the key drivers of sustained growth should come from core businesses, over the long term.”
P&G has delivered an annualized total shareholder return of nearly 17% during the past 20 years, ahead of both the Dow Jones Industrial Average and the S&P 500. Staying at peak performance requires focus on being the best in branding, innovation, and scale. These are key strengths that set P&G apart, Mr. Lafley said. “Three years ago, there were 10 P&G brands with a billion dollars or more in sales,” he pointed out. “Today, P&G has 13 billion dollar brands. Crest, Iams and Olay have joined the club.”
Creating new brands and categories is also a focus. According to Information Resources Inc. three of the top 10 non-food products introduced in the U.S. last year were P&G products. P&G is multiplying its innovative capability with a “connect and develop” strategy that links P&G with external innovation partners. Mr. Lafley stated, “Our vision is that 50% of all P&G discovery and invention could come from outside the company.”
Mr. Lafley commented that another key strength is scale. “We’re the global leader in all of our four core businesses: laundry, baby care, hair care and feminine protection. With leadership comes scale economics. The company is building even more scale advantage with P&G’s global organization design, and is starting to see the full benefits of this unique structure. The benefits are tangible,” Mr. Lafley said.