P&G Strategies Are Working, Says CEO

Chairman, president and chief executive A.G. Lafley told shareholders at the 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 02/03, P&G sales rose 8%, volume rose 8% and net earnings and net earning per share each were up 19%. Core net earnings, which exclude restructuring charges, were up 13%. Core diluted net earnings per 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,” added Mr. Lafley. “P&G is performing like a leading company again.”

P&G business and support organizations in every part of the company delivered leadership results. “This is what you expect from P&G,” Mr. Lafley said. “Most importantly, growth has accelerated over the past three years.” 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 2002/03 growth was organic–coming from core, established businesses. “Acquisitions are part of P&G’s overall growth strategy,” Mr. Lafley 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% over 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. “Three years ago, there were 10 P&G brands with a billion dollars or more in sales,” Mr. Lafley said. “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 pointed out 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. “Better business plans, closer consumer relationships, tighter customer partnerships, more sustainable growth.”

Mr. Lafley concluded that at the heart of P&G’s “mindset” is the company’s commitment to be the most in-touch company in the world. “We are touching lives and improving life for consumers around the world.”