P&G FY16 Tops Estimates As Sales, Earnings Fall

Procter & Gamble reported declines in sales and earnings for fiscal 2016, but the results still beat analysts’ estimates.

Net sales fell 8% to $65.3 billion. Operating cash flow was $15.4 billion for the year. The company also returned $7.4 billion of cash to shareholders as dividends. P&G announced an increase to the quarterly dividend in April, making this the 60th consecutive year of dividend increases.

April-June 2016 quarterly net sales fell 3% to $16.1 billion. However, beauty segment organic sales grew 1% driven by pricing benefits and higher organic volume. Organic sales increased in skin and personal care driven by growth of the super-premium SK-II skin care brand, partially offset by lower sales of Olay. Hair care organic sales were unchanged as innovation-driven growth on Pantene and Head & Shoulders was offset by declines in other brands from competitive activity.

Grooming segment organic sales increased 7% driven by higher pricing and volume. Sales growth was strong in developing markets driven by Fusion FlexBall innovation expansion and higher pricing while in developed markets sales growth behind the Fusion ProShield launch was offset by competitive activity in North America. Organic sales increased on Braun behind innovation-driven volume increases.

Health care segment organic sales increased 8%. Organic sales in oral care were up versus the prior year driven by increased marketing, strong innovation results and increased pricing.

Fabric and home care segment organic sales increased 1% due to an increase in organic volume. Fabric care organic sales were unchanged as increased organic volume from premium product innovation and increased marketing support, was offset by pricing investments. Home care sales increased primarily due to strong innovation-driven growth in the dish care business. Baby, feminine and family care segment organic sales increased 1% versus a year ago. Baby care and feminine care organic sales both increased behind innovation-driven volume growth. Family care organic sales decreased as volume growth in the US was more than offset by pricing investments and a decline in Mexico from discontinuation of certain product lines.

P&G exceeded analyst expectations on revenue and profits in its fourth quarter, as it continued a 10-year cost-cutting effort and improved revenue growth in key product categories. The company posted a $1.9 billion profit, or 79 cents a share, on net sales of $16.1 billion in its fiscal fourth quarter. Wall Street analysts were expecting net sales of $15.8 billion and earnings per share of 74 cents.

P&G also delivered some evidence that its massive reconfiguration, which included thousands of job cuts and the sale of more than 100 brands, is working as officials had planned. P&G posted increases in both organic sales, which exclude the impact of foreign exchange and divestitures, and sales volume, which measures the number of units sold. P&G ended a two-year slump in organic sales growth last quarter, but the growth was driven by price increases—not increased consumption. This quarter, P&G posted volume increases in all product categories. P&G brands gained market share in Japan, Germany and the US, which remains P&G’s largest market. In China, P&G reversed a three-quarter sales slump and is pursuing multiple strategies to capitalize on the country’s growing middle class.

“The fourth quarter was another period of progress,” said Chairman, President and CEO David Taylor, in a statement. “We increased investments in innovation and advertising, funded by strong productivity improvement. Looking forward, we’re committed to continued productivity improvement and cost savings that provide the fuel for innovation and investments needed to accelerate and sustain faster top-line growth.”

For its fiscal 2017, P&G said it expects organic sales to climb about 2%.