P&G Q2 Profit Down 7%, But Meets Estimates; Boosts FY23 Sales Outlook

procter&gamble july30 19jan23 lt

Consumer goods giant Procter & Gamble Co. (PG) reported on Wednesday that profit for the second quarter decreased seven percent from last year, hurt primarily by a decrease in operating margin and a sales decline.

However, earnings per share met analysts' estimates, while quarterly sales topped them. Looking ahead, the company maintained its earnings growth guidance for full-year 2023, while raising all-in sales and organic sales growth outlook.

"We delivered solid results in the second quarter of fiscal year 2023 in what continues to be a very difficult cost and operating environment," said Jon Moeller, Chairman, President and Chief Executive Officer.

For the second quarter, net earnings attributable to P&G declined to $3.93 billion or $1.59 per share from $4.22 billion or $1.66 per share in the prior-year quarter. Currency-neutral core earnings per share were also $1.59 per share.

On average, 19 analysts polled by Thomson Reuters expected the company to report earnings of $1.59 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter edged down 1 percent to $20.77 billion from $20.95 billion in the same quarter last year. Analysts had a consensus revenue estimate of $20.73 billion for the quarter.

Excluding the net impacts of foreign exchange, acquisitions and divestitures, organic sales increased 5 percent, driven by a ten percent increase from higher pricing and a one percent increase from positive product mix, partially offset by a six percent decrease in shipment volumes.

Beauty segment sales were down 3 percent, Grooming segment sales declined 9 percent and Baby, Feminine and Family Care segment sales decreased 1 percent from last year.

Meanwhile, Health Care segment sales increased 2 percent and Fabric & Home Care segment sales improved 1 percent from last year. Organic sales growth was seen across four of the five segments.

Gross margin as a percentage of sales decreased 160 basis points, driven by 380 basis points of increased commodity and input material costs, 130 basis points of negative product mix and 140 basis points of capacity start-up costs and other impacts.

These were partially offset by benefits of 470 basis points from increased pricing and 80 basis points from gross productivity savings.

"Progress against our plan fiscal year to date enables us to raise our sales growth outlook for fiscal 2023 and maintain our guidance range for EPS growth despite significant headwinds," added Moeller.

Looking ahead to fiscal 2023, the company continues to project earnings per share growth in the range of 0 to 4 percent from the base fiscal 2022 earnings of $5.81 per share, implying earnings in a range of $5.81 to $5.83 per share.

The company now projects annual all-in sales to decline 1 to 0 percent, up from the prior forecast for a decline of 3 to 1 percent. The company also raised its outlook for organic sales growth to a range of 4 to 5 percent from the prior growth range of 3 to 5 percent.

The Street expects the company to report earnings of $5.85 per share on revenue growth of 0.1 percent to $80.27 billion for the year.

The Company added that its current outlook estimates headwinds of approximately $1.2 billion after-tax from unfavorable foreign exchange, $2.3 billion from higher commodity and materials costs and $200 million from higher freight costs.

The combined impact of commodities, freight and foreign exchange is approximately a $1.50 per share headwind to fiscal year 2023 earnings per share, or a 26 percentage point headwind to earnings per share growth.

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