Procter & Gamble
Consumer staples giant Procter & Gamble reported first quarter revenues and profits which beat forecasts thanks to North American demand for cleaning and laundry products.
Net sales rose 9% year-on-year for the quarter to $19.3 billion. Organic revenue, which excludes the impact of acquisitions, disposals and forex, also climbed 9% in the quarter. The company experienced organic revenue growth across all five of its business units (Beauty, Grooming, Healthcare, Fabric & Home Care, and Baby, Feminine & Family Care).
Fabric & Home Care and Health Care were the standout divisions growing organic revenues 14% and 12% respectively. This was due to demand for home cleaning products, which helped the home care unit grow 30% in the quarter, and digestive and wellness products from the Health Care unit (like Vicks, toothpaste and antacids).
The Beauty segment saw 7% organic sales growth as North America Skin and Personal Care grew in the mid-teens on the back of a launch of Safeguard hand soap and hand sanitizer. Whilst globally, Personal Cleansing grew over 30%, with double digit growth in every region.
Grooming increased organic sales 6%. Demand for female shaving products (like Venus) made up for weakness in demand for male blades and razors (Gillette). However, the Appliances’ organic sales increased more than 30% due to increased demand for dry shaving and styling products.
The Baby, Feminine & Family Care segment had organic sales rise 4% versus a year ago. Family Care by itself increased sales by double digits as more folks stayed at home and consumed more goods. Baby Care sales (Pampers) fell in the quarter.
Geographically P&G had growth of 16% in the US and 12% from China, with the company mentioning it had not seen US consumers opting for cheaper brands despite the current economic conditions. e-Commerce accounted for 12% of total sales in the period.
Operating Income rose 23% to $5.3 billion. Reported gross margins improved by 170 basis points to 52.7%. Net income rose 20% to $4.31 billion, or $1.63 per diluted share. P&G ended the quarter with $13.4 billion in Cash and Cash Equivalents, a 44% increase year-on-year.
The company spent more on advertising as lockdown restrictions meant consumers were home-bound and glued to their devices for coronavirus updates. But expenses were slightly lower in the period thanks to savings from overheads and other marketing expenses.
Total debt fell 3.4% to $71.3 billion as the company said it would retire some debt early which would reduce net income between 5 and 20 cents.
Proctor & Gamble gave improved guidance, and now expects sales growth of 3% to 4% during fiscal 2021. It also expects to spend more than previously announced on share buy-backs ($7 to $9 billion). Core earnings will now rise between 5% and 8% despite concerns over the negative effects of forex impacts and freight costs. P&G is a diversified, and well run, multinational consumer staples company. It trades on a PE of 27x and a dividend yield of 2.24%. P&G's shares are up 14.7% this year.