P&G's first quarter earnings for 2011 dropped by 6.8% last year to $3.08 billion as the sale of the company made strategic decision to sell their pharmaceutical business and higher service costs helped in decreasing the margins. Overall sales rose about 1.6% to $20.12 billion, and sales of organic goods increased by 4% as consumption volume of organic food increased by 8%.
SEGMENT ANALYSIS
P&G is an international colossal for household and personal goods with $79 billion in sales around the world in 2009 with 24 brands that delivers $1 billion of sales each. P&G operates their business into three Global Business Units that expand, manufactures products on their own and its commercial group which handles the functions and directions of the company.
P&G GOLBAL SEGMENT RESULTS(2010)
SEGMENT
NET SALES ($M)
%NET SALES
TOTAL EARNIGS($M)
%EARNINGS
Beauty
19,491
24.4%
2,712
25%
Grooming
7,631
9.6%
1,477
13%
Health Care
11,493
14.4%
1,860
17%
Snacks,Pet Care
3,135
3.9%
326
3%
Home Care
23,805
29.9%
3,339
31%
Family Care
14,736
18.5%
2,049
19%
Corporate
-1.353
-1.7%
(817)
-7%
TOTAL
79,748
99.0%
10,946
100
Beauty: Recorded about 34.0% of 2010 sale and 38% of 2010 net income The Beauty Global Business Unite includes all the hair and skin products, medications, electric shavers, razors and batteries. This business unit includes most of the product lines while acquiring Gillette in 2005. Proctor & Gamble's global owns about more than 70% of market share in blades and razors, largely revolving around its Gillete-Mach3, Fusion, Venus brands .In June 2009, P&G eagerness to expand more into the market made them acquire "The Art of acquire having" and the men's skin care line Zirh and thereby giving a stronger hold and grip in the men’s grooming industry.
Health and Well-Being: Recorded 18.3% of 2010 sales resulting to 20% of 2010 the net income: The Health and Well-Being includes feminine health, oral care, snacks, coffee, pharmaceuticals and pet care products. In oral care, the company captures 20% of the market and is ranked second in the world. In potato chips, the Pringles hold a large portion of the market with 10%.
Household Care: Recorded 48.4% of 2010 sales, resulting to 50% of 2010 net income of the company. P&G are market leaders in majority of the products in this unit which include detergents to diapers. About 30 percent of the market share in diaper market is held by P&G.
Revenue- 78.9 B
EBIT- 19.1B
NET INCOME- 12.7B
SUMMARY 2010 RESULTS
Net sales increased 3% to $78.9 billion.
Organic sales improved 3%.
Unit quantity improved 4% against the previous year, below mid single digit increase in developing countries and low single digit growth in urbanized regions.
Net earnings decreased 5% to $12.7 billion.
Net earnings from continuing operations improved 2% to $10.9 billion following sales growth and operating margin increase, partly counterbalanced by a higher tax rate.
Operating margin extended 30 basis points against the previous year due to higher gross margins, mostly because of an increase in selling, general and administrative expenses to percentage of net sales.
Net earnings from discontinued operations declined to $1.0 billion from $1.8 billion due to the loss sustained while the divesting the pharmaceuticals and coffee businesses.
It was experiencing a lower current period gains on the sale of discontinued operations.
Diluted net earnings per share declined 4% to $4.11.
Increase of 4% to $3.53 on diluted net earnings per share on continuing operations
Decline of 33% to $0.58 on diluted net earnings per share from discontinued operations
EPS grew by 6% to $3.67.
Cash flow from operating activities was $16.1 billion.
$13.0 billion on Free cash flow
Due to the pharmaceuticals divestiture free cash flow productivity was 102% and which also included a negative 23%.
RATIO ANALYSIS
Cash Management
31 March 2010
31 Dec 2010
31 March 2009
Average- 5yrs
Current Ratio
0.9
0.9
0.7
0.9
Debt to Equity
34.4%
32.4%
33.7%
39.9%
Debt/CFO
1.7 yrs
1.8 Yrs
2.8 Yrs
2.7 Yrs
Inventory/CGS
65.2%
64.6%
66.7%
66.6%
Working Capital
-7.1
-9.8%
-12.1%
-5.5%
Cash Conversion Cycle
41 Days
46 Days
53 Days
52.7 Days
CASH MANAGEMENT ANALYSIS
After decreasing its short-term debt obligations over the past 5 quarters, the Balance Sheet now states $7.04 billion of payable over a year. This figure was a massive $21 billion in 2008 in the third and the fourth quarters. The $3 billion cash P&G received for the sale of the pharmaceuticals business helped make a unfilled gap in the total debt level.
The stock has become much skimmed over last year, in which the level is under its long-term average. The cash competence variables have also improved. The stock is much leaner than it was over the previous years, and it is has gone below than its long-term average. The Cash Conversion Cycle has timed down steeply.
Profitability
30 June 2010
31 March 2010
30 June 2009
5-Year Average
Operating Expense/Revenue
79.7%
78.8%
80%
80%
0ROIC
12.7%
12.6%
11.5%
12.4%
Cash-flow/Invested Capital
14.1
15.7%
11.8%
11.5%
Accrual Ratio
-2.1%
-3.5%
0.6%
-0.7%
PROFITABILITY ANALYSIS
Until the most recent quarter, Profitability has increased as P&G as they have succeeded in trimming Operating Expenses as a proportion of Revenue. This process was forced to conclusion in the June quarter. Operating expenses increased a substantially by 17% because P&G spent intensively to increase market share and to built new products.
ROIC squeezed a marginal gain, but the Free Cash Flow decreased to that of Invested Capital. The Accrual Ratio showed sound earnings superiority, but lesser than the last quarter. The decreasing Accrual Ratio is a optimistic progress, providing a improved earnings quality. Though, it would further add as an advantage if Net Income was rising
BULLS AND BEARS
BULLS
The size of P&G and accolades of their brand names
Introduction of new products in 2010
Strong brands and household products will grow in demand in spite of economic melt-down
Amongst the few companies to survive recessions
BEARS
P&G price increases are leading to sales declines in various markets
Struggling to gain market share in Latin America
Increasing completion by private labels
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