Procter & Gamble Fiscal 2021 Results: Net Sales up 7 Percent From Year Ago

The Procter & Gamble Company announces fourth quarter and fiscal year 2021 results. David Taylor, chairman, president and chief executive officer said, “We delivered another year of strong results with balanced top and bottom-line growth and strong cash generation, exceeding each of our in-going targets. We built strong momentum prior to the pandemic and have strengthened our position further. As we look forward to fiscal 2022, we expect to continue to grow top-line and bottom-line and to deliver another year of strong cash return to shareholders despite a challenging cost and operating environment.”

Fiscal Year 2021 Results

The company reported fiscal year 2021 net sales of $76.1 billion, an increase of seven percent versus the prior year. Excluding the impacts of foreign exchange, acquisitions and divestitures, organic sales increased six percent, driven by a three percent increase in organic volume, a two percent impact from positive mix and one percent from increased pricing. Diluted net earnings per share were $5.50, an increase of 11 percent versus the prior year primarily due to the increase in net sales and an increase in operating margin. Core earnings per share and currency-neutral core EPS both increased 11 percent versus the prior year to $5.66.

The Company generated $18.4 billion of operating cash flow in fiscal 2021 with adjusted free cash flow productivity of 107 percent. The Company returned $19.3 billion of value to shareholders in fiscal 2021 through $8.3 billion in dividend payments and $11 billion of share repurchases.

April-June Quarter Results

The company reported fourth quarter fiscal year 2021 net sales of $18.9 billion, an increase of seven percent versus the prior year. Excluding the impacts of foreign exchange, acquisitions and divestitures, organic sales increased four percent. Diluted net earnings per share were $1.13, an increase of six percent versus the prior year reported EPS and a decrease of three percent versus the prior year Core earnings per share. Operating cash flow was $4.1 billion for the quarter. Free cash flow productivity was 117 percent.

April-June Quarter Discussion

Net sales in the fourth quarter of fiscal year 2021 were $18.9 billion, an increase of seven percent versus the prior year. Favorable foreign exchange had a three percentage point positive impact on sales for the quarter. Excluding the impacts of foreign exchange, acquisitions and divestitures, organic sales increased four percent driven by a one percent increase in shipment volume, a one percent increase in pricing and positive mix impact of one percent. Positive mix was driven by the disproportionate growth of the Health Care segment and the Skin and Personal Care category, both of which have higher than company-average selling prices. The volume increase was driven by strong innovation, partially offset by the higher base period in certain markets and categories due to pandemic-related consumption increases.

Selling, general and administrative expense (SG&A) as a percentage of sales decreased 20 basis points on a reported basis versus the prior year. SG&A as a percentage of sales decreased 30 basis points versus the prior year core SG&A due to approximately 10 basis points of lower non-core restructuring charges in the base period. Foreign exchange increased SG&A by approximately 20 basis points. On a currency-neutral basis, reported SG&A as a percentage of sales decreased approximately 60 basis points versus prior year core SG&A driven by 140 basis points of savings from overhead and marketing expenses, 100 basis points of cost leverage benefit from increased sales and 40 basis points of other benefits. These decreases were partially offset by 170 basis points of increased marketing investments, and 50 basis points of wage inflation, increased incentive compensation and other impacts.

Operating profit margin decreased 100 basis points versus the base period reported operating margin. Reported operating profit margin decreased 230 basis points versus the base period core operating margin due to approximately 130 basis points of non-core restructuring charges in the base period. Unfavorable foreign exchange negatively impacted operating margin by approximately 20 basis points. On a currency-neutral basis, reported operating margin decreased 210 basis points versus the prior year core operating margin. Operating margin included productivity cost savings of 320 basis points (240 basis points net of freight cost increases).

Fiscal Year 2022 Guidance

P&G expects fiscal year 2022 all-in sales growth in the range of two to four percent versus the prior fiscal year. Foreign exchange is expected to be neutral to modestly positive to all-in sales growth. The company expects organic sales growth also in the range of two to four percent.

P&G expects fiscal 2022 GAAP diluted net earnings per share growth in the range of six to nine percent versus fiscal 2021 GAAP EPS of $5.50. Core earnings per share growth for fiscal 2022 is expected to be in the range of three to six percent versus fiscal 2021 core EPS of $5.66.

The company said its current outlook estimates headwinds of approximately $1.9 billion after-tax from higher commodity costs and freight costs, partially offset by foreign exchange benefits of approximately $100 million after-tax. The combined impact of commodities, freight and foreign exchange is approximately a $0.70 per share headwind to fiscal year 2022 EPS, or a 12 percentage point headwind to EPS growth.

The Company is not able to reconcile its forward-looking non-GAAP cash flow and tax rate measures without unreasonable efforts because the Company cannot predict the timing and amounts of discrete items, such as acquisitions, divestitures, or impairments, which could significantly impact GAAP results.

P&G said it expects core effective tax rate in the range of 18 percent to 19 percent in fiscal 2022.

Capital spending is estimated to be in the range of 4 percent to 5 percent of fiscal 2022 net sales.

P&G is targeting adjusted free cash flow productivity of 90 percent and expects to pay over $8 billion in dividends and repurchase $7 billion to $9 billion of common shares in fiscal 2022.

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