Procter & Gamble 3Q 2022 Results: Net Sales up 7 Percent from Year Ago to $19.4 billion

The Procter & Gamble Company reported third quarter fiscal year 2022 net sales of $19.4 billion, an increase of seven percent versus the prior year. Excluding the impacts of foreign exchange, acquisitions and divestitures, organic sales increased 10 percent. Diluted net earnings per share were $1.33, an increase of six percent versus prior year EPS.

Operating cash flow was $3.2 billion for the quarter. Adjusted free cash flow productivity was 74 percent. The Company returned over $3.4 billion of cash to shareholders via approximately $2.2 billion of dividend payments and $1.2 billion of common stock repurchases.

“We delivered another quarter with strong sales growth and made sequential earnings growth progress despite significant and increasing cost headwinds,” said Jon Moeller, president and CEO. “These results enable us to raise our top-line growth outlook for the fiscal year and to maintain our EPS guidance range. Our focus remains on the strategies of superiority, productivity, constructive disruption and continually improving P&G’s organization and culture. These strategies have enabled us to build and sustain strong momentum. They remain the right strategies to manage through the near-term cost and operational challenges we’re facing and to deliver long-term balanced growth and value creation.”

January - March Quarter Discussion

Net sales in the third quarter of fiscal year 2022 were $19.4 billion, a seven percent increase versus the prior year. Organic sales, which exclude the impacts of foreign exchange and acquisitions and divestitures, increased 10 percent. The organic sales increase was driven by a three percent increase in shipment volumes, five percent from increased pricing, and a two percent increase from positive geographic and product mix.

Beauty segment organic sales increased three percent versus year ago. Skin and Personal Care organic sales increased low single digits due to increased pricing and market growth, partially offset by negative product mix. Hair Care organic sales increased low single digits driven by increased pricing partially offset by pandemic-related volume slowdowns.
Grooming segment organic sales increased eight percent versus year ago. Shave Care organic sales increased double digits due to innovation, market growth, increased pricing and positive mix from growth of premium products and developed markets. All regions grew organic sales. Appliances organic sales decreased low single digits, versus a base period that benefited from a pandemic-related consumption increase of in-home shavers and stylers.
Health Care segment organic sales increased 16 percent versus year ago. Oral Care organic sales increased high single digits due to continued growth of premium products and increased pricing. Personal Health Care organic sales increased more than 30 percent due to a stronger cough, cold and flu season versus the prior year, and innovation in sleep and digestive wellness. All regions grew organic sales.
Fabric and Home Care segment organic sales increased 10 percent versus year ago. Fabric Care organic sales increased double digits led by strong growth behind premiumization, innovation and increased pricing. Home Care organic sales increased mid-single digits due to increased pricing, versus a base period that benefited from a pandemic-related consumption increase of cleaning products.
Baby, Feminine and Family Care segment organic sales increased 10 percent versus year ago. Baby Care organic sales increased double digits due to market growth, innovation and increased pricing. Feminine Care organic sales increased double digits driven by innovation, market growth, positive product mix and increased pricing. Organic sales grew in all regions. Family Care organic sales increased mid-single digits due to increased pricing.
Diluted net earnings per share increased by six percent to $1.33, driven by higher net sales and a reduction in shares outstanding partially offset by a slight decline in operating margin. Currency-neutral EPS were up 10 percent versus the prior year EPS.

Gross margin for the quarter decreased 400 basis points versus year ago, 380 basis points on a currency-neutral basis. The decline was driven by 410 basis points of increased commodity costs, 80 basis points of higher freight costs, 30 basis of product/package reinvestments and 130 basis points of negative product mix. These were partially offset by benefits of 220 basis points from increased pricing and 50 basis points from gross productivity savings and other impacts.

Selling, general and administrative expense (SG&A) as a percentage of sales decreased 380 basis points versus year ago, 400 basis points on a currency-neutral basis. The decrease was driven by 270 basis points of leverage benefit due to increased sales and 130 basis points of gross productivity savings from overhead and marketing expenses.

Operating margin for the quarter decreased 10 basis points versus the prior year and increased 20 basis points on a currency-neutral basis. Operating margin included gross productivity cost savings of 170 basis points.

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