P&G Announces Fiscal Year 2025 First Quarter Results

The Procter & Gamble Company reported first quarter fiscal year 2025 net sales of $21.7 billion, a decrease of one percent versus the prior year. Organic sales, which excludes the impacts of foreign exchange and acquisitions and divestitures, increased two percent, on a prior year base period of seven percent growth. Diluted net earnings per share were $1.61, a decrease of 12 percent versus prior year due to higher non-core restructuring charges. Core earnings per share were $1.93, an increase of five percent versus prior year.

Operating cash flow was $4.3 billion, and net earnings were $4.0 billion for the quarter. Adjusted free cash flow productivity was 82 percent, in line with expectations. Adjusted free cash flow productivity is calculated as operating cash flow less capital spending, as a percentage of net earnings excluding a non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in Argentina. The Company returned nearly $4.4 billion of cash to shareowners via over $2.4 billion of dividend payments and over $1.9 billion of share repurchases.

“Our organic sales growth, earnings and cash results in the first quarter keep us on track to deliver within our guidance ranges on all key financial metrics for the fiscal year,” said Jon Moeller, Chairman of the Board, President and Chief Executive Officer. “We remain committed to our integrated growth strategy of a focused product portfolio of daily use categories where performance drives brand choice, superiority — across product performance, packaging, brand communication, retail execution and consumer and customer value — productivity, constructive disruption and an agile and accountable organization. We have confidence this remains the right strategy to deliver balanced growth and value creation.”

July - September Quarter Discussion
Net sales in the first quarter of fiscal year 2025 were $21.7 billion, a one percent decrease versus the prior year. Organic sales, which exclude the impacts of foreign exchange and acquisitions and divestitures, increased two percent. The organic sales increase was driven by a one percent increase from higher pricing and a one percent increase in organic volume (which excludes the impact of acquisitions and divestitures). Mix had a neutral impact on sales growth for the quarter.

Beauty segment organic sales decreased two percent versus year ago. Hair Care organic sales increased low single digits driven by volume growth and favorable premium product mix in North America, Europe and Latin America, partially offset by volume declines primarily in Greater China. Personal Care organic sales increased high single digits driven by innovation-based volume growth and favorable product mix. Skin Care organic sales declined more than 20 percent due to volume declines and unfavorable mix from lower sales of the super-premium SK-II brand.
Grooming segment organic sales increased three percent versus year ago behind innovation-driven volume growth partially offset by unfavorable geographic mix.
Health Care segment organic sales increased four percent versus year ago. Oral Care organic sales increased low single digits due to premium product mix, partially offset by volume declines mainly in Greater China. Personal Health Care organic sales increased mid-single digits due to favorable mix from growth of respiratory products and increased pricing.
Fabric and Home Care segment organic sales increased three percent versus year ago. Fabric Care organic sales increased low single digits due to favorable geographic mix from growth in North America and Europe. Home Care organic sales increased mid-single digits due to volume growth and favorable product mix.
Baby, Feminine and Family Care segment organic sales were unchanged versus year ago. Baby Care organic sales decreased mid-single-digits due to volume declines partially offset by favorable product mix. Feminine Care organic sales increased low single digits driven by favorable product mix and increased pricing, partially offset by volume declines in international markets. Family Care organic sales increased mid-single digits driven by strong volume growth.

Diluted net earnings per share decreased by 12 percent to $1.61, driven primarily by higher restructuring charges related to the substantial liquidation of operations in certain Enterprise Markets, including Argentina. Core earnings per share increased five percent to $1.93. Currency-neutral core EPS were up 4 percent versus the prior year core EPS.

Reported gross margin for the quarter increased 10 basis points versus the prior year. Core gross margin for the quarter was unchanged versus the prior year and increased 10 basis points on a currency-neutral basis. Benefits of 170 basis points from gross productivity savings and 30 basis points from increased pricing were partially offset by 90 basis points of unfavorable commodity costs, 60 basis points of unfavorable mix and 40 basis points of product reinvestments.

Reported selling, general and administrative expense (SG&A) as a percentage of sales decreased 20 basis points versus year ago. Core selling, general and administrative expense (SG&A) as a percentage of sales decreased 30 basis points versus year ago and increased 30 basis points on a currency-neutral basis. The increase was driven by 110 basis points of reinvestments, partially offset by 60 basis points of productivity savings and 20 basis points of organic sales growth leverage. Foreign exchange headwinds in the current period were more than offset by the impact of prior year period foreign exchange headwinds.

Reported operating margin for the quarter increased 30 basis points versus the prior year. Core operating margin for the quarter also increased 30 basis points versus the prior year and decreased 10 basis points on a currency-neutral basis. Core operating margin included gross productivity savings of 230 basis points.

Limited Market Portfolio Restructuring
In the fiscal year ended June 30, 2024, the Company started a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions. During the period ended September 30, 2024, the Company completed this limited market portfolio restructuring with the substantial liquidation of its operations in Argentina and recorded incremental restructuring charges of approximately $0.8 billion after tax, comprising primarily of non-cash charges of accumulated foreign currency translation losses previously included in Accumulated other comprehensive income/(loss). The total incremental restructuring charges incurred under the program beginning in the quarter ended December 31, 2023, through the quarter ended September 30, 2024, were approximately $1.2 billion after tax.

Fiscal Year 2025 Guidance
P&G maintained its guidance range for fiscal 2025 all-in sales growth to be in the range of two to four percent versus the prior year. The combined headwinds from foreign exchange and divestitures are expected to negatively impact all-in sales growth by approximately one percentage point. The Company also maintained its outlook for organic sales growth in the range of three to five percent.

P&G maintained its fiscal 2025 diluted net earnings per share growth to be in the range of 10 percent to 12 percent versus fiscal 2024 diluted net EPS of $6.02. P&G also maintained its fiscal 2025 core earnings per share growth to be in the range of five to seven percent versus fiscal 2024 core EPS of $6.59. This outlook equates to a range of $6.91 to $7.05 per share, with a mid-point estimate of $6.98, or an increase of 6 percent.

P&G now expects a commodity cost headwind of approximately $200 million after tax for fiscal 2025, which equates to a headwind of $0.08 per share. Foreign exchange is now expected to be neutral.

In addition, the prior fiscal year included benefits from minor brand divestitures and favorable tax impacts that are unlikely to repeat to the same extent in fiscal year 2025. Combined, these are an additional $0.10 to $0.12 headwind to core EPS.

The Company is unable to reconcile its forward-looking non-GAAP cash flow and tax rate measures without unreasonable efforts given the unpredictability of the timing and amounts of discrete items, such as acquisitions, divestitures, or impairments, which could significantly impact GAAP results.

P&G continues to expect a core effective tax rate to be in the range of 20 percent to 21 percent in fiscal 2025.

Capital spending is estimated to be in the range of four to five percent of fiscal 2025 net sales.

P&G continues to expect adjusted free cash flow productivity of 90 percent and expects to pay around $10 billion in dividends and to repurchase $6 to $7 billion of common shares in fiscal 2025.

Forward-Looking Statements
Certain statements in this release, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "future," "opportunity," "plan," "may," "should," "will," "would," "will be," "will continue," "will likely result" and similar expressions. Forward-looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties that may cause results to differ materially from those expressed or implied in the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise, except to the extent required by law.

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