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Original Source: FD (FAIR DISCLOSURE) WIRE
. Clayt Daley, Procter & Gamble, CFO . Jon Moeller, Procter & Gamble, VP & Treasurer . Nik Modi, UBS, Analyst . Bill Pecoriello, Morgan Stanley, Analyst . A.G. Lafley, Procter & Gamble, Chairman & CEO
. John Faucher, JPMorgan, Analyst . Amy Chasen, Goldman Sachs, Analyst . Bill Schmitz, Deutsche Bank, Analyst . Wendy Nicholson, Citigroup, Analyst . Justin Hott, Bear Stearns, Analyst . Lauren Lieberman, Lehman Brothers, Analyst . April Scee, Bank of America, Analyst . Chris Ferrara, Merrill Lynch, Analyst . Ali Dibadj, Sanford Bernstein, Analyst . Jason Gere, Wachovia Capital Markets, Analyst
. Bill Chappell, SunTrust, Analyst . Joe Altobello, CIBC World Markets, Analyst . Alice Longley, Buckingham Research, Analyst . Linda Bolton Weiser, Oppenheimer, Analyst . Bill Leach, Neuberger Berman, Analyst
PG announced 1Q08 EPS, an increase of 16% YoverY to $0.92. 1Q08 total sales increased 8% to $20.2b. Mgt. expects 2Q08 EPS of $0.95-0.97 and FY08 EPS of $3.46-3.49, up 14-15% YoverY.
A. Key Data From Call 1. 1Q08 total sales = $20.2b 2. 1Q08 EPS = $0.92 3. 1Q08 gross margin = 52.9% 4. Stock Repurchase = $2.6b, average price $64 per share 5. 1Q08 EPS guidance = $0.95-0.97 6. FY08 EPS guidance = $3.46-3.49
S1. Overview (C.D.) 1. 1Q08 Consolidated Results: 1. Began FY08 with 1Q08 in line with guidance and our long-term growth targets.
2. Balanced top and bottom line growth in each geographic region
and every reportable segment delivering YonY organic Growth.
3. 1Q08 EPS increased 16% to $0.92. 1. Included one time tax benefit of $0.02 per share. 2. Excluding this benefit, EPS growth was 14%. 3. Driven by strong sales growth and modest operating margin improvement. 4. 1Q08 total sales increased 8% to $20.2b.
1. Driven by 5% volume growth and 3 points of FX. 2. Organic volume and sales each up 5%. 3. Developing markets set pace with double-digit volume organic sales growth. 4. Fabric & Home Care and Baby & Family Care led segments. 1. Each delivered 7% organic sales growth. 5. Health Care and Beauty Care were at low end of segments. 1. Due to tough comparison in which Crest Pro-Health and Olay Definity began shipping. 6. SK-II in Asia was 1 point drag on Beauty Care growth. 7. Market share in both Health Care and Beauty Care are up vs. 1Q07. 8. Expect results to improve in balance of FY08. 5. Global market share trends over past three months continue strong with about two-thirds of businesses growing share. 6. Price mix was neutral. 1. Pricing actions recover higher commodity costs, offset by negative mix from strong developing market growth. 2. Earnings and Margin: 1. Operating income increased 9% to $4.4b. 1. Driven by sales growth and operating margin expansion. 2. Operating margin up 30 bp, in line with previous guidance. 3. Gross Margin up 10 bp to 52.9%. 1. Pricing, volume leverage and cost saving projects more than offset impact of higher commodity costs and laundry compaction conversion costs.
2. Higher commodity and energy costs hurt gross margins by about 80 bp. 4. SG&A down 20 bp vs 1Q07. 1. Lower overhead costs as percent of sales more than offset higher marketing spending.
5. 1Q08 tax rate was 27.6%. 1. Due to one-time tax benefit of $0.02 per share. 1. Due to reduction in German statutory tax rates. 2. Revalued deferred tax assets which generates one-time gain. 3. Expect one-time tax benefit to be net incremental for FY08.
3. Cash in 1Q08: 1. Operating cash flow was $3.2b, up nearly $300m from 1Q07. 1. Improvement largely due to earnings growth.
2. Working capital was net use of cash vs. 1Q07. 1. Due to strong business growth. 3. Receivable and inventory days up one and four days respectively vs. 1Q07. 1. Due to stronger FX at 1Q08 end. 4. Payable days up four days YoverY. 1. Converting number of suppliers to new longer payment terms. 5. Capex was $540m or 2.7% of sales, well below 4% annual target. 6. Free cash flow was $2.7b. 1. Free cash flow productivity was 87%. 2. Roughly in line YoverY. 3. On track to beat free cash flow target for FY08. 7. Repurchased $2.6b of PG stock at average price of $64.
1. Part of recently announced three year $24-30b share repurchase program. 2. Combined with $1.1b in dividends, PG distributed $3.7b to shareholders or 120% of net earnings. 4. Summary: 1. Good start to FY08. 2. Continues to deliver broad-based balanced top and bottom line growth.
S2. 1Q08 Segment Overview (J.M.) 1. Beauty: 1. Sales grew 6%, led by double-digit growth in Prestige Fragrances. 2. Impact of the SK-II business disruption in Asia that began late September, 2006 reduced total Beauty sales by approx. 1 point. 3. Fragrances had very strong double-digit results. 1. Driven by recent initiatives on Dolce & Gabbana, Hugo Boss and Lacoste franchises. 4. Hair Care delivered solid 1Q08. 1. Mid-single digit sales growth.
2. Led by double-digit growth in developing markets behind Head
& Shoulders and Pantene. 5. In US all outlet value share improved for each PG top three retail Hair Care brands, Pantene, Head & Shoulders and Herbal Essences. 1. Combined PG value share of US Hair Care increased nearly 2 points to 34%. 2. Retail hair color sales in line with 1Q07, preparing for launch of revolutionary Nice 'n Easy initiative, Perfect 10, in January.
6. Skin Care: 1. Skin Care Olay sales grew double-digits in developing markets, behind continued expansion of key Olay franchises. 1. Includes launch of Olay Regenerist in Poland. 2. Olay Total Effects Skin Cleansing SKUs in Russia. 3. Restage of White Radiance line in China. 2. Olay's excellent developing market results more than offset lower shipments in developed markets, where base period included Olay Definity launch. 3. Olay Facial Moisturizer US all outlet value share continues to grow. 1. Past three months share up more than 1 point YoverY to 43%. 2. Grooming: 1. Sales for Grooming segment increased 9%. 2. Driven by double-digit global sales growth for Blades & Razors. 1. Global Blades & Razors value share increased 0.5 pt., now nearly 71%. 3. Strong top-line results led by over 20% sales growth in developing markets.
1. Mach3 delivered high teens shipment growth of blades in developing markets. 2. Due mainly to distribution synergies.
3. Prestobarba brand in Latin America benefited from increased
distribution and strong results of Prestobarba 3 initiative. 4. In male shaving, Fusion continues to drive strong share growth.
1. Driven growth in premium male systems in all markets where
launched. 1. In US, Fusion share of male systems blades up nearly 12 percentage points YoverY to over 32%. 2. Fusion and Mach3 combined share of US male systems blades up 5 points to 77%. 5. In female razors Venus Breeze continues to drive strong share
growth. 1. US all outlet value share of razors up almost 5 percentage points to nearly 48%. 6. Braun shipments lower YoverY due to supply constraints on Home Appliance business in Western Europe and de-emphasis of business in US. 3. Health Care:
1. Sales increased 7%. 1. Led by high-single digit growth in Oral Care and Feminine Care. 2. Sales up mid-single digits for Pharmaceuticals and Personal Health Care. 3. Oral Care Crest and Oral-B both delivered solid global growth YoverY.
1. 1Q07 included launch of Crest Pro-Health toothpaste in US.
4. US toothpaste business, Crest all outlet value share up more
than 1 point to 37%. 1. Behind new initiatives such as Crest Pro-Health Night Toothpaste and Crest Plus Scope Whitening Paste and Rinse. 5. Oral-B manual brush share in US up YoverY as business improved supply capability. 6. Feminine Care developing markets led growth with mid-teens shipment volume increase.
1. Naturella brand up more than 20% and Always grew double-digits in developing markets. 2. In US Always and Tampax each grew all outlet value …