Procter & Gamble welcomed participants to their quarter end conference call and provided a disclaimer regarding forward-looking statements. They also informed participants of the use of non-GAAP financial measures. Andre Schulten, P&G's Chief Financial Officer, was joined by Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. The company reported that fiscal year '23 was a strong year, with organic sales growing 7%, and growth across all 10 product categories.

P&G reported mid-teens growth in personal healthcare, double digits growth in feminine care, high single digits growth in fabric care, home care and hair care, mid single digits growth in skin and personal care, baby care, family care and grooming, and low single digits growth in oral care. In the United States, organic sales grew 6% and in Greater China organic sales were down low single digits. Enterprise markets were up 15% with Latin America leading the way. Ecommerce sales increased 7%. All channel market value sales in the U.S. categories in which P&G competes grew 7%. Core earnings per share were $5.90, up 2%. Adjusted free cash flow productivity was 95%. The company returned over $16 billion of value to share owners and in the April to June quarter, organic sales grew 8% for seven consecutive quarters with 5% or better organic sales growth.

In the quarter, pricing contributed 7 points to organic sales growth, mix was up 2 points, and volume declined 1 point. All 10 product categories saw growth, with five growing double digits. Each of the 7 regions had organic sales growth, with the U.S. up 6%. Core earnings per share were up 13%, and core operating margin increased 190 basis points. Adjusted free cash flow productivity was 136%, and the company returned $2.3 billion of cash to share owners.

Andre and Jon reflected on the company's strategy, accomplishments, and successes over the last five years. This included consistent top line growth, core earnings per share growth, and cash return to share owners despite headwinds such as commodities, transportation, foreign exchange, and the global pandemic. The team has grown sales by $15 billion, grown market share, and grown core earnings per share by 40%, while returning over $80 billion of cash to share owners.

The team has been able to deliver growth in U.S. dollar sales in Latin America and Turkey despite significant devaluation of currencies and high inflation. Their integrated strategy, focused on consumers and product superiority, has enabled them to grow markets and share, create value with retail partners, and fund investments in innovation, brand building, and market growth. They are re-accelerating productivity back to pre-COVID levels with an objective for gross savings in cost of goods sold of up to $1.5 billion before tax.

P&G is driving improved capacity, greater agility, flexibility, scalability, transparency and resilience in their supply chain, and recently launched a platform of supply chain services to enable best-in-class service and streamline the end-to-end supply chain. They are also simplifying their SKU portfolio to improve the shopping experience and increase on-shelf availability. Additionally, they are working to reduce their environmental footprint and innovating to deliver cross-industry solutions for some of the most pressing environmental challenges. These initiatives are aimed at creating value for P&G, their retail partners, and consumers.

Jon Moeller of P&G believes that the company has a strong hand to play for its 186th anniversary and is committed to serving consumers by leveraging data and digitization, creating a superior employee value equation, and providing superior performing products at a superior value. He is excited for the future and believes that if the company follows its purpose, values, and principles, consumers, customers, employees, society, and shareholders will benefit.

The company expects global market value growth to moderate to around 4%, with pricing becoming less of a driver and volume returning to modest growth. They anticipate organic sales growth of 4-5% and EPS growth of 6-9%, or 9-12% on a constant currency basis. Commodities are expected to be a tailwind of around $800 million after tax, while foreign exchange rates and higher net interest expense will be headwinds of $400 million and $200 million after tax respectively.

P&G is expecting to pay out $14-15 billion in dividends and stock repurchases, and is basing its guidance on current market growth estimates, commodity prices, and foreign exchange rates. They do not anticipate any further reductions in commodity and material costs, and are committed to delivering irresistibly superior propositions to consumers and retail partners.

Procter & Gamble's strategy for the fiscal year of 2024 is to grow their categories across volume and value. To do this, they are focusing on innovation and superiority across five vectors: product, package, communication, go-to-market, and value. As an example, they are investing in Safeguard China, Detox body wash, Ariel four-chamber unit dose, and ECOCLIC packaging. These investments have led to strong results, such as a 20% sales growth in quarter four in Europe and a 3% volume growth in quarter four in the U.S.

P&G has a strong focus on innovation and communication investments to drive market growth, rather than relying on promotions. They have a strong innovation pipeline and pricing has been a positive contributor to their top line growth in the past. They anticipate that their innovation program will provide opportunities to benefit from modest pricing and a mix benefit, which was seen in the last quarter.

The trend of volume is encouraging according to Andre, with global aggregate volume decreasing from -6 to -3 to -1 in the past two quarters. Capacity investments are being made to meet demand, and Andre has stated that if there is additional flexibility due to cost relief, productivity benefits, or top line strength, the principle of return on investment will be applied to determine the best path forward for creating sustainable value.

The company is looking for opportunities to invest in areas such as media spending, service levels, and productivity. They are focusing on ROI-based decision making and have already reflected a significant amount of investments within their guidance range.

Andre Schulten is pleased with P&G's market share performance, with global aggregate volume and value shares increasing in the face of strong pricing. In the U.S., value share growth was 20 basis points while volume share growth was 50 basis points. European focused markets have seen positive share growth in the past one and two months. P&G's strategy of driving superiority and providing value to consumers via innovation and pricing appears to be working, and private label shares in the U.S. are flat.

Andre mentioned that there is some volatility in the market share of family care and baby care products due to private label and smaller brands returning to the shelf, but the business is in a good place. Jon Moeller added that increased marketing investment in Q4 does not lead to immediate market share growth, as purchase cycles are often longer. Lauren Lieberman asked for more information on the SKU simplification program, inquiring about particular markets where it is more pertinent, how far along the process is, and how it interacts with innovation and retailer discussions.

SKU simplification is a global opportunity for Procter & Gamble to better serve their consumers and retail partners. By analyzing POS data and images of customer shelves, P&G can develop algorithms to determine the most efficient shelf set-up and maximize sales. This program will reduce SKUs in a complex manufacturing environment and free up capacity and cost. P&G is taking their time to do it right, and retail partners are excited to work together on this.

Jon was asked if the productivity numbers previously communicated were incremental to the shelf distribution risk. He responded that it was part of the productivity numbers and had top line benefit as well. Nik Modi then asked about the consumer situation in China and the innovation pipeline for the upcoming fiscal year. Jon answered that there was still a comfort level issue with consumers getting out and about, and that innovation had been disrupted but was now getting back to normal. He mentioned that there would be a heavier than normal innovation year, but that P&G was mindful of the spending needs and the ability to get everything onto the shelves.

Jon Moeller discussed the recovery of the business in China, which has seen an improvement from the first half of the year. He noted that there are consumer confidence challenges and underlying economic issues such as high unemployment rates for people in their 20s. He also discussed how the company has been able to refocus energy and effort on productivity, get line time for innovation, and has seen success with their innovations such as Down Power Wash and Dawn Easy Squeeze Bottle, which drove 17% growth in the hand dishwashing business and increased share points in the US and Europe.

Jon Moeller discusses the impact that ecommerce has had on their business overall, particularly in the U.S. He notes that it has changed their relationship with brick and mortar, how it has affected their shelf space, supply chain, and overall discussion with retailers. He also notes that it is getting harder and harder to distinguish between ecommerce and traditional commerce in their conversations with their retail partners.

Jon and Andre are discussing how their business aims to be indifferent between channels and how they are working to raise all boats. They are also discussing initiatives that are designed to benefit both online and physical stores, as well as channel agnostic programs to serve any format within their markets. Andrea Teixeira asked if Jon is seeing a need to defend entry level pricing with promo in the U.S. volume recovery.

Andre Schulten explains that commodity, FX, and interest expenses will lead to a net benefit of $100 million. He also states that any incremental help will take up to six to nine months to be seen on the P&L, but investments will be made if they will drive the strategy and create sustainable value. He also says that if commodity help is coming, it will make the decision to invest easier.

Jon Moeller and Andre Schulten discuss the use of tools such as pack size, shelf placement, and advertising to provide value to consumers who are price sensitive. They also address the potential of retail media spend from the perspective of the CPG business, discussing who is responsible for it and whether it will need to be an incremental spend or if it is simply shifting from shopper marketing dollars.

Jon Moeller believes that most brand choice is made in a retail environment, and that retailer media should be managed in a way that maximizes return on investment. Andre described how this can be done by combining transaction data with media data, and by timing investments in retail and media in line with merchandising plans. Olivia Tong asked if the cost savings seen in the year are sustainable, and if they are a result of last year's being depressed.

Andre Schulten discusses the confidence the company has in returning to pre-COVID levels of cost savings and productivity. He also notes that the company has been prioritizing strong innovation throughout COVID and supply chain struggles in order to create value for their retail partners and consumers, and that their innovation is not just premium innovation.

Andre Schulten states that the company is focusing on innovating across all price tiers to remain competitive and superior. They have seen a good hit rate with their innovations and have the support of retailers to bring these innovations to market. In terms of gross margin, the company is starting to recover the gross margin that was impacted by the commodity cost inflation and their objective is to get back to pre-COVID levels and then grow from there.

P&G is expecting global markets to grow 4%, with 1-1.5 points of that coming from volume growth. They are striving to grow ahead of that and expect sequential progress on the volume line. The company will do everything possible to make that progress happen by driving market growth.

Andre Schulten answered two questions about free cash flow and SK-II. Regarding free cash flow, the company's capital allocation priorities remain unchanged and they are still returning $14-15 billion to shareholders. For SK-II, the 20% growth in the quarter is attributed to the weak base period due to the Shanghai lockdowns. The team is doing a great job in putting SK-II on a solid footing by ensuring pricing is sustainable, investing in the brand's core equity with a new campaign, and building retail support and trial.

Jon Moeller addresses the question of how SK-II fits into P&G's portfolio, noting that it has performed well over the years and that the recent volatility is due to channel and COVID dynamics, which are beginning to turn more favorable. He also notes that P&G wants to be present in daily use categories where performance drives brand choice.

Andre Schulten discussed the state of the grooming industry, noting that the Braun business had seen strong growth due to people bringing jobs in-house during the pandemic. The core grooming side also did well, with the business expanding the jobs covered and driving market growth.

P&G CEO Jon Moeller expressed optimism about the company's recovery in the second half of the year, and thanked the team for their hard work in serving customers and shareholders. He concluded the call by thanking participants for their interest, and the operator ended the conference.

This summary was generated with AI and may contain some inaccuracies.