Procter & Gamble's Quarter End Conference Call began with a reminder that the event is being recorded and may include forward-looking statements. The company also discussed non-GAAP financial measures and provided a reconciliation on their Investor Relations website. The Chief Financial Officer, Andre Schulten, began with an overview of the company's strong results for the October to December quarter, followed by Jon Moeller and Jon Chevalier who provided perspective on recent results and strategic focus areas. The company raised their outlook for core earnings per share and remains on track to meet their fiscal year guidance ranges for organic sales growth, cash productivity, and cash return to shareholders. The upper range for organic sales and core EPS is seen as the likely outcome for fiscal '23 - '24.

In the second quarter, the company saw a 4% growth in organic sales, with volume declining by one point due to issues in certain regions. Pricing contributed four points to sales growth and eight out of 10 product categories saw growth. North America, Europe, Asia Pacific, and Latin America all saw organic sales growth, with North America and Europe experiencing strong volume growth. Latin America had a particularly strong quarter with 17% growth. However, other markets were affected by targeted issues.

In the Greater China market, organic sales were down by 15% due to weakened consumer confidence. The SK-II brand also saw a decline of 34% due to market conditions and temporary headwinds. However, there is expected to be an improvement in sentiment and sales in the second half of the year. In other regions such as Europe, Asia Pacific, Middle East, and Africa, market trends have softened due to inflation and tensions in the Middle East. Despite this, the company's global aggregate value share increased by 40 basis points and 28 of the top 50 category country combinations held or grew share. In the U.S., value and volume share both increased, while in European focus markets, value share increased by 90 basis points. Overall, North America, Europe, Asia Pacific, and Latin America saw 6% organic sales growth in the second quarter, with volume and price mix contributing equally. The remaining 25% of company sales, including Greater China, Eastern Europe, and Middle East Africa, were impacted by local market issues but are expected to improve. SK-II consumption is also showing signs of improvement.

Despite challenges in the global market, the company expects growth in the China market and easing pressures in the Middle East and Turkey. The company reported a 16% increase in core earnings per share and a 400 basis point increase in core operating margin, with strong productivity improvements. The company returned $3.3 billion to shareholders through dividends and share repurchases. The CEO also discussed the company's strong top-line progress, including 22 consecutive quarters of 4% or better organic sales growth and volume acceleration in key markets. He also mentioned several temporary headwinds, such as tensions in the Middle East and temporary volume impacts following price increases. The CEO recently visited China and met with consumers, retail CEOs, and government officials.

The writer believes that the long-term opportunity in China is still strong, but there may be challenges in the near future. The team has been executing their strategy well for the past five years, even during COVID and a period of inflation. Their strategy includes a focused portfolio of products in daily use categories, with a commitment to innovation and creating value for shareholders. They are also making changes in their go-to-market approach in certain countries. The team is dedicated to investing in irresistible superiority through innovation and working with retail partners to grow markets and their share in them. Plans for each business are strong and focused on increasing their margin of superiority and consumer satisfaction.

The company's superior innovations, driven by deep consumer insights and marketed effectively, have led to positive consumer response and growth in various categories. Examples include Charmin Ultra Soft Smooth and GilletteLabs razor. The company is also focusing on productivity improvements to fund investments in innovation and brand building, mitigate costs, and expand margins. They are on track to achieve gross savings of up to $1.5 billion before tax.

The company is working with retailers to optimize the supply chain, using data and AI tools to save money and increase efficiency. They are also disrupting traditional methods and have an empowered and diverse organization model. They are making strong progress in all strategic areas and have outlined four focus areas for future growth.

The company is focused on improving capacity planning, supply agility, flexibility, data transparency, scale, and resilience in their supply chain, which has resulted in higher quality products, increased supply assurance, and better cash and cost structures. They are also committed to environmental sustainability, digital acumen, and creating a superior value equation for all employees. These four areas work together to strengthen the company's ability to execute their overall strategy.

P&G's strategic choices in portfolio superiority, productivity, constructive disruption, and organization are reinforcing and building on each other. They are committed to delivering superior propositions to consumers and retail partners, and are confident in their ability to drive market growth and create value. Despite a volatile and challenging environment, P&G is maintaining their guidance for organic sales growth and raising their outlook for fiscal '24 core earnings per share. However, they expect slower bottom-line growth in the second half due to less pricing and commodity cost benefit.

Inflation in wages and benefits, as well as foreign exchange headwinds, will impact the supply chain and direct costs. P&G expects organic sales and core EPS growth to be towards the upper end of their guidance ranges. They also anticipate commodities to be a tailwind and foreign exchange to be a headwind. Net interest expense is expected to be higher, and general inflation and wage costs will also be earnings headwinds. P&G plans to return $14-15 billion in cash to shareholders through dividends and stock repurchases. The outlook is based on current market estimates, and P&G will closely monitor regions with volatility and competitive dynamics to maintain their brands' value.

P&G's Chief Financial Officer Jon Moeller expresses satisfaction with the company's strong results in a challenging environment and thanks employees for their contribution. While they expect continued volatility, they remain confident in their strategy and committed to delivering growth and value for shareholders. During the Q&A, they address the 4% Q2 core sales growth and explain that the full year guidance is in line with their projections, with some volatility in certain geographies. The core point is that 75% of the sales are performing well.

In North America, Europe, and Latin America, volume growth and sales are accelerating, giving the company confidence for the second half of the year. The sentiment for SK-II is improving in China and the company is driving innovation and relying on loyal customers to help spread their message. They expect volatility to improve in the second half and pricing impacts in markets like Turkey to disappear over time. While the company has had strong performance in the first half, they anticipate a reversal of some effects in the second half, including the majority of commodity help and foreign exchange hurt.

In this paragraph, the speaker discusses the factors that will impact the company's growth and earnings in the second half of the year. They mention that the majority of growth will come from Argentina, but they will need to adjust pricing to offset any potential challenges. They also mention that wage inflation will impact their operations and supply chain. However, they remain optimistic about the potential for upside and believe their guidance reflects the potential variability. The other speaker adds that they are encouraged by the progress made in increasing volume and the breadth of top-line progress in various categories and brands.

The speaker is confident that the company will continue to see growth in both top and bottom line, and they expect to deliver towards the upper end of their range of 4-5% organic sales growth for the full year. There is a significant amount of reinvestment going back into the company, and the speaker addresses concerns about excessive reinvestment.

Lauren asks Jon about the efficiency of spending in the company's P&L and if they are aiming for a 30% core rates for share growth. Jon responds by saying that now is not the time to pull back on investments in marketing and commercialization efforts, as there is a lot of innovation coming to market and they want to fully penetrate households with it. He also mentions their focus on increasing the effectiveness and return rates of their advertising through the use of tools and data sets. Andre adds that they are being very granular in assessing the ROI of their investments and the majority of the spend is focused on driving market growth.

The company has seen significant growth in the North American market for their Fabric Enhancers and Oral-B products. They are focused on driving penetration and communicating the benefits to consumers. The company carefully considers ROI when investing and prioritizes market growth. In response to a question about consumer demand in the U.S. and China, the company states that the U.S. market continues to be strong with volume growth and market share gains, while China is also performing well with trade up within their product offerings. The company also mentions the positive performance of their SK-II brand in Greater China, including travel retail.

In the US, private label share is slightly up, but consumers still find better value in the company's propositions. The China market remains a huge opportunity for growth, and the company is committed to investing in it. Short-term results in China have been affected by consumer sentiment, but the decrease in key opinion leaders and heavy discounting is seen as a positive for the company. SK-II's minus 34% sales in the quarter include domestic travel retail.

In summary, the speaker reiterates their confidence in the recovery of the SK-II business as sentiment improves. They provide additional insight into the decline in China, attributing 50% to anti-Japanese sentiment and 50% to market dynamics. They also mention that the traditionally heavy purchase period in November was lower this year, which they view as a positive for the company's position.

The speaker discusses the positive outlook for P&G's growth potential in China, citing the addition of middle income consumers and alignment between their strategy and the government's. They also mention being able to contribute to society while creating value. The next questioner notes the confidence and assertiveness in the company's comments, despite challenges in certain markets. They ask why people think P&G will be thrown off course or become complacent.

The speaker discusses the challenges faced by the organization, including COVID, inflation, and profit reduction, but expresses confidence in the organization's ability to overcome these challenges and continue to grow. They emphasize the importance of avoiding complacency and staying focused on strategic goals, and notes that the organization is currently experiencing a high level of growth and has many opportunities ahead.

The speaker discusses the challenges and opportunities associated with their organization's growth, citing recent accomplishments and progress in innovation as reasons for confidence. They also mention a recent impact on their business in China and a positive outlook for the country in the second half of the year. In response to a question about U.S. volume growth, the speaker notes that their data is not as specific as Nielsen data but acknowledges a significant improvement and mentions potential factors such as non-track channel boosts.

The speaker discusses the current debate surrounding the factors driving volume growth in the consumer staples industry. They mention that there is a trend of consumers purchasing larger pack sizes, and that both covered and non-covered channels are performing well. The growth is attributed to a combination of factors such as pricing lapping, strong innovation, and targeted communication. The US market is highlighted as being particularly sophisticated in this regard.

The Gillette business has seen growth through innovation on their core razor product, but they are also expanding into new jobs like female facial hair removal and male and female body hair removal. Similar growth is seen in the Oral-B electric toothbrushes, where converting more users and offering lower-priced options has driven incremental growth. The new Olay Super Serum has also been successful in bringing in new customers to the category. Other examples of successful innovation include Head & Shoulders BARE and Swiffer PowerMop. The company plans to continue this trend of innovation and expansion in order to maintain growth.

The speaker discusses the company's strong performance in driving market share, volume, and sales in the US and EU focus markets, despite tough comparisons for the cold and flu season. They also mention securing more distribution and expecting mid-single-digit growth in China in the long term. They highlight the success of their beauty brands such as Head & Shoulders, Pantene, and skin and personal care products in various regions.

The company's PHC business has been performing well with a growth rate of 13%, but there has been a slower start to the normal season due to a higher base last year and lower immunity levels after the COVID pandemic. However, the business is still strong and showing growth in all treatment areas and regions. The company expects to see improvement as the season progresses.

Andrea is asked about distribution and she mentions that driving innovation, incremental sales, and category growth helps their retail partners and keeps their brands on shelves. The next question is about commodity outlook and Andre says that they are maintaining their outlook but there may not be as much tailwind as before. He also mentions that the commodity basket is complex and constantly changing. He expects no headwind in the second half and there may be some volatility in spot prices but it will have a decreasing impact over time. The next question is about cost buckets and Andre says that there may be some tailwind but it will be less than the first half. There may be some volatility in spot prices but it will have a decreasing impact over time.

The speaker addresses questions about the North America volume strength and the improvement in SK-II. They clarify that there was no significant benefit in the quarter from under-shipment and that the improvement in SK-II is due to a decrease in negative consumer sentiment. They also mention that market conditions are improving but may still be volatile in the coming quarters.

In this paragraph, Jon Moeller discusses the impact of the SK-II boycott in China and how it has affected consumer behavior. He shares an anecdote about a heavy SK-II user in Beijing who is not afraid of the boycott and prioritizes the effectiveness of the product over any potential backlash. Moeller also mentions that there has been a decrease in personal stocks of SK-II among some consumers. The next question from a Bernstein analyst asks about P&G's decision to restructure in markets like Argentina and Nigeria, and Moeller explains that these decisions are not taken lightly and that they are moving to an import model in Nigeria.

The company is facing challenges in certain markets due to currency and pricing controls, making it difficult to operate. As a result, they have decided to focus on more viable opportunities and maintain options for the future. The CFO clarifies that the term "substantial liquidation" is an accounting term and does not reflect the company's business execution.

Olivia Tong from Raymond James asks about competitive response and pushback from retailers in developed markets. Jon Moeller and Andre Schulten explain that promotion levels are stable and even below pre-COVID levels, with frequency increasing in Europe but not depth. This is because P&G's focus is on creating business rather than taking it from competitors, which benefits all parties involved. The company's strong supply chains also allow for a focus on growing markets, resulting in a win-win-win-win situation for retailers, P&G, consumers, and shareholders.

The speaker discusses the current state of the company and mentions recent conversations in Europe and China. The next question from an analyst is about the company's presence in China and any updates on a portfolio structure examination. The speaker reaffirms the company's commitment to the beauty business in China and explains that they have focused on daily use categories with strong performance. They have exited more fickle categories and are focused on driving long-term loyalty with superior performance.

The speaker discusses the success of their company in China and states that there will always be a higher trial rate in the beauty category. They also mention the strong performance in Europe, attributing it to their execution of strategy and strong innovation. They mention specific examples, such as the launch of Ariel in sustainable packaging, which has led to a 20% increase in organic sales. They also mention their previous belief that low prices were the most important factor in Europe, but have since realized the importance of innovation and pricing.

The company has seen high growth in heavy discounters in Europe, indicating the importance of price in the consumer value proposition. However, they have shifted their focus to innovation as a driver of value in recent years. The market's executional capability has also been praised for their strong results. The company has confidence in their ability to maintain success in the future. The CEO looks forward to discussing more at the upcoming CAGNY conference.

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