P&G Delivers Second Quarter Core EPS Growth +12%, $1.22 Per Share; Raises Sales And Earnings Outlook For Fiscal Year

The Procter & Gamble Company (NYSE:PG) increased core earnings per share by 12 percent to $1.22 for the October – December quarter. Diluted net earnings per share were $1.39, an increase of 144 percent. Non-core items include restructuring charges of $0.05 per share and a $0.21 per share holding gain resulting from P&G’s purchase of the balance of P&G’s Baby Care and Feminine Care joint venture in Iberia, which was completed on October 22, 2012.

Organic sales grew three percent. Net sales were $22.2 billion, an increase of two percent versus the prior year period including a negative one percent impact from foreign exchange. The Company delivered broad-based organic sales growth, with all business segments increasing organic sales by two percent or more versus the prior year.

P&G held or grew market share in businesses representing nearly 50 percent of sales in the October - December quarter, as measured on a constant currency value basis. In the U.S. market, P&G held or grew value share in businesses representing nearly 60 percent of sales.

“Our second quarter results were at the high end of our expectations on the top-line and well ahead of forecast on operating profit, earnings per share and cash flow,” said Chairman, President, and Chief Executive Officer, Bob McDonald. “Global market share trends improved as we continued to implement our growth strategy and made very good progress against our productivity and cost savings goals. Our strong first half results have enabled us to raise our sales, earnings and share repurchase outlook for the fiscal year, while we strengthen investments in our innovation and marketing programs.”

Executive Summary

• Organic sales increased three percent for the quarter, at the top end of the guidance range.
• Organic sales growth was broad-based, with all business segments increasing by two percent or more versus the prior year.
• Core net earnings per share increased by 12 percent to $1.22.
• Core gross margin increased 110 basis points due to the impact of higher pricing and manufacturing cost savings, partially offset by unfavorable geographic and product mix. Reported gross margin, including non-core restructuring charges, increased 80 basis points.
• Core and reported selling, general and administrative expenses (SG&A) as a percentage of net sales was unchanged, as enrollment reductions and productivity savings were offset by higher pension and employee benefit costs. Non-core charges in SG&A were in line with the prior year level.
• Core operating profit increased seven percent. Reported operating profit, including non-core charges, increased 68 percent.
• Operating cash flow was $3.8 billion for the quarter. The Company repurchased $1.4 billion of shares during the quarter and returned $1.6 billion of cash to shareholders as dividends.

Fiscal Year 2013 Guidance

P&G increased its core earnings per share guidance for the year to $3.97 to $4.07, up three percent to up six percent versus prior year core EPS of $3.85, behind strong productivity improvement and resulting cost savings. P&G also raised its all-in GAAP earnings per share guidance to a range of $4.04 to $4.14, equating to growth of 10 percent to 13 percent versus prior year GAAP EPS of $3.66. The increase reflects higher core earnings and an increase in the non-core holding gain resulting from P&G’s purchase of the balance of our Baby Care and Feminine Care joint venture in Iberia. The all-in EPS range also includes non-core restructuring charges of $0.15.

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