Source: Seeking Alpha
The Procter & Gamble Company (NYSE:PG)
Q4 2014 Earnings Conference Call
August 1, 2014 08:30 ET
Jon Moeller – Chief Financial Officer
AG Lafley – President and Chief Executive Officer
John Chevalier – Director, Investor Relations
Bill Schmitz – Deutsche Bank
John Faucher – JPMorgan
Lauren Lieberman – Barclays Capital
Wendy Nicholson – Citi Research
Dara Mohsenian – Morgan Stanley
Olivia Tong – Bank of America
Chris Ferrara – Wells Fargo
Nik Modi – RBC Capital Markets
Ali Dibadj – Bernstein
Michael Steib – Credit Suisse
Steve Powers – UBS
Good morning, and welcome to Procter & Gamble’s Quarter End Conference Call. Today’s discussion will include a number of forward-looking statements. If you will refer to P&G’s most recent 10-K, 10-Q, and 8-K reports, you will see a discussion of factors that could cause the company’s actual results to differ materially from these projections.
As required by Regulation G, P&G needs to make you aware that during the call, the company will make a number of references to non-GAAP and other financial measures. Management believes these measures provide investors valuable information on the underlying growth trends of the business. Organic refers to reported results, excluding the impacts of acquisitions and divestitures and foreign exchange, where applicable. Free cash flow represents operating cash flow less capital expenditures. Free cash flow productivity is the ratio of free cash flow to net earnings. Any measure described as core refers to the equivalent GAAP measure, adjusted for certain items. P&G has posted on its website, www.pg.com, a full reconciliation of non-GAAP and other financial measures.
Now, I will turn the call over to P&G’s Chief Financial Officer, Jon Moeller.
Jon Moeller – Chief Financial Officer
Good morning. I am joined this morning by AG Lafley and John Chevalier. We will start our discussion with a review of fiscal year and fourth quarter results, AG will then discuss our going forward strategy and plans to strengthen our results, and I will close with guidance for fiscal 2015. One housekeeping item before we begin all the numbers we will be discussing today assume discontinued operations treatment for the pet care business, reflecting in our planned exit. Impacts of the move from operating results to discontinued operations were provided previously in an 8-K filing and are available online.
Now, on to results, we grew organic sales 3% in the fiscal year we just completed in line with median performance in our industry. We essentially held market share. Core earnings per share increased 5%. Organic sales and earnings per share results were both within our target ranges. In fact, they were both within the pre-Venezuela devaluation ranges that we established going into the fiscal year despite more than a 25% reduction in market growth rates from 4 points a year ago to 2.5 points to 3 points currently and significant negative foreign exchange developments versus our going in plan. Our productivity program, which we will talk more about later, was a significant enabler in delivering in this outcome.
On a constant currency basis, core earnings per share grew double-digits despite market growth headwinds. All-in sales grew 1%. All-in earnings per share grew 4%. We generated $10.1 billion of free cash flow with 86% free cash flow productivity. We increased the dividend 7%, the 58th consecutive year that the dividend has been increased. We have returned $12.9 billion in cash to shareholders, $6.9 billion in dividends, and $6 billion in share repurchase. About 110% of net earnings all-in. We made significant progress on productivity, operating discipline and execution. We delivered $1.6 billion of cost of goods savings, well ahead of our target run rate of $1.2 billion and ahead of our going in estimate of $1.4 billion.
We improved manufacturing productivity by over 7%, reducing overall enrollment while adding new capacity and new sites. We opened the first new multi-category distribution center in the U.S. with five additional centers slated to come online by early next calendar year. We continued to accelerate overhead reduction. In February 2012 we announced the targeted 10% reduction of non-manufacturing enrollment by June of 2016. As of July 1, 2014, we have reduced roles by 16% more than 50% ahead of the original objective two years earlier. We have made good progress driving marketing effectiveness and efficiency through an optimized media mix with more digital, mobile, search and social presence, improved message clarity and greater savings in non-media spending.