Duracell Parent Company Announces Increased Sales in Quarter
Procter & Gamble Company Press Release (excerpted)FlashlightNews.org - 08/02/2006
P&G Delivers 8% Organic Sales Growth For The April-June Quarter; Drives Base Business EPS Growth Above 17%
Duracell Batteries
CINCINNATI, Oh. - The Procter & Gamble Company (NYSE: PG) announced net sales growth of 25 percent during the April - June quarter to $17.84 billion and 20 percent for the fiscal year to $68.22 billion, including the addition of Gillette. Organic sales, which exclude the impacts of acquisitions, divestitures and foreign exchange, increased eight percent during the quarter and seven percent for the fiscal year. Organic sales growth in both periods was well ahead of the company's post-Gillette organic growth target range of four to six percent and was broad-based across segments and geographies. Earnings per share increased six percent during the quarter to $0.55 and four percent during the fiscal year to $2.64. Excluding the impact of Gillette dilution, base business earnings per share increased an estimated 17% - 21% for the quarter and 12% - 13% for the fiscal year.
"This marks the fifth consecutive year in which P&G has delivered topline growth at or above the company's targets," said Chairman of the Board, President and Chief Executive A.G. Lafley. "Demand for P&G's brands is strong. We're continuing to drive P&G's business with breakthrough innovations and excellent in-market execution. This, combined with the great progress on integrating Gillette, positions P&G to deliver its growth objectives in fiscal year 2007 and beyond."
Net sales for the quarter increased 25 percent to $17.84 billion. Organic sales increased eight percent, well ahead of the company's post-Gillette organic sales target range of four to six percent. Price increases taken across several segments added one percent to sales growth. In addition, a more premium product mix, driven by product initiatives and the impact of adding the Gillette business, more than offset the negative mix impact of disproportionate growth in developing regions and contributed one percent to sales growth.
Unit volume for the April - June quarter increased 23 percent behind the addition of the Gillette business and strong six percent organic volume growth. Growth continued to be driven by successful product innovations and continued expansion in developing regions. Each business segment and every geographic region increased organic volume during the quarter, led by double- digit growth in developing regions.
Net earnings during the quarter increased 36 percent to $1.90 billion. Net earnings increased behind strong organic sales growth, the addition of the Gillette business and significant margin improvements across most business segments. Diluted net earnings per share increased six percent to $0.55, including an estimated $0.06 - $0.08 dilution impact from Gillette. The Gillette dilution estimate includes approximately $0.04 per share of one-time items.
Gross margin improved by 150-basis points to 50.2% during the quarter. Commodity costs had a negative impact on gross margin of about 100 basis points. Organic volume growth, pricing and cost savings projects more than offset commodity cost increases. The mix benefit from adding the Gillette businesses contributed approximately 125-basis points.
Business Segment Discussion for the Quarter (Duracell and Braun)
Duracell and Braun net sales were $882 million during the quarter, in-line with the prior year period. Volume/mix increased sales by one percent during the quarter. Duracell market share increased by 1.2 points in North America during the quarter. Duracell unit volume was down, however, due to retailer inventory reductions in North America and strong competitive activity in Western Europe. In Braun, growth in developing regions behind new product initiatives was offset by a decline in the shaver category in Japan and strong competitive activity in Western Europe. Pricing activity, primarily on Duracell, had a positive three percent impact on sales growth. However, an accrual adjustment for trade promotion in the base period had a negative four percent year-on-year impact. Net pricing had a negative one percent impact on sales during the quarter. Earnings before income taxes declined 35 percent during the quarter to $81 million, including purchase accounting adjustments that negatively impacted earnings before income taxes by six percent. Earnings decreased as cost savings were more than offset by higher commodity costs. Reported net earnings were $54 million during the quarter.
Fiscal Year Discussion (Duracell and Braun)
Sales for Duracell and Braun since the acquisition closed on October 1, 2005, were $2.92 billion, in-line with the comparable prior year period pro forma results including a negative two percent foreign exchange impact. In the Duracell business, market share growth in North America and the impacts of price increases to compensate for rising commodity costs were offset by strong competitive activity in Western Europe. Braun sales increased in the low-single digits as double-digit growth in Central & Eastern Europe/Middle East/Africa behind new product initiatives was largely offset by declines in Western Europe due to strong competitive activity. Earnings before income taxes increased nine percent to $400 million, including acquisition-related charges of $60 million that negatively impacted earnings by 16 percent in the period. The acquisition-related charges primarily represented increased amortization charges as a result of revaluing Gillette's intangible assets to fair market value and increased product costs for revaluing opening inventory balances at fair value. Earnings margin was favorably impacted by base period charges for severance and other exit costs associated with Gillette's Functional Excellence program, including charges related to the shutdown of a manufacturing facility, as well as current-year synergy savings from pre- and post-acquisition cost reduction efforts. Net earnings were $273 million since the acquisition closed on October 1, 2005.