Q3 2014 Earnings Call Transcript

Transcript Call Date 04/23/2014

Foreign exchange was a $0.12 per share headwind for the Company in the quarter. Excluding foreign exchange, core earnings per share grew 17%.

The effective tax rate on core earnings was about 20%. Tax accounted for roughly $0.03 of earnings per share benefit on the quarter versus the prior year. We generated $3.2 billion in free cash flow, achieving 119% free cash flow productivity and remaining on track to deliver free cash flow productivity of about 90% for the fiscal year.

As planned, we returned $1.7 billion of cash to shareholders and dividends. We also announced a 7% increase in our dividend. P&G has now been paying a dividend for 124 consecutive years since its incorporation in 1890. This is the 58th consecutive year the Company has increased its dividend. We repurchased $1.5 billion in stock, bringing year-to-date share repurchase to $5.5 billion.

Stepping back, we're satisfied with our top line growth particularly against a difficult macro backdrop, constant currency earnings progress was very strong. We're reliably converting earnings to cash and are building on a strong track record of cash return to shareholders.

As we move forward, value creation for consumers and share owners remains our top priority. Operating TSR is our primary business performance measure. Operating TSR is an integrated measure of value creation at the business unit level, requiring sales growth, margin progress, and strong cash flow productivity. Operating TSR drives focus on core brands and businesses, our leading most profitable categories, and leading most profitable markets.

Our strongest brands and business units and total Company positions are in the U.S. We need to continue to ensure our home market stays strong and growing. The actions we've taken over the past two years to restore consumer value, expand our vertical product portfolios and horizontal regimens, and lead innovation have enabled us to restore value-creating share growth in many parts of the business.

We still have a lot more work to do in a few categories, and the competitive environment is intense, which leads to choppy results on a quarter-to-quarter basis, but we're making good progress. We'll continue to grow and expand our business in developing markets with a focus on the categories and countries with the largest sizes of prize and the highest likelihood of winning. This is where the world's babies will be born and where more new households will be formed. Developing markets will continue to be a significant growth driver for our Company this year and for years to come.

We'll continue to focus the Company's portfolio, allocating resources to businesses where we can create value. Over the past six years, we've exited businesses that have accounted for over $6 billion in sales, including coffee, pharmaceuticals, snacks, kitchen appliances and water purification. Last quarter, we announced our exit from the bleach business. Two weeks ago, we announced our plan to exit the pet food business.

Mars will buy our business in the Americas and several other countries. We expect to sell the European business to a different buyer. The $2.9 billion purchase price Mars has agreed to pay for the non-European business represents a 1.8 times multiple of sales and an 18 times multiple of EBITDA on an average of the past two years sales and profits for the global pet food business.

Read our Earnings Call Transcript disclaimer.
Add a Comment
E-mail me new replies.