The Procter & Gamble Company Q4 2023 Earnings Conference Call Insights

Key highlights from The Procter & Gamble Firm (PG) This autumn 2023 Earnings Concall

Administration Replace:

• [00:01:48] PG mentioned its natural gross sales grew 7%, pushed by broad-based progress throughout all 10 product classes.

• [00:17:30] PG expects world market worth progress in its classes to reasonable in fiscal 2024. Nonetheless, the corporate is assured that it may well proceed to develop above underlying market ranges and construct mixture market share globally.

• [00:18:42] PG expects to extend capital spending in fiscal 2024 because it provides capability in a number of classes.

Q&A Highlights:

• [00:21:10] Bryan Spillane of Financial institution of America requested how PG is approaching income rebalancing in its 2024 working plan, by way of degree of funding, mixture of spending, and give attention to completely different segments and geographies. Jon Moeller CEO replied that P&G’s technique for FY24 is to develop classes throughout quantity and worth, primarily by way of innovation and superiority. The corporate will give attention to above-the-line investments and strategic promotions.

• [00:31:05] Dara Mohsenian at Morgan Stanley queried how PG is positioned to enhance market share efficiency sooner or later, given latest reinvestments in advertising and the degrees of payback from these investments. Andre Scholten CFO mentioned that PG is proud of its regular market share and robust pricing contribution. It’s assured in its technique of driving superiority by way of innovation and offering worth to shoppers. PG is well-positioned to proceed driving market progress and lengthening its share premium.

• [00:35:24] Lauren Lieberman of Barclays requested in regards to the SKU simplification program, reminiscent of its geographic focus, maturity, and influence on current productiveness packages. Andre Scholten CFO answered that PG is launching a SKU simplification program to cut back the variety of SKUs in its portfolio and enhance shelf effectivity. This system is anticipated to generate top-line and bottom-line advantages for P&G and its retail companions.

• [00:39:16] Nik Modi of RBC Capital enquired in regards to the drivers of shopper habits in China, and whether or not it is because of COVID-related elements or financial elements. Jon Moeller CEO mentioned that PG’s enterprise in China is recovering steadily, however there are nonetheless some underlying financial challenges. The corporate is optimistic in regards to the long-term prospects for China.

• [00:39:48] Nik Modi of RBC Capital additionally requested how PG plans to handle its innovation pipeline in fiscal 2024, given the anticipated enhance in competitors for shelf area. Jon Moeller CEO answered that as PG rebalanced its provide chain, the corporate was in a position to focus extra on productiveness and innovation. This led to sturdy progress within the hand dishwashing enterprise, and P&G is assured that it may well proceed to innovate and develop market share.

• [00:47:58] Andrea Teixeira of JPMorgan enquired if PG is seeing extra have to defend entry-level pricing with promo within the U.S., and is PG comfy with its worth pack structure because it stands now. Jon Moeller CEO replied that PG will use pack measurement, channel choices, and worth communication to offer worth to shoppers dealing with financial strain, somewhat than merely reducing costs.

• [00:48:43] Andrea Teixeira with JPMorgan additionally enquired if commodity prices are available in higher than anticipated, would PG reinvest the financial savings or stream them by way of to the underside line. Andre Scholten CFO mentioned PG’s steering for FY2024 consists of $800 million in commodity assist, offset by $400 million in FX and $200 million in curiosity expense. Any incremental assist from commodities will take time to stream by way of the P&L, and funding selections will probably be made on a case-by-case foundation based mostly on ROI.

• [00:51:53] Callum Elliott of Bernstein queried about PG’s method to retail media spend, who’s liable for it, and whether or not will probably be incremental spend or a shift from different advertising channels. Andre Scholten CFO replied that P&G consists of all media spend in its advertising combine and is exploring the effectiveness of retail media. It’s working with retail companions to maximise the return on retail media spend by sharing information and optimizing campaigns. Retail media should earn its place within the combine based mostly on its return on funding.

• [00:54:51] Olivia Tong of Raymond James requested if PG believes that the development in price financial savings in fiscal 2023 is sustainable or is it an elevated degree on account of final 12 months’s depressed ranges. Andre Scholten CFO mentioned PG is assured in its capacity to return to pre-COVID ranges of productiveness throughout price of products, media, financial savings, and basic productiveness. The corporate can also be assured in its capacity to generate $1.5 billion in web financial savings by way of Provide Chain 3.0.

• [00:58:12] Peter Grom of UBS requested about how to consider the pacing of GM development, given the $800 million of depletion that will probably be extra back-half weighted, however wholesome tailwinds from productiveness and worth. Andre Scholten CFO mentioned that PG is on the trail to recovering GM to pre-COVID ranges, however it can take time. The corporate can also be dedicated to investing in innovation and communication, which would require some working margin enlargement.

• [00:59:49] Filippo Falorni of Citi enquired about natural gross sales progress steering for fiscal 2024, particularly quantity assumptions and if quantity progress is anticipated within the first half of the 12 months. Andre Scholten CFO replied that PG expects 1 -1.5 factors of world market progress to return from quantity in fiscal 2024. The corporate will try to develop forward of that, and expects sequential progress on the amount line.

• [01:01:35] Chris Carey at Wells Fargo requested that with sturdy free money stream era and leverage trending down, if PG will enhance share repurchases. Andre Scholten CFO mentioned PG’s capital allocation priorities haven’t modified. The corporate will proceed to completely fund the enterprise, pay the dividend, do M&A the place it is smart, and return money to shareholders by way of share repurchase.

• [01:01:50] Chris Carey from Wells Fargo requested for an replace on the SK-II model, together with its channel well being and whether or not it may well proceed to be a major driver of progress for PG. Andre Scholten CFO answered that SK-II’s 20% progress in 4Q was constructed on a weak base, however the crew is doing a superb job of placing the model on a stable footing for fiscal 2024. Early indicators in China are optimistic.

• [01:06:38] Invoice Chappell of Truist Securities requested in regards to the disruption within the European grooming market and supply an replace on the state of the grooming trade going right into a normalized subsequent 12 months. Andre Scholten CFO answered that the grooming enterprise has been sturdy in latest quarters, and the corporate is optimistic in regards to the future outlook. The enterprise is increasing its product choices and driving market progress.