CINCINNATI - The Procter & Gamble Company (NYSE:PG) reported third quarter fiscal year 2023 net sales of $20.1 billion, an increase of four percent versus the prior year. Organic sales, which excludes the impacts of foreign exchange and acquisitions and divestitures, increased seven percent. Diluted net earnings per share were $1.37, an increase of three percent versus prior year.

Operating cash flow was $3.9 billion, and net earnings were $3.4 billion for the quarter. Adjusted free cash flow productivity was 92%, which is calculated as operating cash flow less capital spending, as a percentage of net earnings. The Company returned $3.6 billion of cash to shareholders via approximately $2.2 billion of dividend payments and $1.4 billion of common stock repurchases. The dividend increase declared earlier this month marks the 67th consecutive year that P&G has increased its dividend and the 133rd consecutive year that P&G has paid a dividend since its incorporation in 1890.

'We delivered strong results in the third quarter of fiscal year 2023 in what continues to be a very difficult cost and operating environment,' said Jon Moeller, Chairman of the Board, President and Chief Executive Officer. 'Our team's strong execution of our strategies and our progress through three quarters enable us to raise our fiscal year outlook for sales growth and cash return to shareowners and maintain our guidance range for EPS growth despite continued cost and foreign exchange headwinds. We remain committed to our integrated strategies of a focused product portfolio of daily use categories where performance drives brand choice, superiority, productivity, constructive disruption and an agile and accountable organization structure. These strategies have enabled us to build and sustain strong momentum, and we're confident they remain the right strategies to deliver balanced growth and value creation going forward.'

January - March Quarter Discussion

Net sales in the third quarter of fiscal year 2023 were $20.1 billion, a four percent increase versus the prior year. Unfavorable foreign exchange had a four percent impact on net sales. Organic sales, which exclude the impacts of foreign exchange and acquisitions and divestitures, increased seven percent. The organic sales increase was driven by a ten percent increase from higher pricing and a one percent increase from favorable product mix, partially offset by a three percent decrease in shipment volumes.

Net sales percentage changes are approximations based on quantitative formulas that are consistently applied.

Other includes the sales mix impact from acquisitions and divestitures and rounding impacts necessary to reconcile volume to net sales.

* Beauty segment organic sales increased seven percent versus year ago. Skin and Personal Care organic sales grew low single digits as higher pricing and innovation-based volume growth were partially offset by lower sales of SK-II in the travel retail channel. Hair Care organic sales increased double digits driven by increased pricing.

Grooming segment organic sales increased seven percent versus year ago as higher pricing was partially offset by negative volume and mix impacts from market contraction of appliances. All regions grew organic sales.

Health Care segment organic sales increased nine percent versus year ago. Oral Care organic sales increased high single digits due to increased pricing. Personal Health Care organic sales increased double digits due to increased pricing, favorable mix and volume growth driven by innovation and a strong respiratory season.

Fabric and Home Care segment organic sales increased nine percent versus year ago. Fabric Care organic sales increased high single digits due to increased pricing, partially offset by volume declines primarily in Europe. Home Care organic sales increased double digits due to increased pricing and favorable product mix, partially offset by volume declines primarily in Europe.

Baby, Feminine and Family Care segment organic sales increased six percent versus year ago. Baby Care organic sales increased mid-single digits due to increased pricing, partially offset by volume declines mainly in Europe. Feminine Care organic sales increased low teens driven by increased pricing and favorable geographic and product mix, partially offset by volume declines in enterprise markets. Organic sales grew in all regions. Family Care organic sales increased low single digits due to increased pricing, partially offset by larger pack size mix and modestly lower shipment volumes.

Diluted net earnings per share increased by three percent to $1.37, driven by an increase in net sales, an increase in operating margin and a reduction in shares outstanding. Currency-neutral EPS were up 13% versus the prior year EPS.

Gross margin for the quarter increased 150 basis points versus year ago, 220 basis points on a currency-neutral basis. The increase was driven by benefits of 470 basis points from increased pricing and 210 basis points from gross productivity savings. These were partially offset by 270 basis points of increased commodity and input material costs, 140 basis points of negative product mix and 50 basis points of product reinvestments and other impacts.

Selling, general and administrative expense (SG&A) as a percentage of sales increased 100 basis points versus year ago and 50 basis points on a currency-neutral basis. The increase was driven by 310 basis points of marketing investments, inflation and other impacts, partially offset by 180 basis points of net sales growth leverage and 80 basis points of productivity savings.

Operating margin for the quarter increased 40 basis points versus the prior year, 160 basis points on a currency-neutral basis. Operating margin included gross productivity savings of 290 basis points.

Fiscal Year 2023 Guidance

P&G raised its guidance for fiscal 2023 all-in sales to grow approximately one percent versus the prior fiscal year, from a prior guidance range of down one percent to in-line. The Company also raised its outlook for organic sales growth to approximately six percent versus the prior fiscal year from a prior growth range of four to five percent. Foreign exchange is expected to be a five percentage point headwind to all-in sales growth for the fiscal year.

P&G maintained its outlook for fiscal 2023 diluted net earnings per share growth in the range of in-line to up four percent versus fiscal 2022 EPS of $5.81. The Company added that it expects EPS results towards the lower end of the fiscal year guidance range.

P&G said its current fiscal 2023 outlook includes headwinds of approximately $1.3 billion after-tax due to unfavorable foreign exchange rates and $2.2 billion due to higher commodity and material costs. Combined, these items are a $3.5 billion after-tax headwind, or approximately $1.40 per share, to fiscal 2023 earnings versus fiscal 2022, or a headwind of approximately 24 points to EPS growth. The $3.5 billion headwind is a modest sequential improvement versus the guidance provided in January, due to commodities and freight, partially offset by increased foreign exchange headwinds. Additionally, the Company expects the net impact of interest expense and interest income to be a $125 million before tax earnings headwind for fiscal year 2023.

The Company is unable to reconcile its forward-looking non-GAAP cash flow measure and tax rate measures without unreasonable efforts because the Company cannot predict the timing and amounts of discrete cash items, such as acquisitions, divestitures, or impairments, which could significantly impact GAAP results.

P&G expects a core effective tax rate of approximately 20% in fiscal 2023.

Capital spending is now estimated to be approximately 4% of fiscal 2023 net sales.

P&G continues to expect adjusted free cash flow productivity of 90% and now expects to pay around $9 billion in dividends and to repurchase $7.4 billion to $8 billion of common shares in fiscal 2023.

Forward-Looking Statements

Certain statements in this release, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are 'forward-looking statements' within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words 'believe,' 'project,' 'expect,' 'anticipate,' 'estimate,' 'intend,' 'strategy,' 'future,' 'opportunity,' 'plan,' 'may,' 'should,' 'will,' 'would,' 'will be,' 'will continue,' 'will likely result' and similar expressions. Forward-looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties that may cause results to differ materially from those expressed or implied in the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise, except to the extent required by law.

Risks and uncertainties to which our forward-looking statements are subject include, without limitation: (1) the ability to successfully manage global financial risks, including foreign currency fluctuations, currency exchange or pricing controls and localized volatility; (2) the ability to successfully manage local, regional or global economic volatility, including reduced market growth rates, and to generate sufficient income and cash flow to allow the Company to effect the expected share repurchases and dividend payments; (3) the ability to manage disruptions in credit markets or to our banking partners or changes to our credit rating; (4) the ability to maintain key manufacturing and supply arrangements (including execution of supply chain optimizations and sole supplier and sole manufacturing plant arrangements) and to manage disruption of business due to various factors, including ones outside of our control, such as natural disasters, acts of war (including the Russia-Ukraine War) or terrorism or disease outbreaks; (5) the ability to successfully manage cost fluctuations and pressures, including prices of commodities and raw materials and costs of labor, transportation, energy, pension and healthcare; (6) the ability to stay on the leading edge of innovation, obtain necessary intellectual property protections and successfully respond to changing consumer habits, evolving digital marketing and selling platform requirements and technological advances attained by, and patents granted to, competitors; (7) the ability to compete with our local and global competitors in new and existing sales channels, including by successfully responding to competitive factors such as prices, promotional incentives and trade terms for products; (8) the ability to manage and maintain key customer relationships; (9) the ability to protect our reputation and brand equity by successfully managing real or perceived issues, including concerns about safety, quality, ingredients, efficacy, packaging content, supply chain practices or similar matters that may arise; (10) the ability to successfully manage the financial, legal, reputational and operational risk associated with third-party relationships, such as our suppliers, contract manufacturers, distributors, contractors and external business partners; (11) the ability to rely on and maintain key company and third-party information and operational technology systems, networks and services and maintain the security and functionality of such systems, networks and services and the data contained therein; (12) the ability to successfully manage uncertainties related to changing political conditions and potential implications such as exchange rate fluctuations and market contraction; (13) the ability to successfully manage current and expanding regulatory and legal requirements and matters (including, without limitation, those laws and regulations involving product liability, product and packaging composition, intellectual property, labor and employment, antitrust, privacy and data protection, tax, the environment, due diligence, risk oversight, accounting and financial reporting) and to resolve new and pending matters within current estimates; (14) the ability to manage changes in applicable tax laws and regulations; (15) the ability to successfully manage our ongoing acquisition, divestiture and joint venture activities, in each case to achieve the Company's overall business strategy and financial objectives, without impacting the delivery of base business objectives; (16) the ability to successfully achieve productivity improvements and cost savings and manage ongoing organizational changes while successfully identifying, developing and retaining key employees, including in key growth markets where the availability of skilled or experienced employees may be limited; (17) the ability to successfully manage the demand, supply and operational challenges, as well as governmental responses or mandates, associated with a disease outbreak, including epidemics, pandemics or similar widespread public health concerns; (18) the ability to manage the uncertainties, sanctions and economic effects from the war between Russia and Ukraine; and (19) the ability to successfully achieve our ambition of reducing our greenhouse gas emissions and delivering progress towards our environmental sustainability priorities. For additional information concerning factors that could cause actual results and events to differ materially from those projected herein, please refer to our most recent 10-K, 10-Q and 8-K reports.

About Procter & Gamble

P&G serves consumers around the world with one of the strongest portfolios of trusted, quality, leadership brands, including Always, Ambi Pur, Ariel, Bounty, Charmin, Crest, Dawn, Downy, Fairy, Febreze, Gain, Gillette, Head & Shoulders, Lenor, Olay, Oral-B, Pampers, Pantene, SK-II, Tide, Vicks, and Whisper. The P&G community includes operations in approximately 70 countries worldwide. Please visit https://www.pg.com for the latest news and information about P&G and its brands. For other P&G news, visit us at https://www.pg.com/news.

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