Procter & Gamble Company (The)

Good morning and welcome to Procter & Gamble's quarter-end conference call. Today's event is being recorded for replay. This 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, Procter & Gamble needs to make you aware that during the discussion, the company will make a number of references to non-GAAP and other financial measures. Procter & Gamble believes these measures provide investors with useful perspective on underlying business trends and has posted on its investor relations website www.pginvestor.com a full reconciliation of non-GAAP financial measures. Now I will turn the call over to P&G's Chief Financial Officer, Andre Scholten.

Good morning, everyone. Joining me on the call today are John Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I'll start with an overview of results for fiscal year 22 and the fourth quarter. John will add perspective on our strategic focus areas. We'll close with guidance for fiscal 23 and then take your questions. Fiscal 2022 was another very strong year. Execution of our integrated strategies continues to yield strong sales, earnings, and cash results in an incredibly difficult operating environment. We delivered broad-based, strong top-line growth across categories and regions, earnings growth in the face of significant cost headwinds, continued strong return of cash to P&G shareholders. Organic sales for the fiscal grew 7%, up 13% on a two-year stack, up 19% on a three-year stack. Growth was broad-based across business units with all 10 of our product categories growing organic sales. Personal health care grew 20%. Fabric care and feminine care grew double digits. Baby care up high single digits. Oral care and grooming up mid-single digits. Hair care, home care, skin and personal care, and family care Each grew low singles. Focus markets were up 5% for the year, enterprise markets 10%. We delivered strong results in our largest and most profitable market, the United States, with organic sales growing 8%, up 16% on a two-year stack. E-commerce sales increased 11%, now representing 14% of company total. Our integrated strategies continue to drive strong market growth and, in turn, share growth for P&G. All channel market value in the U.S. categories in which we compete grew approximately 6% in fiscal 22. P&G value share continued to grow, up 90 basis points for the year. Global aggregate market share increased 50 basis points, 36 of our top 50 category country combinations held or grew share for the year. Importantly, this share growth is broad-based. Nine of 10 product categories grew share globally over the past year. Core earnings per share grew 3% for the year, despite a 22 percentage point headwind to earnings from commodities, freight, and foreign exchange. Our initial outlook predicted $1.8 billion after tax of headwinds. We ended up at $3.2 billion, so despite an incremental $1.4 billion of earnings pressure, versus ingoing plan, we delivered core EPS growth within our initial guidance range for the year. On a currency neutral basis, core EPS was up 5%. Adjusted free cash flow productivity was 93%. We increased our dividend by 5% and returned nearly $19 billion of value to share owners, $8.8 billion in dividends, and $10 billion in share repurchase. Moving to the April-June quarter. Organic sales grew 7%. Pricing contributed eight points to organic sales growth as additional price increases reached the market. Mix was flat and volume declined one point, which is due to reduced operations in Russia. Volume for the balance of the business, excluding Russia, was up one point. These strong company results are grounded in broad-based category and geographic strengths. Nine of the 10 product categories grew organic sales in the quarter. Personal health care grew mid-teens. Fem care was up low teens. Fabric care grew double digits. Oral care up high singles. Baby care and family care up mid-single digits. Hair care, home care, and grooming each grew low singles. Five of seven regions grew organic sales, with focus markets up 3%. and enterprise markets up 18% for the quarter. Organic sales in the U.S. grew 6%, up 24% on a three-year stack. European-focused markets were up 3%, excluding Russia, Europe-focused markets were up 7%. Greater China organic sales were down 11%, mainly due to COVID-driven lockdowns in major regions of the markets. Since lockdowns have eased, we've seen sequential market recovery, but somewhat slower than expected when we gave guidance last quarter. In enterprise markets, each of the three regions grew organic sales 14% or more. Global aggregate market share increased 50 basis points. 29 of our top 50 category country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.21. 7% versus prior year. On a currency neutral basis, core EPS increased 12%. Core operating margin decreased 30 basis points as gross margin pressure were largely offset by sales leverage and productivity improvements in SG&A. Currency neutral operating margin increased 20 basis points. Pre-cash flow productivity was 99%. We returned $3.5 billion of cash to share owners this quarter, nearly $2.3 billion in dividends, and nearly $1.3 billion in share repurchase. In summary, we met or exceeded each of our going-in target ranges for the year, organic sales growth, core EPS growth, pre-cash flow productivity, and cash return to share owners. Strong performance in very difficult operating conditions. Now I'll pass it over to John.

Thanks, Andre. P&G employees have delivered great results over the past four years in a very challenging macro environment against very capable competition. In those four years, P&G people have added more than $13 billion in annual sales and roughly $5 billion in after-tax profit, executing our integrated strategies with excellence. I want to publicly thank our colleagues in product supply and R&D who have enabled this progress with formulation, sourcing, manufacturing, and logistics agility and extraordinary commitment to serve consumers, customers, and each other through lockdowns, inbound supply shortages, outbound truck shortages, port blockages, natural disasters, and geopolitical tensions. What P&G's people have accomplished together is truly extraordinary. Still, we're very clear-eyed about the trials ahead. The list of challenges we face heading into our new fiscal year is longer than any I can recall. The progress we've made and our collective commitment to our strategies give me confidence we can manage through these challenges. We've never been better positioned. A portfolio that's focused on daily use categories where performance drives brand choice. Superiority across product, package, brand communication, in-store execution, and value. Leveraging that superiority to grow markets and our share in them. Creating business versus taking business. Powerful with our retail partners as we work to jointly create value. We've developed a productivity muscle that helps us address some of the challenges we face. We remain fully committed to cost and cash productivity in all facets of our business. up and down the income statement and across the balance sheet in each business and corporately. Productivity improvement is a necessity to drive balanced top and bottom line growth and strong cash generation. Success in our highly competitive industry and in this dynamic and challenging environment requires agility that comes with a mindset of constructive disruption. a willingness to change, adapt, and create new trends and technologies that will shape our industry for the future. In the current environment, that agility and constructive disruption mindset are even more important. Our organization structure is yielding what we intended, a more empowered, agile, and accountable organization with little overlap or redundancy, flowing to new demands, seamlessly supporting each other. This improved agility and accountability have been important enablers of our strong results in the dynamic environment we've faced. Going forward, there are four areas in which we need to be even more deliberate and intentional to strengthen the execution of the strategy. The first is supply. Improved capacity, agility, cost efficiency, and resilience for a new reality and a new age. The capability investments we made prior to COVID to improve our manufacturing and distribution networks have helped us to manage through the last few years with relatively few prolonged issues. We're already making the next round of investments needed to ensure we have multiple qualified suppliers for key inputs, sufficient manufacturing capacity to satisfy growing demand, and flexibility to meet the changing needs of all types of retailers. The second area is environmental sustainability, integrated into our product packaging and supply chain innovation work. Irresistibly superior offerings that are sustainable. New cardboard packaging on Gillette razors is an improvement for the environment and a noticeably superior experience for consumers at the first and second moments of truth. New fully recyclable paper packaging on our premium always cotton protection pads recently launched in Germany. laundry detergent formulations that deliver superior cleaning in cold water, reducing energy usage, saving money, and extending garment lifespans for consumers. Third, increasing our digital acumen to drive consumer and customer preference, reduce cost, and enable rapid and efficient decision-making. Increased digitization on manufacturing lines. More use of AI, more use of blockchain are not ends unto themselves. They are tools we can use to delight consumers and customers at the most reasonable cost possible. Fourth, our employee value equation. For all gender identities, races, ethnicities, sexual orientations, ages and abilities, for all roles, to ensure we continue to attract, retain and develop the best talent. By definition, this must include equality. To deliver a superior employee value equation, there must be something in it for everyone. These are not new or separate strategies. They are necessary elements in continuing to build superiority and reducing costs to enable investment and value creation and strengthening our organization. They are part of the constructive disruption we must continue to lead. The operational cost and currency challenges we've faced over the last two years will continue in fiscal 23. We begin the new fiscal year with consumers facing inflation levels not seen in the last 40 years. We know one of the most pressing questions out there is how we plan to deal with the severe cost and currency impacts we're facing. $6.5 billion after tax in just two years, nearly an $8 billion hit to operating profit. I'll repeat what I said on our April 2020 earnings call. The best response to uncertainties and challenges we face is to double down on the integrated set of strategies that are delivering very strong results. It won't be easy. There will be bumps along the road. But we have the portfolio, superiority, productivity, and in my not so humble opinion, the best organization in the world. We have everything we need. So again, I think we are very well positioned. We're committed to keep investing to strengthen the superiority of our brands across innovation, supply chains, and brand equity to deliver superior value for consumers in every price tier in which we compete. Alongside our productivity work, we'll continue to offset a portion of the cost impacts with price increases. Whenever possible, we'll close couple those price increases with innovation. Those moves will be tailored to the market category and brand. As consumers face increased pressure on nearly every aspect of their household budgets, we invest to deliver truly superior value and combination of price and product performance to earn their loyalty every day. So far, elasticities in most categories where we've taken price increases have been better than our historical experience. Our strategic choices on portfolio, superiority, productivity, constructive disruption, and organization are not independent strategies. They reinforce and build on each other, and the four focus areas that I mentioned strengthen the execution of that strategy. When all of this is executed well, we grow markets, which in turn grow shares, sales, and profit. These integrated strategies are a pathway to delivering balanced growth. We've been talking about the importance of balance for a long time in the context of needing both top line and bottom line growth to deliver value for shareholders. We're in a world that needs more from us now. We need to expand that concept to serve and delight consumers, customers, employees, society, and our shareholders. And I firmly believe that if we fail to do any of those, we will fail to do all of them. Our consumers increasingly rely on us to deliver superior solutions that are sustainable. Our world requires that we do our part in this regard. This challenge is also a wonderful opportunity to extend our margin of superiority, further grow our categories, and create more value, all while positively impacting the environment and society. These strategies were delivering strong results before the pandemic and have served us well during these volatile times. We're confident they remain the right strategic framework as we move forward. With that, I'll hand it back to Andre to outline our guidance for fiscal 2023. Thank you, John.