The Procter & Gamble Company (P&G) announced its second-quarter fiscal year 2025 financial results, highlighting a two percent increase in net sales to $21.9B, with organic sales growth at three percent year over year (YOY).
“Diluted net earnings per share were $1.88, an increase of 34% versus the prior year, due primarily to a non-cash impairment of the carrying value of the Gillette intangible asset in the base year,” the company stated. P&G’s core earnings per share (EPS) also rose two percent to $1.88.
Regarding overall financial performance, Jon Moeller, Chairman of the Board, President, and CEO, stated that “the P&G team delivered an acceleration in organic sales growth, core EPS growth, and strong cash return to shareowners in the second quarter.”
Financial & segment performance overview
P&G’s operating cash flow for the quarter was reported at $4.8B, with adjusted free cash flow productivity reaching 84%. “The Company returned over $4.9B of cash to shareowners via $2.4B of dividend payments and $2.5B of share repurchases,” according to the results.
Performance varied across business segments, driven by “innovation, geographic mix, and pricing strategies.”
In the beauty segment, which includes hair care brands like aussie, Herbal Essences, and Pantene, as well as skin care brands Native and Olay, “organic sales increased two percent versus year ago.” The results highlighted that this growth was supported by low single-digit growth in hair care “driven by volume growth in North America, Europe, and LATAM and favorable geographic and premium product mix, partially offset by volume declines primarily in Greater China.”
Of note, P&G also reported, “Personal Care organic sales increased double digits driven by innovation-based volume growth.” In contrast, “Skin Care organic sales declined mid-single digits due to volume declines, partially offset by favorable product mix from higher sales of the super-premium SK-II brand.”
The grooming segment, which includes brands like Braun and Gilette, saw similar results to beauty: “organic sales increased two percent versus year ago behind innovation-driven volume growth partially offset by unfavorable geographic mix.”
Jon Moeller, P&G’s Chairman, President, and CEO, remarked, “Our first-half results keep us on track to deliver within our guidance ranges on all key financial metrics for the fiscal year.”
FY25 guidance
The company maintained its full-year outlook for fiscal 2025. “All-in sales growth is expected to be in the range of two to four percent versus the prior year, with organic sales growth in the range of three to five percent,” according to the report.
Earnings are also projected to grow significantly. “P&G maintained its fiscal 2025 diluted net earnings per share growth to be in the range of 10% to 12% versus fiscal 2024 diluted net EPS of $6.02,” the company stated.
The report explained that this equates to an EPS range of $6.91 to $7.05, with a midpoint estimate of $6.98, representing a six percent increase.
Headwinds are anticipated to impact results. “P&G continues to expect a commodity cost headwind of approximately $200M after tax for fiscal 2025,” and “the Company now expects unfavorable foreign exchange rates will be a headwind of approximately $300M after tax,” P&G reported. “Collectively these impacts are a headwind of $0.20 per share.”
Additionally, P&G expects capital spending to range from four to five percent of fiscal year 2025 net sales.
Operational metrics
The company reported mixed results on margins for the quarter. “Reported operating margin for the quarter increased 550 basis points versus the prior year,” but “core operating margin decreased 80 basis points versus the prior year,” reflecting reinvestments and higher commodity costs.
P&G’s adjusted free cash flow productivity target remains at 90% for the full fiscal year. “The Company expects to pay around $10B in dividends and to repurchase six to seven billion dollars of common shares in fiscal 2025.”
P&G highlighted its continued focus on growth strategies, which Moeller described as a combination of “superiority — across product performance, packaging, brand communication, retail execution and consumer and customer value — productivity, constructive disruption and an agile and accountable organization.” He added, “This strategy has enabled our solid results and is a foundation for balanced growth and value creation.”
