Morgan Stanley Global Consumer & Retail Conference. November 18, 2015

Transcription

1 Morgan Stanley Global Consumer & Retail Conference November 18, 2015

2 Forward Looking Statements Certain statements in this release or presentation, 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 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. 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 disruptions in credit markets, reduced market growth rates or changes affecting our credit rating, and generate sufficient income and cash flow to allow the Company to effect the expected share repurchases and dividend payments; (3) the ability to maintain key manufacturing and supply arrangements (including sole supplier and sole manufacturing plant arrangements) and manage disruption of business due to factors outside of our control, such as natural disasters and acts of war or terrorism; (4) the ability to successfully manage cost fluctuations and pressures, including commodity prices, raw materials, labor costs, energy costs and pension and health care costs, and achieve cost savings described in our announced productivity plan; (5) the ability to stay on the leading edge of innovation, obtain necessary intellectual property protections and successfully respond to technological advances attained by, and patents granted to, competitors; (6) the ability to compete with our local and global competitors in new and existing sales channels by successfully responding to competitive factors, including prices, promotional incentives and trade terms for products; (7) the ability to manage and maintain key customer relationships; (8) the ability to protect our reputation and brand equity by successfully managing real or perceived issues, including concerns about safety, quality, efficacy or similar matters that may arise; (9) the ability to successfully manage the financial, legal, reputational and operational risk associated with third party relationships, such as our suppliers, contractors and external business partners; (10) the ability to rely on and maintain key information technology systems and networks (including Company and third-party systems and networks) and maintain the security and functionality of such systems and networks and the data contained therein; (11) the ability to successfully manage regulatory and legal requirements and matters (including, without limitation, those laws and regulations involving product liability, intellectual property, antitrust, privacy, accounting standards and environmental) and to resolve pending matters within current estimates; (12) the ability to manage changes in applicable tax laws and regulations; (13) the ability to successfully manage our portfolio optimization strategy, as well as ongoing acquisition, divestiture and joint venture activities, to achieve the Company s overall business strategy, without impacting the delivery of base business objectives; and (14) the ability to successfully achieve productivity improvements and manage ongoing organizational changes, while successfully identifying, developing and retaining particularly key employees, especially in key growth markets where the availability of skilled or experienced employees may be limited. For additional information concerning factors that could cause actual results to materially differ from those projected herein, please refer to our most recent 10- K, 10-Q and 8K reports.

3 Regulations FD and G Disclosure For a full reconciliation, please visit: 3

4 Morgan Stanley Global Consumer & Retail Conference November 18, 2015

5 Agenda Macro Environment P&G Transformation Results & Outlook 5

6 Macro Environment Growth rates decelerating Currencies weakening 6

7 Large Positions in Tough Markets Index vs. Largest Multi-National Competitor Local Currency Devaluation* Sales BT Profit vs. USD vs. EUR Russia 3x 4x -38% -23% Ukraine 3x 5x -79% -60% Japan 6x 5x -12% -1% China 3x 3x -1% 10% Middle East 2x 3x -6% 5% P&G Sales in Tough Markets ~$14 Billion** * FY 15 impacts ** FY14 sales 7

8 P&G Transformation Productivity Supply Chain Portfolio Product category strategies & business models

9 Productivity Transformation Non-Manufacturing Enrollment Original Target: -10% by June 2016 Results to Date: -23% as of Sept 2015 Updated Plan: -25% to -30% by June 2017 June -11 June-12 June-13 June-14 June-15 Cumulative Reduction -5% -12% -15% -22% 9

10 Productivity Transformation Cost of Goods Savings ($bn) $1.2 $1.3 $1.6 $1.5 Cumulative Savings: ~$7bn $1.4 Target Run-Rate = $1.2B/yr FY 12 FY 13 FY 14 FY 15 FY 16e 10

11 Productivity Transformation Same Site Manufacturing Enrollment Enrollment (People, 1000s) Results to Date: -19% as of June 2015 Target: -25% to -30% by June 2017 June-12 June-13 June-14 June-15 Cumulative Reduction -5% -11% -19% 11

12 Productivity Transformation Agency / Production Savings Reduction Number of Agencies -40% Agency/Production Spending ($ million) -$300 12

13 Productivity Transformation Inventory Days on Hand Cumulative DOH Improvement FY 12 FY 13 FY 14 FY 15 13

14 Productivity Transformation Payables Supply Chain Financing Contribution 4 Cumulative ($ Bn) 2 0 $2.3 $1.1 $0.2 FY 13 FY 14 FY 15 14

15 Productivity Transformation Adjusted Free Cash Flow 120% Objective of 90 to 100% 105% 90% 75% 60% 45% 30% 15% 0% FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16e 15

16 Productivity Transformation Free Cash Flow vs. Mega-Cap Peers Most Recent FY GAAP Results Revenue ($bn) Net Income ($bn) Free Cash Flow ($bn) Walmart General Motors United Health Group Nestle P&G Johnson & Johnson PepsiCo Coca-Cola

17 Value to Shareholders FY 15 $11.9 bn Past 5 Yrs $60 bn Next 4 Yrs $70 bn 17

18 Supply Chain Transformation Mixing & Distribution Centers 18

19 Supply Chain Transformation Re-Siting 19

20 Supply Chain Transformation Manufacturing Productivity Affordable automation Platform standardization 20

21 Portfolio Transformation Baby Fem Family Fabric Home Hair Skin & PC Grooming Oral PHC *Not representative of all brands 21

22 Portfolio Transformation Value Accretive Interventions Exiting or Fixing Under-Earning Businesses 22

23 Value Accretive Business Unit Moves Mexico Family Care Pre-Change* Post-Change* Sales, $ millions 100 ~25 Before Tax Margin Negative Double-Digits Positive Double-Digits * Pre = FY 15, Post = Going 23

24 Value Accretive Business Unit Moves Fabric Care $ Millions Sales Forms Additives, Bars, Bleaches, Gels, Tablets Organic Sales Growth Impact % Brands Tier III % Total Impact to Fabric Care % * FY 16 24

25 Value Accretive Market Interventions India $ Millions 2013/ /15 Organic Sales Growth +Mid-Teens +High-Single Digits Before Tax Profit Negative Positive Before Tax Margin -Low-Single Digits +Mid-Single Digits 25

26 Business Transformation Largest Categories Largest Markets Baby + Fabric + Hair + Grooming *Not representative of all brands 26

27 Business Transformation Fabric Care 27

28 Business Transformation Fabric Care 28

29 Business Transformation U.S. Fabric Care 29

30 Business Transformation U.S. Diapers Market Share P&G 44% 36 Huggies 37% 30 07/04/09 07/25/15 30

31 31

32 Business Transformation Baby Care 32

33 Business Transformation Grooming 33

34 Business Transformation Gillette FlexBall 34

35 GILLETTE NEW FUSION INNOVATION Confidential. Property of 35 P&G.

36 Gillette ProShield Commercial

37 GILLETTE FUSION NEW FUSION PROSHIELD INNOVATION LAUNCH Confidential. Property of 37 P&G.

38 Business Transformation Grooming 38

39 Business Transformation Grooming In-Store Availability 39

40 40

41 P&G Transformation Productivity Supply Chain Portfolio Product category strategies & business models 41

42 Q1 FY 2016 Results Q1 16 Organic Sales Growth -1% Core Earnings Per Share Growth -1% Constant Currency Core EPS Growth 12%

43 Q1 FY 2016 Results Free Cash Flow Q1 16 $3bn Adjusted Free Cash Flow Productivity 101% Dividends ($bn) 1.9 Share Repurchase ($bn) 0.5 Cash Returned to Shareholders $2.4bn

44 FY 2016 Guidance* Organic Sales Growth FY 2016 Organic Sales Growth In-line to Up Low Single Digits Currency -5% to -6% Venezuela & Minor Brand Divestitures -2% to -3% All-in Sales Growth Down High Single Digits * Guidance assumes that Batteries & transitioning Beauty businesses are accounted for as discontinued operations

45 FY 2016 Organic Sales Growth 3% 2% 1% 0% -1% -1% + Stronger Back-Half JAS 15 OND 15 JFM 16 AMJ 16-2%

46 FY 2016 Guidance* EPS Growth FY 2016 Core Operating Profit Up Mid to High Single Digits Core Earnings Per Share Growth Down Slightly to Up Mid-Single Digits All-in Earnings Per Share Growth +53% to 63% * Guidance assumes that Batteries & transitioning Beauty businesses are accounted for as discontinued operations

47 FY 2016 Guidance Cash Returned to Shareholders Share Retirement/Repurchases*: $8B to $9B Dividends: $7B+ Cash Returned to Shareholders: $15B to $16B * Includes shares retired at the close of the Duracell transaction.

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49 The Procter & Gamble Company Regulation G Reconciliation of Non-GAAP Measures In accordance with the SEC's Regulation G, the following provides definitions of the non-gaap measures used in Procter & Gamble's November 18, 2015 Morgan Stanley Global Consumer & Retail Conference and associated slides and the reconciliation to the most closely related GAAP measure. The measures provided are as follows: 1. Organic Sales Growth page 1 2. Core EPS and Currency-Neutral Core EPS pages Free Cash Flow and Adjusted Free Cash Flow page 3 4. Adjusted Free Cash Flow Productivity page 4 1. Organic sales growth: Organic sales growth is a non-gaap measure of sales growth excluding the impacts of Venezuela deconsolidation, acquisitions, divestitures and foreign exchange from year-over-year comparisons. We believe this provides investors with a more complete understanding of underlying sales trends by providing sales growth on a consistent basis. Organic sales is also one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation. The reconciliation of reported sales growth to organic sales is as follows: Three Months Ended September 30, 2015 Net Sales Growth Foreign Exchange Impact Acquisition/ Divestiture Impact* Organic Sales Growth Total P&G (12)% 9% 2% (1)% *Acquisition/Divestiture Impact also includes the Venezuela deconsolidation, the mix impacts of acquisitions and divestitures and rounding impacts necessary to reconcile net sales to organic sales. Guidance Total Company FY 2016 Estimate Net Sales Growth Foreign Exchange Impact Acquisition/ Divestiture Impact* Down high single digits (5)% to (6)% (2)% to (3)% Organic Sales Growth In line to up low single digits *Acquisition/Divestiture Impact also includes the Venezuela deconsolidation, the mix impacts of acquisitions and divestitures and rounding impacts necessary to reconcile net sales to organic sales

50 The Core earnings measures included in the following reconciliation tables refer to the equivalent GAAP measures adjusted as applicable for the following items: charges for incremental restructuring due to increased focus on productivity and cost savings and charges for balance sheet impacts from the devaluation of the foreign currency exchange rate in Venezuela prior to deconsolidation. We do not view these items to be part of our sustainable results. We believe that these Core measures provide an important perspective of underlying business trends and results and provide a more comparable measure of year-on-year results per share growth. 2. Core EPS and currency-neutral Core EPS: Core EPS is a measure of the Company's diluted net earnings per share from continuing operations adjusted as indicated below. Core EPS is also one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation. Currency-neutral Core EPS is a measure of the Company's Core EPS excluding the incremental current year impact of foreign exchange. We believe the currency-neutral Core EPS measure provides a more comparable view of year-on-year earnings per share growth. The table below provides a reconciliation of diluted net earnings per share to Core EPS and Core EPS to Currency-neutral Core EPS: Three Months Ended September Diluted Net Earnings Per Share from Continuing Operations $0.96 $0.93 Incremental Restructuring Venezuela Balance Sheet Remeasurement Core EPS $0.98 $0.99 Percentage change vs. prior period (1)% Currency Impact to Earnings $0.13 Currency-Neutral Core EPS $1.11 Percentage change vs. prior period 12% Note All reconciling items are presented net of tax. Tax effects are calculated consistent with the nature of the underlying transaction.

51 Guidance Total Company Diluted EPS Growth Impact of Incremental Non-Core Items* Core EPS Growth FY 2016 (Estimate) 53% to 63% (48)% to (64)% Down slightly to up midsingle digits *Includes change in discontinued operations (includes Batteries impairments) and the absence of significant one-time items (e.g. Venezuela charge) 3. Free cash flow and adjusted free cash flow: Free cash flow is defined as operating cash flow less capital spending. Adjusted free cash flow is free cash flow plus tax payments for the Pet Care divestiture. We view these as important measures because they are a factor used in determining the amount of cash available for dividends and discretionary investment. The reconciliation of free cash flow and adjusted free cash flow is provided below (amounts in millions): Operating Cash Flow Capital Spending Free Cash Flow Cash Tax Payment Pet- Care Sale Adjusted Free Cash Flow Three Months Ended September 30, 2015 $3,538 $(532) $3,006 - $3,006 Operating Cash Flow Capital Spending Tax Payment on Divestitures Adjusted Free Cash Flow FY 2015 $14,608 $(3,736) $729 $11,601 FY ,958 (3,848) - 10,110 FY ,873 (4,008) - 10,865 FY ,284 (3,964) 519 9,839 FY ,330 (3,306) - 10,024 FY ,131 (3,067) ,044 FY ,919 (3,238) - 11,681 FY ,008 (3,046) - 11,962 FY ,435 (2,945) - 10,490 FY ,375 (2,667) - 8,708

52 4. Adjusted free cash flow productivity: Adjusted free cash flow productivity is defined as the ratio of adjusted free cash flow to net earnings excluding impairment charges. The Company's long-term target is to generate annual free cash flow at or above 90 percent of net earnings. Adjusted free cash flow productivity is also a measure used to evaluate senior management and is a factor in determining their atrisk compensation. The reconciliation of adjusted free cash flow productivity is provided below: Adjusted Free Cash Flow Net Earnings Impairment & Deconsolidation Charges Net Earnings Excl. Impairment Charges Adjusted Free Cash Flow Productivity Three Months Ended Septenber 30, 2015 $3,006 $2,635 $350 $2, % Adjusted Free Cash Flow Net Earnings Divestiture Gain Impairment & Venezuela Charge Net Earnings Excl. Gain and Impairment Adjusted Free Cash Productivity FY 2015 $11,601 $7,144 $- $4,187 $11, % FY ,110 11, ,785 86% FY ,865 11, ,402 95% FY ,839 10,904 1,418 (1,503) 10,989 90% FY ,024 11, ,927 84% FY ,044 12,846 1,585-11, % FY ,681 13,436 2,011-11, % FY ,962 12, ,075 99% FY ,490 10, , % FY ,708 8, , %