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Brian Sozzi of Yahoo Finance talks to Jon Moeller, CFO of Procter & Gamble, about the latest quarter and the company’s outlook.
Video transcript
BRIAN SOZZI: And on this inaugural day, we’re also looking at P&G stocks. Quarterly earnings and sales exceeded estimates this morning. The tie maker also raised its full-year sales and profit outlook. The report therefore played a major role in shaking the confidence of the consumer staples stock markets on Wall Street. Here’s what P&G VP and CFO Jon Moeller told me in a conversation this morning.
JON MOELLER: Well, basically, you know, we’re building on the strong momentum we’ve built over the last few years. And it continues in the COVID environment. So if you look at calendar year 19 as an example, before COVID we increased 6%, we increased basic earnings per share by 15%, 102% free cash flow productivity, the all based on a strong portfolio of brands, a set of strategies that we believe in, in an organization that has done a tremendous job of executing against those strategies.
And that has allowed us to keep the momentum going during the COVID era and, in many cases, build it. So, as you said, a strong quarter of 8%, revenue of 15%, core earnings per share growth of 18% at constant exchange rates, and productivity of 113% of cash flows. available cash. Like or more importantly, we believe we are uniquely positioned to continue this momentum, even in what will hopefully soon be a post-COVID environment.
BRIAN SOZZI: Yeah, let’s talk about the post-COVID environment, Jon, because you talk to a lot of people on Wall Street. And the idea is that once the vaccination is over, once again people start getting vaccinated in the United States and around the world, a lot of these consumer staples companies, the next 12 months could be very different from the last 12 months. But do you see that these results are lasting?
JON MOELLER: Yeah, and that’s due to several things. First, we look forward to responding to what we believe is a forever changed need for consumers for products that help them improve their health, hygiene and a clean home. There are habits that form during this sadly long period of COVID, which we believe will continue, to some extent, after COVID. And then there are a number of categories, geographies, our cost structure that have been hit hard by COVID.
So this has not resulted in an increase in demand in all categories. It’s depressed demand, for example, in our beauty care business and our deodorant business and part of our skin care business. Markets increased during COVID in the United States, but they declined significantly in parts of the developing world, with declines of 13%, 15% and 20% of GDP.
And we have had entire distribution channels that have been shut down as a result of COVID – the travel retail channel, the election channel in Europe, dental offices, the out-of-home market with low occupancy in restaurants. and the hotels we serve. And, as I said from a cost perspective, there have been benefits to increasing throughput, as we’ve stepped up to meet the increased consumer needs.
But it has been difficult to find the amount of material needed to meet this demand, the cost of transportation, and most importantly, the cost of ensuring a safe environment for employees. So as COVID, as we get to a post-COVID environment, some of the headwinds, or certainly some of the tailwinds, will dissipate. But it is hoped that some headwinds will also dissipate. And we left with the strength of our brands and our strategy and the capacity of our organization, which makes us very happy.
BRIAN SOZZI: You wear a lot of hats, Jon, at P&G. You are the CFO. You are also the COO and you see many different parts of the company because of these positions. COVID-19 is costing, is it just the new way of doing business, or expect a lot of the costs you had to bear last year from the pandemic, is it disappears?
JON MOELLER: Some become a cost of doing business, but others will disappear. I expect that part of the premium that has been given to transport services, land and sea, around the world will normalize over time. And there are also savings that we were able to identify as part of our experience with COVID, hence the need today to create the productivity inventions of tomorrow.
I expect the future, not necessarily quarter after quarter, but certainly, year after year, that we will be in an environment that allows us to continue to grow our sales and continue to modestly increase margins. , as these different cost brackets settle.
BRIAN SOZZI: Hey, Jon, I’m not sure many people know this, but today is actually the first – the anniversary – the first anniversary of the confirmation of the first case of COVID-19 in the United States, the States. -United. laboratory. Looking back, how do you think the pandemic is one year here, at least officially based on today’s anniversary, how do you think that has changed P&G?
JON MOELLER: I think it made us stronger, more resilient, more agile, less presumed, a stronger company overall.
BRIAN SOZZI: And today, I would be remiss if I did not mention that today is, in fact, inauguration day. How do you think – how do you bring the temperature down in the United States, on the American political scene, how does that change the outlook for P&G for the next two years?
JON MOELLER: You know, first and foremost, first, second and third, we focus on meeting consumer needs in a preferential way, in a way that thrills consumers and improves their daily lives. And when we do that and well, we worry a lot less about who or what party is in power or what the political environment is. And so, that’s our goal. And again, we are confident that doing this right will serve consumers, we will serve our employees and partners, and we will serve shareholders.
BRIAN SOZZI: Do you think this is an environment that stimulates consumer confidence? Obviously that would be good for your business.
JON MOELLER: Consumer confidence is very important. And as consumer confidence grows, that’s clearly positive.
BRIAN SOZZI: Another positive point too, before you let go, Jon, you are also increasing your share buyback plan for this fiscal year to $ 10 billion. We’re in a $ 7 billion to $ 9 billion range. What gives you the confidence to pull the trigger?
JON MOELLER: The strength of the entire income statement, from sales to earnings, then the cash flow that occurs – I mentioned a productivity of 113% of free cash flow in the quarter. So we’re increasing our share buyback commitment to a combined $ 10 billion, with $ 8 billion in dividends. That will be a return of $ 18 billion to shareholders this fiscal year, or about 125% of profits. We feel good about it.
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