Procter & Gamble finally has good news for investors – The Fool Motley

It took a long time, but Procter & Gamble (NYSE: PG) the shareholders finally notice an improvement in the results of titan, a consumer product. The owner of consumer staples franchises, including Gillette razors and Pampers diapers, this week announced faster sales gains than he had been seeing for more than two years. P & G also associated these new positive revenues with improved profitability. The results have enabled the company to meet its ambitious operational and financial targets for the 2019 fiscal year.

More information on the objectives of the exercise in an instant. First, here is how the first quarter results compare to those of the previous year:

Source: P & G financial documents

Find traction

P & G's expansion rate is significantly accelerated thanks to strong sales volumes and price stability. A few long-term categories, including shaving, have had healthy rebounds, suggesting that strategic initiatives by management may finally be successful.

The highlights of the quarter:

• Net sales remained stable due to currency movements. On an organic basis, however, sales jumped 4%, marking a sharp acceleration from P & G's 1% increase in each of the last two quarters.
• P & G began to implement price increases in key portions of its portfolio during the quarter and its prices improved over the prior quarter. However, most of the growth comes from higher sales volumes, particularly in the shaving and laundry sectors. The company attributed its gains in e-commerce and previous price reductions to the relaunch of the Gillette brand. As for laundry products, they continue to sell well thanks to innovations and effective marketing support.
• The gross profit margin decreased as savings from cost reduction were offset by higher input prices. However, P & G recorded an increase in operating margin thanks to stable prices and lower expenses.
• Adjusted free cash flow was $ 2.7 billion, of which more than 90% was directly translated into earnings.
• P & G spent $ 1.3 billion on share buybacks and $ 1.9 billion on dividend payments.

What management had to say

CEO David Taylor celebrated the acceleration of the growth rate while noting that it was fueled by growing demand. "We generated strong consumption, volume and organic sales in the first quarter," he said in a press release. Leaders mentioned improving industry trends in some segments, but said the bulk of the rebound may be related to their supply chain, innovation and other initiatives. marketing. "Our focus on superiority, productivity, and improved P & G organization and culture leads to better results," explained Taylor.

Looking forward to

P & G has confirmed all key elements of its outlook for the year. Reported sales decreased by 2%, but only due to currency fluctuations. Sales of organic products are still expected to increase by 2% to 3%, according to management, compared to 1% last year and 2% for fiscal 2017. Profits are expected to grow faster, between 3% and 8%, thanks to a combination of rising prices and efficiency gains. These benefits will be partially offset by higher raw material costs on inputs such as plastics, oil and paper.

Overall, the report gives investors good reason to be optimistic about P & G's activities. Yes, its recovery has slowed down several times over the past two years. However, the underlying demand seems stronger today than it has been for some time now. This positive trend could help P & G to achieve a significant increase in volume, which could support higher prices – and profitability – over the coming quarters.