Financial Data and Key Metrics - Organic sales growth for fiscal year 2024 was 4%, marking the sixth consecutive year of 4% or better organic growth despite challenging market conditions [7] - Core earnings per share (EPS) for the year were $6 59, up 12% year-over-year, with core gross margin improving by 360 basis points and core operating margin increasing by 170 basis points [9] - Adjusted free cash flow productivity was 105%, and the company returned over $14 billion to shareholders, including $9 3 billion in dividends and $5 billion in share repurchases [9] - In Q4 2024, organic sales growth was 2%, with volume up 2% and pricing up 1% [10] - Core EPS for Q4 was $1 40, up 2% year-over-year, with core gross margin increasing by 140 basis points [13] Business Line Performance - Eight out of ten product categories grew organic sales in fiscal 2024, with home care, hair care, and grooming showing high single-digit growth, while skin and personal care and baby care declined by low single digits [7] - In Q4 2024, nine out of ten product categories grew or held organic sales, with home care, hair care, grooming, and oral care each up by high single digits [10] - The beauty segment, excluding SK-II, grew 6% in Q4 and 7% for the fiscal year, with strong performance in hair care and personal care brands like Head & Shoulders, Pantene, and Native [87][88] Market Performance - North America organic sales grew 5% for the year and 4% in Q4, driven by strong volume growth [8][10] - Greater China organic sales declined 9% for the year and 8% in Q4, primarily due to weak market conditions and brand-specific headwinds for SK-II [8][12] - Latin America saw 15% organic sales growth for the year and 8% in Q4, with Brazil contributing high single-digit growth [8][11] - E-commerce sales increased 9% for the year, now representing 18% of total company sales [8] Strategy and Industry Competition - The company's strategy focuses on driving market growth through superior products, packages, and brand communication, with a commitment to innovation across five vectors: product, package, brand communication, retail execution, and value [19][20] - Productivity improvements of over $2 3 billion were achieved in fiscal 2024, enabling increased investment in innovation and marketing [9][22] - The company is focusing on supply chain optimization, environmental sustainability, digital acumen, and employee value to strengthen its competitive position [25][26][27][28] Management Commentary on Operating Environment and Future Outlook - Management acknowledged the challenging economic and geopolitical environment but expressed confidence in the company's ability to deliver balanced growth and value creation [14][17] - For fiscal 2025, the company expects organic sales growth of 3% to 5% and core EPS growth of 5% to 7%, despite headwinds from commodity costs and foreign exchange [30][31] - The company plans to return $16 billion to $17 billion to shareholders through dividends and share repurchases in fiscal 2025 [32] Other Important Information - The company divested its operations in Argentina, which will be largely removed from organic sales reporting in fiscal 2025 [11] - The company expects headwinds in China and the Middle East to moderate or annualize over the coming periods, with a return to growth anticipated in the second half of fiscal 2025 [12][41] Q&A Session Summary Question: Organic sales growth in Q4 and market performance [36] - Response: 85% of the business performed in line with expectations, with strong growth in North America and Europe, while headwinds in China, the Middle East, and Argentina impacted results [37][38][39] Question: Balance between pricing and volume in fiscal 2025 guidance [46] - Response: The company expects a balanced contribution from volume and price mix, with productivity improvements supporting continued investment in marketing and innovation [49][50] Question: Performance of fabric care and baby care segments [55] - Response: Fabric care is expected to re-accelerate with new innovations, while baby care shows strong performance in North America but faces challenges in Europe [57][59][60] Question: Consumer environment and channel performance [64] - Response: The company does not see significant consumer pressure in North America or Europe, with private label shares stable and consistent category growth [65][66][68] Question: Enterprise markets and assumptions for China and the Middle East [71] - Response: Enterprise markets grew 6% for the year, with Latin America up 15% The company assumes annualization of headwinds in China and the Middle East, with potential for improvement in the upper end of the guidance range [72][73] Question: Pricing elasticity and promotional environment [76] - Response: Pricing and mix have been positive contributors for 19 years, with a stable promotional environment in North America and Europe [77] Question: Commodity outlook and transportation costs [79] - Response: The commodity headwind for fiscal 2025 is primarily driven by pulp, with transportation costs remaining stable [80][81] Question: Beauty segment performance and growth potential [85] - Response: Excluding SK-II, the beauty segment grew 6% in Q4 and 7% for the year, with strong performance in hair care and personal care brands [87][88] Question: China market dynamics and portfolio performance [91] - Response: The company expects China to return to mid-single-digit growth over time, with stable run rates and strong performance in baby care and hair care [92][93][95] Question: Investment levels in trade spending and advertising [97] - Response: The company is satisfied with the payout from increased media spend, which is driving market growth and sales growth in key regions [99][100] Question: Promotions and mid-tier product innovation [104] - Response: The company remains focused on delivering superior value at every price tier, with innovation driving growth in mid-tier products like Luvs [105][107] Question: SK-II brand performance and portfolio fit [111] - Response: The company is transitioning its portfolio to better align with digital channels in China, with a focus on creating value in both brick-and-mortar and online channels [113] Question: North America consumer trends and pricing annualization [115] - Response: The company expects price mix neutralization to continue through the first half of fiscal 2025, with stable volume growth [116] Question: Olympic sponsorship and brand building [118] - Response: The company views Olympic sponsorship as a brand-building opportunity, with activation focused on regions closer to the event [119][120] Question: Long-term strategy and performance [121] - Response: The company's strategy has delivered strong results over the past six years, with significant sales, profit, and market cap growth, and remains confident in its ability to navigate future challenges [122][123]
P&G(PG) - 2024 Q4 - Earnings Call Transcript