On July 30th, US time, Procter&Gamble (P&G) announced its Q4 and fiscal year 2024 results. Driven by price increases, Procter&Gamble's net sales and net profit attributable to shareholders for fiscal year 2024 (2023.06.30-2024.06.30) both increased by 2% year-on-year. However, compared to fiscal year 2023, Procter&Gamble's price increases in fiscal year 2024 have relatively slowed down, with sales remaining the same as the previous year.
Affected by market weakness and declining SK-II sales, Procter&Gamble's performance in Greater China remains pessimistic. In the fiscal year 2024, Procter&Gamble's organic sales in Greater China decreased by 9% compared to the same period last year. The senior management of Procter&Gamble stated that they expect the company's performance in China to achieve median growth over time.
Procter&Gamble Fiscal Year 2024
Net sales increased by 2% year-on-year
In the fiscal year 2024, Procter&Gamble's net sales increased by 2% year-on-year to $84 billion. Excluding the impact of exchange rates, mergers and acquisitions, and asset divestitures, organic sales increased by 4% year-on-year; In this fiscal year, Procter&Gamble's net profit attributable to shareholders increased by 2% year-on-year to $14.879 billion, and its gross profit margin increased from 47.9% in fiscal year 2023 to 51.4%.
Despite the increase in net profit for the whole year, Procter&Gamble's net profit attributable to shareholders decreased by 7% year-on-year in Q4 of the fiscal year, and net sales ($20.532 billion) remained basically the same as the same period last year ($20.553 billion). During the quarter, both the beauty and baby, women's, and home care sectors experienced a decline in net sales.
Looking closely at the performance of Procter&Gamble in Q4, the Fabric&Home Care segment, which owns brands such as Tide and Blue Wave, saw a 1% price reduction and a 2% sales increase. In contrast, the Beauty segment, which owns brands such as SK-II, saw a 3% price increase and a 1% sales decline. Procter&Gamble stated that the performance growth brought about by the pricing increase in the beauty sector was offset by the sales decline of the ultra high end brand SK-II and the Greater China region.
By region, during the earnings conference call on July 30th, Procter&Gamble CFO Andre Schulten stated that in key markets, North America grew by 5%, Europe grew by 8%, and organic sales in Greater China decreased by 9%, mainly due to market weakness and the unfavorable situation of the SK-II brand.
It is worth noting that in response to the challenging economic environment in the local area, Procter&Gamble decided to terminate its on-site production business in Nigeria in December last year, turning Nigeria into a pure import market. On July 1st of this year, Procter&Gamble completed the divestment of its Argentina business. Procter&Gamble also sold its advertising business to German consumer goods giant Henkel in the fiscal year.
Procter&Gamble expects sales to increase by 2% -4% year-on-year in fiscal year 2025, with organic sales growing by 3% -5%.
Price increase slows down in fiscal year 2024
Net profit of beauty business decreased by 7%
Procter&Gamble has five major business segments. In the fiscal year 2024, the fabric and home care sector remains Procter&Gamble's largest revenue generating segment, with net sales increasing by 4% year-on-year to $29.495 billion; Next is the Baby, Women's, and Home Care section, which includes Pampers and Comfort Products, Feminine & Family Care）， During the reporting period, the net sales of this sector remained unchanged from previous periods, reaching $20.277 billion;
The beauty segment of star products such as SK-II, OLAY, and Shufujia is Procter&Gamble's third largest revenue segment, with net sales increasing by 1% year-on-year to $15.222 billion, but net profit decreasing by 7% year-on-year to $2.963 billion. It is also the only business in Procter&Gamble's portfolio with a net profit decline, showing no increase in revenue.
The net sales of the Health Care segment, which includes companies such as Crest, increased by 5% year-on-year to $11.793 billion; The net sales of Grooming, which owns brands such as Gillette razors, increased by 4% year-on-year to $6.654 billion.
In the fiscal year 2024, Procter&Gamble's businesses experienced varying degrees of price increases, ranging from 3% to 8%, with an average increase of 4%, and sales remained the same as the previous year. However, in the fiscal year 2023, Procter&Gamble's average increase was 9%, with the highest business increase of 11% and a 3% decline in sales.
The challenges faced by Procter&Gamble in China
Including declining birth rates and channel shifts
The performance of SK-II in the Chinese market remains a key concern for investors.
During the earnings conference call, Procter&Gamble CEO Jon Moeller stated that the overall performance of Procter&Gamble's beauty business is influenced by two factors - SK-II and China. He stated that other products in the business have achieved good results, with sales growth of 7% for Head&Shoulders and 10% for Pantene last year. He stated that Procter&Gamble's largest business in China is hair care, and expressed satisfaction with the performance of Head&Shoulders and Pantene.
Andre Schulten stated that the Greater China market remains weak, with a significant decrease in the key consumption period of June 18th compared to the same period last year, similar to the key shopping periods of Double Eleven, New Year, and Valentine's Day. In addition, due to the market environment of Japanese brands in China, SK-II is still in a headwind state. "We expect that with the passage of time, the overall market trend in China and the dynamics related to SK-II will improve, but it may take one or two quarters to recover growth.
Andre Schulten stated that Procter&Gamble's China business has experienced a significant decline from double-digit growth, and "we do not expect it to return to double-digit growth. We expect that over time, it may return to median growth, which is more in line with what we have seen in other developed markets. Of course, we do not expect a return to pre pandemic growth rates.
He also stated that due to the decline in birth rates, the most difficult category to compete in China at present may be infant care. He mentioned that Procter&Gamble's challenges in China also include channel transformation, as over the past 30 years, the company's business has mainly focused on physical stores, and the digital acceleration during the pandemic has clearly moved the company's business online much faster than anywhere else in the world. "We are taking time to transition our business portfolio... I believe we can maintain moderate growth and create value in China.
In fact, in the past few quarters' financial conference calls, SK-II and its performance in the Chinese market have been named by P&G executives. In Q2 of fiscal year 2024, P&G's organic sales in Greater China decreased by 15%, SK-II's sales in China decreased by 34%, and in Q3 of the same fiscal year, organic sales in Greater China decreased by 10% year-on-year, while SK-II's sales in China decreased by about 30%. During the Q3 conference call, Andre Schulten stated that the top priority is to establish category consumption and restore business growth in China and the Middle East, and to make every effort to accelerate the growth of SK-II in China.