P&G Announces Business Results for the Third Quarter of

The Procter & Gamble Company has announced it maintained top-line growth momentum in its fiscal third quarter and grew core operating profit in a difficult economic and competitive environment. The Company stated it expects to accelerate organic sales growth, while further improving core operating profit growth in the fourth quarter.

P&G delivered two percent sales growth to $20.2 billion for the January - March quarter. Organic sales increased three percent driven by price increases, partially offset by geographic and product mix. The Company continued to deliver broad-based organic sales growth, with all five business segments up versus the prior year for the third consecutive quarter. Diluted net earnings per share from continuing operations were $0.81, reflecting non-core charges of $0.13 per share. Core net earnings per share were $0.94.

We delivered broad-based organic sales growth, with all of our business segments growing, in a difficult macroeconomic and competitive environment," said Chairman of the Board, President and Chief Executive Officer Bob McDonald. "We are making good progress against our productivity and cost savings program and improving core operating profit growth as we continue to execute our innovation and portfolio expansion plans. Looking ahead, we expect further acceleration in core operating profit growth in the fourth quarter driven by top-line growth, more favorable cost comparisons and productivity improvements."

Executive Summary

Organic sales increased three percent for the quarter. Organic sales growth was broad-based, with all five business segments growing for the third consecutive quarter. Operating profit decreased eleven percent. Adjusted for non-core charges core operating profit increased two percent. Core net earnings per share were in line with the prior year period at $0.94. The benefits from sales growth and cost savings were offset by higher commodity costs. Diluted net earnings per share from continuing operations were $0.81, down 14 percent due to non-core charges of $0.13 per share. The non-core items included incremental restructuring charges due to our recently announced productivity and cost savings plan. Operating cash flow was $3.8 billion for the quarter and free cash flow, which is operating cash flow less capital spending, was $2.9 billion and 119 percent of net earnings.

Billion-Dollar Brands

The Company announced the addition of two brands, SK-II and Vicks, to the elite group of billion-dollar brands, which represents brands with annual net sales of at least one billion dollars. This increases the Companys billion dollar brands from 24 to 26. Both brands have reached the billion-dollar brand status through sustained product innovation and geographic expansion, with SK-II becoming the first Asian "homegrown" billion dollar brand.

Business Segment Discussion

Beauty net sales increased one percent to USD 4.8 billion on unit volume growth of one percent. Organic sales grew two percent. Price increases added five percent to net sales growth. Mix reduced net sales by four percent due to disproportionate growth in developing regions and product categories, which have lower than segment average selling prices. Unfavorable foreign exchange reduced net sales by one percent. Volume in Hair Care increased low single digits behind high-single-digit growth in developing regions due to product innovation activity and distribution expansions in Asia, which more than offset a mid-single digit decline in developed markets. Volume in Skin Care, Personal Care and Cosmetics decreased low single digits primarily due to heightened competitive activity in North America. Volume in Prestige Products increased mid-single digits, with organic volume increasing high single digits driven by initiatives on SK-II and fragrances. Net earnings increased three percent to $523 million, due to sales growth and a lower effective tax rate, partially offset by operating margin contraction. Operating margin decreased due to higher commodities and unfavorable geographic and product mix, partially offset by a reduction in SG&A expenses.