Deutsche Bank Conference. Paris June 11th, 2007

Size: px

Start display at page:

Download "Deutsche Bank Conference. Paris June 11th, 2007"

Clement Bryan
6 years ago
Views:

1 Deutsche Bank Conference Paris June 11th, 2007

2 John P. Goodwin Treasurer The Procter & Gamble Company 1 Agenda 2 Business update Zoom on CEEMEA (Central & Eastern Europe, Middle East and Africa) Q&A 2 3 Forward looking statement :All statements, other than statements of historical fact included in this release, are forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of Such statements are based on financial data, market assumptions and business plans available only as of the time the statements are made, which may become out of date or incomplete. We assume no obligation to update any forward-looking statement as a result of new information, future events or other factors. Forwardlooking statements are inherently uncertain, and investors must recognize that events could differ significantly from our expectations. In addition to the risks and uncertainties noted in this release, there are certain factors that could cause actual results to differ materially from those anticipated by some of the statements made. These include: (1) the ability to achieve business plans, including with respect to lower income consumers and growing existing sales and volume profitably despite high levels of competitive activity, especially with respect to the product categories and geographical markets (including developing markets) in which the Company has chosen to focus; (2) the ability to successfully execute, manage and integrate key acquisitions and mergers, including (i) the Company s merger with The Gillette Company, and (ii) the Domination and Profit Transfer Agreement with Wella, and to achieve the cost and growth synergies in accordance with the stated goals of these transactions; (3) the ability to manage and maintain key customer relationships; (4) the ability to maintain key manufacturing and supply sources (including sole supplier and plant manufacturing sources); (5) the ability to successfully manage regulatory, tax and legal matters (including product liability, patent, and intellectual property matters as well as those related to the integration of Gillette and its subsidiaries), and to resolve pending matters within current estimates; (6) the ability to successfully implement, achieve and sustain cost improvement plans in manufacturing and overhead areas, including the Company's outsourcing projects; (7) the ability to successfully manage currency (including currency issues in volatile countries), debt, interest rate and commodity cost exposures; (8) the ability to manage continued global political and/or economic uncertainty and disruptions, especially in the Company's significant geographical markets, as well as any political and/or economic uncertainty and disruptions due to terrorist activities; (9) the ability to successfully manage competitive factors, including prices, promotional incentives and trade terms for products; (10) the ability to obtain patents and respond to technological advances attained by competitors and patents granted to competitors; (11) the ability to successfully manage increases in the prices of raw materials used to make the Company's products; (12) the ability to stay close to consumers in an era of increased media fragmentation; and (13) the ability to stay on the leading edge of innovation. For additional information concerning factors that could cause actual results to materially differ from those projected herein, please refer to our most recent 10-K, 10-Q and 8-K reports. 1

4 Regulation G Disclosure For full reconciliation, visit: www.pg.

3 4 Regulation G Disclosure For full reconciliation, visit: 4 Growth Strategies Are Delivering Core business leading brands, countries, customers Faster growing, higher margin, more asset-efficient businesses Developing markets and lower income consumers growth strategies 5 Leveraging P&G s Organization Structure 6 Enables focus and leverages P&G s scale across 20+ Global Product Categories Go Go to to Market Operations Baby Care Blades & Razors Home Care Hair Care Skin Care Fem Care Oral Care Fabric Care Family Care OTC Health Care Global Business Services & Corporate Functions 6 2

Core Strengths Innovation Branding Consumer Understanding Go-to- Market Scale Sustainable Growth Model Through FY 2010 8 Sales Growth Organic: +4% to +6% Ex.

4 Core Strengths Innovation Branding Consumer Understanding Go-to- Market Scale Sustainable Growth Model Through FY Sales Growth Organic: +4% to +6% Ex. FX: +5% to +7% 2010 Operating Margin of about 24% Double Digit EPS Growth 90%+ Free Cash Flow Productivity 8 Strong Sales Growth (*) Sales Growth ex FX 21% Organic Target: +4% to +6% thru FY % 15% 12% 9% 6% 3% 0% FY '02 FY '03 FY '04 FY '05 FY '06 FY '07e Acquisitions & Divestitures Organic (excludes foreign exchange, acquisition & divestiture impacts) (*) ex F/X 3

5 Reliable EPS Growth 10 Annual EPS Growth Target: 10%+ 5 year EPS CAGR ( 02 07E) >10% $3,50 $3,00 $2,50 $2,00 $1,50 $1,00 $0,50 $0,00 Reported EPS FY '02 FY '03 FY '04 FY '05 FY '06 FY '07-E Delivering Cash Flow Productivity Ahead of Target FCF Productivity : Free Cash Flow ($ Bn) 155% 151% 119% 94% 100% FY 02 FY 03 FY 04 FY 05 FY 06 FCF Productivity Target 90% of Net Earnings 11 Gillette Integration Retention rate over 95% during critical period. > 95% of customer orders through common systems. Cost Synergies :on track Revenue Synergies : on track. 4

6 FY 07/08 Initial perspective Priority : Sustain Strong Top Line Growth while delivering key projects (restructuring, Laundry Liquid NA compaction) in a tough competitive environment with increased raw material costs We expect to deliver double digit EPS growth Strong cash flow will lead to increased discretionary share repurchases Werner Geissler Group President Central & Eastern Europe, Middle East and Africa (CEEMEA) 14 AGENDA 15 CEEMEA Facts P&G Results in CEEMEA Strategy and Key Success Drivers The Future 5

7 CEEMEA 105 Countries 166 Main Languages 1.7 Billion Consumers 15% of the World s GDP Income Diversity Average GDP/head: $ 2,500 GDP ($ per capita): >25,000 (Gulf states) 3,000 9,000 (Russia, Poland) 1,000 3,000 (Egypt, Ukraine) 25% 25% Similar to: UK Mexico China 0 1,000 (Pakistan, Nigeria) 50% India 17 Consumer Diversity Urban population % Population <15 years % Developed 15 Gulf States Central Europe Developing Former USSR Turkey Egypt Under developed Pakistan most of Africa 18 6

CEEMEA in P&G CEEMEA = our largest developing region CEEMEA = 40% - 45% of P&G s sales in developing markets CEEMEA Results Profitable growth engine for the company: Organic sales growth in mid teens

8 CEEMEA in P&G CEEMEA = our largest developing region CEEMEA = 40% - 45% of P&G s sales in developing markets CEEMEA Results Profitable growth engine for the company: Organic sales growth in mid teens range over past 3 years Broad based growth across countries and product categories Profit growth consistently ahead of sales growth After tax profit margins similar to company average 20 Leading Share Positions Category Rank Value Share Lead vs. Key Comp. Laundry #1 47% +27% Fabric Enhancer #1 39% +14% Hand Dish #1 47% +34% Diapers #1 51% +39% Fem Care #1 49% +35% Shampoo #1 40% +23% Colorants #2 26% -3% Dentifrice #2 25% -4% Blades & Razors #1 81% +76% Batteries #1 40% +22% 90% of our sales are in categories which have grown share in the past 6 months AC Nielsen : Past 6 months to Feb 07 in markets where we play, Russia: past 6 months to Oct 06; 7

9 Developing Markets Strategy Serve More of the World s Consumers 22 Crisis resistant business model Focus on big countries, brands, customers Leveraging core strengths: Consumer driven innovation & branding Scale Go-to-market capabilities Low cost / low capital solutions Crisis Resistant Model A Balanced Portfolio by Geography Near East & Africa Arabian Peninsula & Pakistan Turkey/ CCAR Central Europe Eastern Europe 23 Crisis Resistant Model A Balanced Portfolio by Product Category (*) Gillette Fabric & Home Care Baby Care Health & Beauty Care (**) (*) Blades & Razors, Batteries and Braun (**)ncluding former Gillette Oral Care brands 24 8

10 Focus on Big Brands Our top 10 brands represent >2/3 rd of the business Our top 20 brands represent >80% of the business Top 10 Brands Brands #11-20 Consumer driven innovation & branding Multi-tiered Portfolio of Brands Price Tiers Hair Care Baby Care Fem Care Laundry Toothpaste I II III IV V Categories Consumer driven innovation & branding A strong Innovation Program, Sourced Globally and Locally Taking the best of P&G world; e.g. Olay Definity, Pantene Restage Innovation for our own consumers and exporting the idea to other regions; e.g. Shamtu, Discreet, Gillette Perfect Shave Importing to CEEMEA what has worked in other low income markets; e.g. Naturella, Always Fresh 27 9

Superior Go-to-Market Strategy Global / Regional 3,500 stores Local chains 10,000 stores Coverage by P&G Go-to-Market Reinvention Integrated Trade

500,000 stores Small stores 1,000,000 stores Coverage by Distributors 370,000 perfect stores Expand direct coverage Network of dedicated best-in-class

11 Superior Go-to-Market Strategy Global / Regional 3,500 stores Local chains 10,000 stores Coverage by P&G Go-to-Market Reinvention Integrated Trade Terms True Scorecard / Joint Business Planning 28 Superior Go-to-Market Strategy 29 Superior Go-to-Market Strategy Global / Regional 3,500 stores Local chains 10,000 stores Coverage by P&G Go-to-Market Reinvention Integrated Trade Terms True Scorecard / Joint Business Planning Medium stores 500,000 stores Small stores 1,000,000 stores Coverage by Distributors 370,000 perfect stores Expand direct coverage Network of dedicated best-in-class distributors 30 10

12 Superior Go-to-Market Strategy 31 Low Cost Operations leveraging our Scale 22 regional manufacturing sites Scale-based advantages on media, overheads and purchases Scarcity mentality 32 Successful Integration of Acquisitions 33 Integration Status Strong top and bottom line growth Successful retention of top talent Cost synergies on target & faster Revenue synergies started. Much more to come Substantial growth potential 33 11

CEEMEA: The Future 34 The Future: Enormous Growth Potential 120 P&G Sales per Head per Year 90 100 60 30 0 North America CEEMEA highest CEEMEA overall 35 Category Development Perspective

13 CEEMEA: The Future 34 The Future: Enormous Growth Potential 120 P&G Sales per Head per Year North America CEEMEA highest CEEMEA overall 35 Category Development Perspective Consumption per head CEEMEA vs. Czech (%) Fabric Softeners 7 Baby Wipes 16 Fem Care Liners 18 Diapers 21 Fem Care Pads 21 Toothpaste 28 Personal Cleansing 28 Shampoos 33 Laundry Powder

14 Rural Focus, Morocco 37 Mobile Clinics 38 Future Growth Potential 110 CEEMEA West Africa subregion North America & Western Europe > Number of babies 0-2 years % of households ow ning automatic w ashing machine 39 13

15 Whitespace Opportunities in CEEMEA P&G's Presence (number of categories) in Key Markets* 27 Bubble size = population United Kingdom Russia Poland 11 Turkey South Africa Pakistan Egypt 4 0 Nigeria *ex Gillette The Future: Sources of Growth Market growth Share Growth Portfolio Extension Country / Category White Space 41 Our Mantra: Profitable Affordability Multi-tiered portfolio in all categories Low cost operations in all areas Consumer needs-based innovation 42 14

16 Q&A 43 15

17 Non-GAAP Financial Measures The preceding presentation includes the disclosure of non-gaap financial measures. In accordance with the SEC s Regulation G, the following provides definitions of the non-gaap measures used in the presentation and the reconciliation to the most closely related GAAP measure. Organic Sales Growth. Organic sales growth measures sales growth excluding the impacts of acquisitions, divestitures and foreign exchange from year-over-year comparisons. The Company believes this provides investors with a more complete understanding of underlying results and trends by providing sales on a consistent basis. For example, this measure excludes the impact of the Gillette acquisition on sales growth in FY06. FY02 FY03 FY04 FY 05 FY06 FY07E Jan- Mar 2007 Reported Sales Growth 3% 8% 19% 10% 20% 11-12% 8% Less: Acquisitions & Divestitures Impact -3% 0% -7% 0% -14% -4% 0% Less: FX Impact 1% -2% -4% -2% 1% -2% -2% Organic Sales 1% 6% 8% 8% 7% 5-6% 6% Note: Sales percentages are approximations based on quantitative formulas consistently applied. Sales Growth Excluding Foreign Exchange. Sales Growth Excluding Foreign Exchange is a measure of the company s net sales growth versus prior year excluding the impact of year-on-year changes in exchange rates. FY02 FY03 FY04 FY05 FY06 FY07E Reported Sales Growth 3% 8% 19% 10% 20% 11-12% Less: FX Impact 1% -2% -4% -2% 1% -2% Sales Growth Excluding Foreign Exchange 4% 6% 15% 8% 21% 9-10% Free Cash Flow Productivity. Free cash flow productivity is defined as the ratio of free cash flow to net earnings. The Company s longterm target is to generate free cash at or above 90 percent of net earnings. Free cash flow is also one of the measures used to evaluate senior management. The reconciliation of free cash flow and free cash flow productivity is provided below: FY 02 FY 03 FY 04 FY 05 FY 06 Operating Cash Flow $7,740 $8,702 $9,355 $8,679 $11,375 Capital Spending -$1,679 -$1,482 -$2,024 -$2,181 -$2,667 Free Cash Flow $6,061 $7,220 $7,331 $6,498 $8,708 Net Earnings $3,910 $4,788 $6,156 $6,923 $8,684 Free Cash Flow Productivity 155% 151% 119% 94% 100%

Deutsche Bank Conference. Paris June 19 th, 2008.

Deutsche Bank Conference. Paris June 19 th, 2008. Deutsche Bank Conference Paris June 19 th, 2008. 1 Clayt Daley Vice Chairman and Chief Financial Officer Agenda 2 Business update Hot topics Key focus areas Q&A s Sustainable Growth Model Through FY 2010