The Procter & Gamble Company (NYSE:PG) started off the year on a positive note and rose by 12.2%. The company didn’t have an easy year but after making many tough decisions in 2012, its outlook has improved. Will this leading consumer product company be able to keep growing in 2013? How is this company performing compared to other leading consumer product companies?
Little Growth, Stable Profitability
Based on the company’s recent financial reports, as of the fourth quarter, among the company’sfive segments, grooming had the highest profit margin at 24.4%. But this segment contracted by 4% in the recent quarter compared to Q4 2011. Moreover, the segment accounts for only 10% of the company’s net revenue, which puts grooming the smallest segment of the five. The sharpest gain was in Baby Care and Family Care segment with a 4% growth in revenue. This segment, however, has the lowest profitability of the five segments at 14.1%. If this trend will continue, this could lead to a drop in profitability in the coming months. The net profit margin of all five segments was 18.4% in the fourth quarter and the revenue growth was only 2% (year-over-year).
On a yearly scale, the company’s profit margin fell to 16% in 2012 compared to 19% in 2011. This figure is a bit misleading as there was an unusual expense of $2.6 billion, which includes a $1.5 billion provision for “Goodwill and indefinite lived intangible asset impairment charges.” After adjusting for this provision, the company’s operating profitability bounces back to 19%. In terms of profitability, The Procter & Gamble Company (NYSE:PG) is in the middle of the pack compared to other leading consumer goods companies: during 2012 the profitability of Unilever N.V. (ADR) (NYSE:UN) was around 14% and Colgate-Palmolive Company (NYSE:CL) had a profit margin of 23%.
In terms of revenues growth, The Procter & Gamble Company (NYSE:PG) is also in the middle of the pack with only a 3% growth in 2012 compared to 2011. Most of this growth was due to the company’s rise in prices of products by an average of 4%. The total volume of sales remained unchanged during the year. In my opinion, of the two, a rise in volume would have been better as it would have shown growth in demand for the company’s products. The silver lining is that despite the rise in prices, the volume sold wasn’tadversely affected by it.
Unilever N.V. (ADR) (NYSE:UN) recorded a growth rate of 10% in revenues, and Colgate-Palmolive Company (NYSE:CL)’s revenues grew by only 2%. Thus, P&G doesn’t lead other consumer product companies in terms of growth in revenues or profitability. Even though The Procter & Gamble Company (NYSE:PG) is in the middle of the pack on the above-mentioned criteria, the company still has made some changes that could put it as a company worth considering.
P&G has recently announced a bump in its dividend payment to reach $0.562 per share. This could put the company’s payout (the percentage of the dividend payment out of net earnings) higher than it was back in 2012 (assuming, of course, the company’s net earnings per sharewon’t rise). In 2012, the company’s payout was 69% compared to 51% in 2011. This means, in 2012, the company paid its investors 69% of its earnings per share. In comparison, Unilever N.V. (ADR) (NYSE:UN)’s payout was 63% in 2012 andColgate-Palmolive Company (NYSE:CL)’s was only 47%. Assuming The Procter & Gamble Company (NYSE:PG) will have the same earnings per share as it did in 2012, the company’s payout based on the current dividend payment will rise to 72%.