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Procter & Gamble (NYSE:PG) reported fiscal 2016 fourth-quarter results on Aug. 2. The owner of brands such as Tide laundry detergent and Bounty towels continues to generate sizable cash flows despite sluggish sales.

Procter & Gamble: The raw numbers


Q4 2016

Q4 2015

Growth (YOY)


$16.102 billion

$16.553 billion


Net income

$1.951 billion

$521 billion


Earnings per share




Data Source: Procter & Gamble Q4 2016 earnings press release.

What happened with Procter & Gamble this quarter?

Organic sales -- which exclude the impact of foreign exchange, acquisitions, and divestitures -- rose 2%, driven by increased shipment volume. However, foreign currency exchange-rate movements reduced sales by 3 percentage points, with brand divestitures and the deconsolidation of P&G's Venezuelan operations reducing sales by an additional 2 percentage points. That led to an overall year-over-year decline in net sales of 3%, to $16.1 billion.

Despite the sales decline, earnings per share from continuing operations surged 318%, to $0.71, mainly as a result of the Venezuelan deconsolidation, which lowered Q4 2015 EPS by $0.71.

P&G continues to work toward improving its profitability. "Core" (a non-GAAP measure that adjusts for restructuring and other non-recurring charges) gross margin improved 160 basis points, and 240 basis points on a currency-neutral basis, driven by productivity cost savings and lower commodity costs. Still, core operating profit margin was down 150 basis points versus the year-ago quarter, mostly due to the impact of foreign exchange, as well as higher selling, general, and administrative costs. All told, core EPS fell 15% year over year, to $0.79, and 8% on a currency-neutral basis.

"The fourth quarter was another period of progress driving P&G's results to a balance of strong top-line growth, bottom-line growth and cash generation," said Chairman and CEO David Taylor in a press release. "We grew organic volume and sales in all reporting segments. We increased investments in innovation and advertising, funded by strong productivity improvement."

Cash flow and capital returns

Procter & Gamble's cash-flow generation remains strong, with full-year operating cash flow exceeding $15.4 billion, and free cash flow surpassing $12.1 billion. That, along with the more than $13 billion in cash investments on its balance sheet, allowed P&G to reward its investors with $4 billion in stock buybacks and $7.4 billion in dividend payments in fiscal 2016.

Looking forward

P&G issued its fiscal 2017 guidance, including all-in sales growth of approximately 1%. Organic sales are expected to increase 2%, with foreign exchange and minor brand divestitures projected to reduce sales by 1%. Procter & Gamble also anticipates core earnings-per-share growth in the "mid-single digits" compared to fiscal 2016 core EPS of $3.67.

"Looking forward, we're committed to continued productivity improvement and cost savings that provide the fuel for innovation and investments needed to accelerate and sustain faster top-line growth," added Taylor. "We expect fiscal 2017 to mark another significant step toward our goal of balanced growth and value creation and total shareholder return in the top third of our competitive peer group."

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