Procter & Gamble's (NYSE:PG) new fiscal year is off to a sluggish start. The consumer goods giant today posted quarterly earnings results that showed little in the way of sales and profit growth. But the company generated tons of cash and continued to make bold changes to its portfolio -- in this case by dumping its battery business. 

Source: P&G.

The big picture
Overall, P&G's fiscal first quarter sales came in at $20.8 billion. That result was flat against the prior year, but met Wall Street's low expectations. Organic sales growth, which strips out currency fluctuations, was 2%. That matched the prior quarter's slow growth rate and was below the 3% improvement that the company managed for the full 2014 fiscal year.

"P&G's first quarter results were in-line with our expectations, despite a very difficult operating environment," CEO A.G. Lafley said in a press release.

As more evidence of that rough retail environment, rival Colgate-Palmolive also posted flat quarterly revenue in its fiscal third quarter this morning, although it managed higher organic sales growth of 3.5%. 

Drilling down to product divisions, four of P&G's six business lines turned in flat sales, while health care operation was the major standout with a 6% gain. The company said that innovation and higher pricing in its oral care products drove that jump.

P&G earned $1.07 per share, or 2% better than last year. That profit result met Wall Street's targets exactly. But foreign currency changes continued to drag on reported earnings, and P&G said that profit growth would have been 9% on a currency neutral basis. Profitability held steady, with gross margin sticking at 49% of sales.

Duracell exit
The company also announced that it is exiting the Duracell battery business as part of its plan to slim down its brand portfolio and focus on only the biggest sales and profit opportunities. The first step of that exit has already happened: P&G sold its interest in a China-based battery business in August for an undisclosed sum.

Source: P&G.

The second, bigger step, involves splitting Duracell off into a separate company. But management hasn't yet decided whether that will occur as a sale, a spin-off to shareholders, or a divestiture. P&G acquired Duracell in 2005, and it has grown into the leading brand in the global battery business, which should make the split even bigger than P&G's recent sale of its billion-dollar pet care business.

Outlook and cash flow
P&G reiterated its full-year financial outlook calling for reported EPS to fall by between 2% and 5%, but rising in "mid-single digits" on a currency neutral basis. Organic sales growth will be in the "low-to-mid single digit" range as well, management said.

That forecast shows that P&G doesn't see the challenging retailing environment changing anytime soon. Still, the business continues to generate heaps of cash, much of which the company is returning directly to shareholders. Free cash flow more than doubled last quarter to $2.8 billion, and P&G delivered a massive $4.2 billion to investors over that time through share buybacks and dividends.