Procter & Gamble (NYSE:PG) hasn't had the best start to its fiscal 2016. The consumer-goods giant recently posted third-quarter earnings results that were held back by negative organic sales growth. P&G also managed just a small reported profit increase.

Image source: P&G.

Chief Financial Officer Jon Moeller held a conference call with investors to put these seemingly weak results into context. Here are the key points he had to say in that discussion.

It's a tough world -- really

We continue to operate in a challenging and volatile macro environment. We entered the year expecting the market to grow close to 4% globally. We now expect 3%. There are more flashpoints across the globe than at any time in recent memory. 

Citing the challenging global-selling environment can sound like an excuse to investors, particularly if you're judging P&G's performance against the headline results of its peers. Unilever (NYSE:UL), for example, recently logged 6% global organic growth compared to P&G's 1% loss. And the company believes it will post 4% gains through the year compared to P&G's expected flat performance.

But Moeller explained how comparisons like that don't tell the whole story. P&G has vastly bigger positions than its competitors in some of the toughest markets in the world, including Russia, China, and Ukraine. In fact, troubled markets represent a disproportionate 20% of its business. Given that unusually heavy exposure to economic and currency turmoil, P&G investors shouldn't be surprised as the company underperforms rivals on a global basis.

Cost cuts are paying off

We're dramatically improving productivity, with a lot of upside still ahead.

While it can't change the growth rate of emerging markets, P&G can focus on cutting its own costs. And management has made great strides in that area.

Non-manufacturing overhead expenses are down by one quarter, while an additional $6 billion has been sliced out of annual manufacturing costs. Both of these improvements are running ahead of management's goals, and they're contributing to huge underlying profit gains. Excluding foreign currency swings, earnings were actually up 32% this quarter.

Executives think they have plenty of room to continue squeezing efficiencies out of P&G's operations in this fiscal year and next. That points to substantial profitability improvements ahead.

Existing underperforming businesses

We're making smart choices for short-, mid-, and long-term value creation or going-bad business, even when these choices create short-term top-line pressure.

P&G is in the process of transforming its portfolio of products to focus on the 10 categories with the most promising long-term profit and sales-growth trends. In the short term, this shift is hurting sales growth, management explained.

Image source: P&G investor presentation.

And as examples, Moeller highlighted how P&G recently exited the value-tissue market in Mexico, and the value-fabric-care market in India. While those choices both reduced sales growth, he said, they improved overall profits and profitability. Investors can expect P&G to keep prioritizing that smart growth over absolute growth as this portfolio transformation process unfolds.

Outlook for the next nine months

We're maintaining our outlook for organic sales growth of in line to up low-single digits versus fiscal 2015.

P&G reiterated its top-line forecast that leaves open the possibility for zero organic sales growth in fiscal 2016. The main drivers behind that soft target are the weak global operating environment, and the company's choice to step out of several underperforming product areas.

Yet executives are also calling for "robust" profit growth (as much as 63% higher core earnings), and a strong showing financially -- cash flow should improve from the current $14.6 billion annual pace. Those gains should easily fund an expected $15 billion of cash returns to shareholders in the form of dividends and stock buybacks in fiscal 2016, up from $12 billion last year. P&G plans to return as much as $70 billion to its investors during the next four fiscal years.

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