Good morning and welcome to Procter & Gamble’s quarter end conference call. Today’s event is being recorded for replay. This discussion will include a number of forward-looking statements.

If you will refer to P&G’s most recent 10-K, 10-Q and 8-K reports, you will see a discussion of factors that could cause the company’s actual results to differ materially from these projections.

As required by Regulation G, Procter & Gamble needs to make you aware that during the discussion, the company will make a number of references to non-GAAP and other financial measures.

Procter & Gamble believes these measures provide investors with useful perspective on underlying business trends and has posted on its Investor Relations website, www.pginvestor.com a full reconciliation of non-GAAP financial measures. Now I will turn the call over to P&G’s Chief Financial Officer, Andre Schulten..

organic sales growth, core EPS growth, free cash productivity and cash returns to share owners, strong performance again this year in a challenging economic and geopolitical environment. With that, I’ll pass it over to Jon..

Oral B IO power toothbrushes deliver superior cleaning and delightful user experience. Superior communication includes the insight that manual brushes leave 50% of plaque behind, but Oral B IO delivers 100% more plaque bacterial removal with its round head and removes plaque in hard to reach places.

This superior proposition is accelerating power brush trial and adoption, bringing new power brush users into the category, driving high single digit market growth of the power brush category, double digit sales growth for Oral B power, and two points of Oral B value share growth over the past 12 months.

Native, our premium personal care brand is delivering superiority across all five vectors and across multiple product forms, including deodorants, body wash, shampoo and conditioners, superior performance with fewer ingredients and irresistible scents.

Transparent labeling and clean white packaging, superior retail execution and strong retailer partnerships showcasing the full range of forms and scents. Premium positioning with the category providing superior value for the consumer looking for an offering with more natural ingredients.

Native has driven a step change in market value growth for the U.S. deodorants and personal care categories from low singles to mid teens. Native sales have grown nearly 10 times over the last five years to over $700 million in fiscal ’24. Third strategy element, productivity improvement in all areas of our operations.

In order to fund investments in innovation, brand building and market growth to mitigate cost and currency challenges and to expand margins and generate cash. We delivered very strong cost savings in fiscal ’24.

Visibility to more savings opportunities is increasing as the businesses continue to build their three-year rolling productivity master plans. We have an objective for gross savings in cost of goods sold of up to $1.5 billion before tax, enabled by platform programs with global application across categories like supply chains 3.0.

We’re working in a new way with retailers on the totality of the supply chain end to end versus simply trying to optimize our respective pieces. One example using data and machine learning algorithms to optimize truck scheduling to minimize idle time for drivers.

We’re also using digital tools to optimize fill rates and for our dynamic routing and sourcing optimization. $200 million to $300 million of savings opportunity across these areas. We have line of sight to savings from improved marketing productivity.

More efficiency and greater effectiveness, avoiding excess frequency and reducing waste while increasing reach. We’re taking targeted steps to reduce overhead as we digitize more of our operations.

Next, constructive disruption of ourselves and our industry, a willingness to change, adapt and create new trends, technologies and capabilities that will shape the future of our industry and extend our competitive advantage.

We continue to be a constructive disruptor of brand building, in-housing more of the media planning and placement activity using our proprietary tools and consumer data to increase the effectiveness and efficiency of our communication.

We’re disrupting traditional lab-based innovation models to dramatically increase the speed and breadth of discovery. Last but clearly not least, we’ve designed and continued to refine an empowered, agile and accountable organization, an inclusive and diverse organization, enabling us to better serve an increasingly diverse set of consumers.

Strong progress across all strategic pillars with significant opportunity ahead of us. No reason to stand still, as illustrated by the four focus areas that we’ve outlined previously. Number one, supply chain 3.0, it’s delivering productivity, as you can see in the results.

We’re also driving improved agility, flexibility, scalability and transparency in a rapidly evolving landscape. Optimized sustainable and flexible up and down the supply chain, inclusive of our retail partners.

All of this is driving higher quality, increased supply assurance, and higher on-shelf availability of our products, and of course better cash and cost structures. These programs improve superiority with consumers and further strength what is already the top ranked supply chain by our retail partners in third party industry surveys.

Next, environmental sustainability. Superior propositions for consumers, customers and share owners that are more sustainable. Driving sales and profitability while reducing the footprint of our operations, enabling consumers to reduce their footprint and innovating to deliver cross-industry solutions for some of our most pressing challenges.

The next focus area is digital acumen, leveraging data and digitization to delight consumers , streamline the supply chain, increase quality, drive productivity, all driving share owner value.

One example is the improvement we’ve delivered in ad copy qualification and media buying with proprietary digital tools we’ve developed and the digital molecule development work in fabric care. We’ve built similar tools to drive faster, cheaper and better innovation in perfume, which benefits almost every product category in the company.

We’re also digitizing more of our back office work processes to lower costs and drive efficiencies while delivering higher quality output.

Each of these examples has obvious cost benefits, but they’re also driving product and package superiority, superior brand communication to consumers, superior retail execution in store and online, stronger internal controls and jobs that enable people to focus on higher order tasks with greater business impact.

Last focus area, a superior value equation for all employees, for all roles to ensure we continue to attract, retain and develop the best talent and are best positioned to serve all consumers. These four focus areas are not separate strategies, they simply strengthen our ability to execute our integrated growth strategy.

Our strategic choices on portfolio, superiority, productivity, constructive disruption of our organization reinforce and build on each other.

We continue to believe there’s merit in doubling down on this integrated strategy, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners, fueled by productivity.

We remain as confident as ever in our strategy and our ability to drive market growth and to deliver balanced growth in value creation to delight consumers, customers, employees, society and share owners. At the end of the day, P&G serves people with a strong desire to improve their lives and the lives of their families.

I believe in the capabilities and commitment of P&G people to serve consumers and to do this in the most responsible way, consistent with P&G’s values and principles. I’m excited about what lays ahead. Of course we’ll continue to face challenges, but the future holds great promise.

We have many opportunities ahead to grow markets, grow our business, and create significant value for our owners. With that, I’ll hand it back to Andre to outline our guidance for the new year..

Thank you Jon. As we enter fiscal ’25, we continue to expect the environment around us to remain volatile and challenging, from input costs, currencies, to consumers, competitors, retailers, and geopolitical dynamics. As Jon said, we’ll navigate these challenges with our dynamic integrated strategy guided by consumers every step of the way.

Our going-in guidance for fiscal ’25 is consistent with our long term algorithm. On the top line, we currently expect the markets in which we compete to deliver local currency sales growth in the range of 3% to 4% for the year. Our objective is to grow organic sales modestly ahead of the underlying growth in these markets.

This translates to an organic sales growth guidance range of 3% to 5% for the fiscal year - apologies, I had my mic muted. On the bottom line, our algorithm calls for mid to high single digit core earnings per share growth. Our core EPS guidance range for fiscal ’25 starts the year at 5% to 7% versus fiscal ’24 core EPS of $6.59.

This guidance equates to a range of $6.91 to $7.05 per share, $6.98 up 6% at the center of the range. This outlook includes a commodity cost headwind of approximately $300 million after tax and a foreign exchange headwind of approximately $200 million after tax.

Combined, foreign exchange and commodities are projected to be a headwind of $0.20 per share for fiscal ’25, or a 3 percentage point drag on core EPS growth. In addition, the prior fiscal year included benefits from several minor brand divestitures, and we expect a somewhat higher tax rate in the new fiscal year.

Combined, these are an additional $0.10 to $0.12 headwind to core EPS. We expect adjusted free cash flow productivity of 90% for the year. This includes an increase in capital spending as we add capacity in several categories.

We expect to pay around $10 billion in dividends and to repurchase $6 billion to $7 billion of common stock, combined a plan to return $16 billion to $17 billion of cash to share owners this fiscal year.

While we are clear eyed on the challenges in the market and the work needed to continue to drive the business, fiscal ’25 guidance for top line, bottom line and cash are each consistent with our long term algorithm. A few items for you to consider as you build your quarter-to-quarter estimates.

On the top line, please keep in mind that the July to September period has the most difficult comp for the year, and many of the market-level challenges we’ve noted will not fully annualize or improve materially in our estimate until the second half of the year.

On the bottom line, the foreign exchange and commodity headwinds skew a bit toward the front half of the year, and the back half comps include the benefit of the tax items and minor brand divestitures I mentioned earlier. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates.

Significant additional currency weakness, commodity cost increases, geopolitical disruptions, major supply chain disruptions, or store closures are not anticipated within the guidance ranges. With that, I’ll hand it back to Jon for his closing thoughts..

We’re very pleased with the strong results P&G people have delivered over the last year and inclusive of prior years in a very challenging and volatile environment. The earnings power and value creation potential of the company are as strong as ever.

We continue to believe that the best path forward to deliver sustainable, balanced growth is to double down on the strategy, excellent execution of an integrated set of market constructive strategies delivered with a focus on balanced top and bottom line growth and value creation, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners.

With that, we will be happy to take your questions..

[Operator instructions] Our first question will come from Bryan Spillane of Bank of America. Please go ahead..

Thanks Operator, and good morning everyone.

I guess the question that we’ve fielded a few times this morning, and if you could touch on this a bit, the last couple of quarters, it seems like organic sales have come in maybe slower or lower than expected--than you were expecting at the start of each quarter, so maybe if you can touch a little bit on just what’s developed, especially in the fourth quarter, maybe different than what you were expecting, and then if you can add to that also, is that true for the market? At a 2% organic sales for this quarter, are we above, below, or in line with market growth? Thanks..

Morning Bryan. I’ll start and then Jon, I’m sure, will add some perspective as well. I’ll start back where we kind of started the prepared remarks. I think we delivered a year where we exceeded on that, all of our in-going guidance metrics. Now, the year wasn’t linear, as you highlight, and I’d distinguish two parts of the business.

Eighty-five percent of the business is performing right in line with expectations, and right in line with what we would have expected throughout the year. We have strong growth in North America, 4% in the quarter, 4% volume growth in the quarter.

Europe focus markets growing volumes at 3%, Europe enterprise markets growing volumes at 6%, LA normalizing to about 8% organic sales growth, so that’s part of the business where the trajectory is not impacted by significant external events. I think it’s moving right along.

We expected the normalization and price-mix contribution, as we have talked throughout the quarters. If you look at the headwinds that we started to communicate in December, they are really still with us in--throughout the second half, and that’s what’s driving the volatility in the top line results.

Those headwinds have accelerated in part, and honestly in quarter four, some of them developed late in the quarter, so when you think about China and SK-II, we’re heavily impacted by 6/18, a weaker key consumption period in China, and overall market sentiment in China has not improved throughout H2.

We had highlighted that we expect the China recovery to be slow and to take time, and I think that’s playing out in the results we see in the second half.

The Middle East situation has not really improved, so we continue to see developing stronger impacts on western retailers in some of these markets, and while the team has implemented many interventions, the execution in-store has been limited by some of these headwinds in the Middle East.

The last element, we saw a softening in quarter four on the Argentina volumes driven by the general circumstances in the market, strong high translation pricing in Argentina, so there was a softer contribution on organic sales growth in quarter four than what we’d seen in quarter three.

If you step back, though, the performance of the business and the way we set up for ’25, I think is very strong. Eighty five of the business is developing right in line with what we would have expected. We’re growing share in North America. The balance of the markets are growing volume, which is really the shift we needed to see.

Our gross margin is at record levels. Our productivity is very strong. That has enabled us to remain fully invested from a media perspective and from an innovation perspective, and so going into the year, we feel all the structural elements of the business are strong.

Now, what is important to understand, and we mentioned it in the prepared remarks, those headwinds that we have experienced in H2 will still be with us in H1 of this fiscal year, so we expect this year not to be linear and we have to accelerate sales growth throughout the quarters as some of these headwinds annualize and we return to growth.

But overall, I think we’re well set up to deliver against the guidance metrics we just communicated..

I agree with everything that Andre just said.

I would remind you relative to the comment of performing versus our own expectations, precisely because of the volatility of the world that we all live and operate in, we don’t provide quarterly guidance, we only provide annual guidance, and as Andre said, we met our beat, each of those numbers that were provided.

There have been two primary questions that have been--that we’ve all been working through. One is can we re-accelerate volume, and as Andre said, that is broadly happening and impressively so. If you look at North America over the course of the fiscal year, plus-3, plus-3, plus-4, plus-3. If we look at Europe, plus-2, plus-3, plus-4, plus-2.

Andre gave you figures for some of the other regions, but broadly that question f can volume be re-accelerated is answered with an emphatic yes.

The second question that at least we’ve been working through is, can that happen in the context of continued margin expansion? If you look at the fiscal year numbers, top line to bottom line that’s definitely happened.

If you look at gross margin in the quarter we just completed, which comes in at a 17-year high, we’re certainly able to continue to re-accelerate volume growth while holding or building margins.

Like Andre, I approach next year in a realistic fashion and realizing that the first couple quarters are going to look a little bit more like the one we just completed, but with overall a belief that the fundamentals of the business are in very strong shape and that as we bring the innovation that’s planned to market throughout the fiscal year, we’re going to be happy with the results in line with the guidance that he’s provided.

One other element of the strength and health of the business fundamentally, if you look at the last fiscal year at a brand level, 21 out of 25 brands were growing. Eleven of those 25 brands were growing at high single digits or higher rates, so again from a breadth standpoint, I think we’re positioned very well and the team’s doing a great job..

The next question comes from Dara Mohsenian of Morgan Stanley. Please go ahead..

Hey, good morning. I actually just wanted to follow up on those last two points you made, Jon.

On the 3% to 5% organic sales growth guidance for fiscal ’25, can you just parse out a bit more detail in terms of how you’re thinking about the balance between pricing and volume? I know you won’t want to be exact, but how you’re thinking about that and the 3% to 4% category growth assumption, do you think there’s good visibility there given the slowing pricing, and then if you bless me with a Part B, I guess just how do you think about earnings flex relative to top line, given some of the top line volatility, obviously significant year-over-year gross margin expansion in fiscal ’24 but that’s been dissipating, you boosted marketing a lot, you’ve got strong productivity, as you mentioned, so there’s a lot going on sort of in the margin line items, so just how do you think about earnings flex next year relative to top line growth, given some of this volatility? Thanks..

Thanks Dara. I’m going to turn it over to Andre to take us through some of the details, and then I’ll round out the answer. Go ahead, Andre..

Yes, thanks for the question, Dara. The volume versus price mix contribution is expected to be broadly balanced.

We expected markets to return to more sustainable growth rates of 3% to 4% - that is largely happening now, and if you look at the construction of that market growth, about half of that is driven by volume, the other half is driven by price mix. I would expect our construct to look similar for the fiscal year.

Obviously it will differ by quarter and front half versus back half, but broadly balanced between volume and price mix. On the margin perspective, you saw us make a choice to continue to invest fully in the business.

We have delivered very strong productivity, more than $2 billion in productivity for the year, and we have significantly increased our media support, and we see the results for those investments in the strong growth we continue to deliver in North America, including share growth consistently across every period.

The strong results in Europe focus markets, including strong volume growth consistent across the quarters, so we feel good about those investments.

We’ll continue to be very disciplined and, as you can appreciate, not all of those investments will have paid out, so as we do our post-event analysis, we’ll re-assess every step of the way, whether those are better flowing to the P&L or reinvested somewhere else.

Productivity for fiscal ’25 is also very strong, as I mentioned in my previous comments, so that will allow us to maintain fully invested both in terms of market support, as well as innovation, which is really the underpinning driver for our growth next year..

I would just add two or three comments. One, as Andre indicated, where you see the increase in marketing investment, that is largely in the geographies where we’re seeing the growth accompany that from a top line standpoint. As he also said, we will continue to monitor the effectiveness of that spending and will adjust either up or down accordingly.

Also, I just want to make sure we all understand the return on those investments is not an overnight occurrence. We have a commercialization cycle that needs to run its course, we have consumer purchase cycles that can be annual in some cases.

While our portfolio is constructed to focus on categories where the product is used daily, that doesn’t mean it’s purchased daily, and so it sometimes takes a little bit of time to evaluate and see the market response to those investments.

But if you look at the last several years, it’s generally always been there, and it’s been one of the reasons for the growth over the last, call it six years as I mentioned in my remarks - plus-5, plus-6, plus-6, plus-7, plus-7, plus-4 in a more challenging environment.

Like Andre, I feel good about the balance that’s implied in the guidance and in our internal plans, but it’s something we wake up every day and continue to re-evaluate and deliver in an optimal way..

The next question comes from Steve Powers of Deutsche Bank. Please go ahead..

Good morning guys, thank you. I was hoping that we could talk about fabric and home and baby and family specifically. It seems like those are the two segments that drove the most disconnect, at least versus external forecasts.

The release cites promotional spending and at least a degree of share loss across those segments, so maybe you could just drill down further into the headline numbers, give us a bit more context of what you’re seeing, both competitively and within your own momentum, and just how we should think about both the drivers and the timing of the build back in those businesses, noting you’ve obviously got some challenging first half comparisons especially in the current quarter, but just really understanding where you expect those businesses to trend and land over the course of fiscal ’25..

Morning Steve. Look - home care, I think is just performing outstandingly well, 9% organic sales growth on the year, 13 quarters of sustained share growth and gaining momentum, so I think I’d focus my comments on fabric care. I would tell you two things.

Number one, we are annualizing record periods in Europe with differentiated pricing between competitors, where we had a bit of a tailwind last year that is turning into a high base comp.

But structurally, the business is in great shape in Europe - Ariel continues to perform extremely well, the innovation across unit dose and the broader portfolio, including FE, is doing very well, so I expect that business to re-accelerate very quickly.

In North America, we are just launching the innovation bundle, the spring innovation bundle which is supported with the right level of investment, including promotion investment and merchandising investment, and that’s why you see the negative price mix component in the North American business.

But the business is picking up momentum, we’re growing share, so I expect also North America to continue to move in the right direction on fabric care, and we’re very encouraged with the innovation, both the innovation that just launched and the innovation that is in the pipeline.

Last point maybe on fabric care, in China specifically, we also made a portfolio choice to focus on the most profitable part of the business, and so there are some short term implications in terms of base period there.

Again, for the longer term, benefit of the China fabric care business, I think that’s the right decision, but it’s part of the softness that you see right now in the current quarter. Baby care, I’ll talk two regions. One is North America - the baby care business on the premium end continues to be doing very well.

We have Swaddlers growing share by 1.4%, Cruisers 360 is growing, so on the premium end of the spectrum where we’ve been able to innovate over the past one to two years, we continue to see the momentum accelerating across Pampers.

We have an opportunity, we’ve had an opportunity on Luvs, the mid-tier brand, where we postponed innovation due to some supply chain challenges. That innovation is now in the market, so again very significant acceleration expected given the innovation just launched in the market over the next few quarters.

In Europe, again base period mostly in terms of share data, and that is something we need to work through, and certainly in Europe baby, I think that’s one of the areas where we’re watching our sufficiency of innovation very closely, simply because the spread versus private label is the most significant, so again the team is working through strong communication and innovation that will be launching here over the next few quarters..

SK-II and China, both of which should annualize by the second half of the year. If you then step back and look at the balance of the business, Head & Shoulders, in part behind the BARE innovation, increased sales by 7% last year. Pantene, in part behind the Pantene Miracles innovation, grew 10% last year.

The personal care side of the business is growing extremely well as well. I just want to kind of complete the picture in terms of some of the progress that isn’t as obvious in an aggregate look, but will make a difference going forward..

The next question comes from Lauren Lieberman of Barclays. Please go ahead..

Great, thanks. I was wondering if you could comment a bit, because one thing that’s been absent is a discussion is the consumer broadly, so I think it could be helpful to get some perspective on the consumer environment. It feels like in U.S.

and Western Europe, from what we’ve heard from other companies, things in the last month or two have kind of gotten demonstrably worse, as a general statement, so curious your perspective on that, and then also differences in channel performance and what you’re doing around that in terms of areas of particular focus or investment. Thanks..

From a consumer standpoint, we generally don’t see the dynamic that some are describing, and I’m not meaning to discredit their descriptions, but if you look at a couple of dynamics, private label shares as an example, which typically would be increasing during a time of significant consumer pressure, that’s not what we’re seeing.

Private label shares generally both in North America and Europe are in line with pre-COVID levels, and period to period, so last quarter to this quarter, are not changing significantly.

The second data point that we look at to assess the answer to your question is back to volume, is unit growth declining, and that’s again not what we’re generally seeing.

Now, certainly there are some consumers that are, I’m sure, under increased pressure and are probably modifying their behavior and purchases correspondingly, but in our categories--and remember, of course, these are less discretionary categories, these are daily use categories where performance drives brand choice.

We typically have the best performing product in the market, at least that’s our objective, and as a result, we’re not seeing any significant consumer-driven impact.

I’ve been in Europe quite a bit recently, I’ll be back there tomorrow, Andre was there earlier in the month of June with many of you at the Deutsch Bank conference, but also spent time with our business, and I’m not seeing it there either. We remain encouraged as we go forward.

It’s something that we’re very cognizant of and watch very closely, but so far, so good..

And the market growth rates, I think substantiate the point that Jon made.

If you look at the U.S., I think the key point is over the past one, three, six, 12 months, the category volume growth in our categories is consistently 2%, so consumers are not decelerating consumption across our categories, and similarly if you look at value growth in Europe, it’s also very consistent over the same period, so as Jon said, we’re watching it, but we don’t see it in the data..

And even--you know, if we look at the responsiveness to many of our strong innovations, I mentioned in my remarks Oral B IO, which is a significant premium to the balance both within the power segment and across power and manual, and it’s growing at double digits.

We built two share points in the last year, so just an example of responsiveness to strong innovation in these categories where performance drives brand choice..

The next question comes from Robert Ottenstein of Evercore ISI. Please go ahead..

Great, thank you very much. A couple of follow-ups.

Could you just talk a little bit about the enterprise markets, what they would have looked like ex-Argentina, and then as you look at your guidance, how much of an actual rebound in China are you assuming, how much, if any, rebound in the Middle East issues are you assuming, and is that part of the range or is there no rebound at all in the range, if that’s clear? Thank you..

Hey Robert. Enterprise markets, I think in aggregate are performing strongly for the year, up 6%, last year they were up, I think 10%, so I think very strong continued growth. Latin America, as we said, is growing on the year 15% and in the most recent quarter 8%. Europe focus markets up 8% for the year.

Where we see headwinds is in the Middle East, in line with what we have described, so you see our Asia-Middle East-Africa markets impacted by those Middle East headwinds, and again we expect those to be temporary.

The Argentina contribution to the total number is decreasing by almost a point quarter-over-quarter, so it was only 30 basis points in the current quarter.

Most importantly, we divested the Argentina business, so that effect will not matter anymore in the current year because it will be removed from the organic sales base as we move through the quarter here. In terms of assumptions, I think that’s part of the range, right? I would say we largely assume annualization.

The upper end of the range would assume some level of improvement, but I think the main contribution to the midpoint of the range would be a normalization and annualization of those headwinds we were describing, including China, SK-II, the Middle East, and again Argentina coming out of the base because of the divestiture of the business..

And Robert, my view of those things as its reflected in guidance generally or indirectly is just as Andre described, which is annualization. I think if things improve either in the Middle East or China, we should have the opportunity to deliver, ceteris paribus, even better results than the midpoint of the guidance range.

On the other hand, we’re not assuming--I’m not assuming that they get worse, and that can always happen, so I think we’re centered on a realistic expectation of outcomes..

The next question comes from Andrea Teixeira of JP Morgan. Please go ahead..

Thank you, good morning. I was hoping you could talk about a bit of the pricing elasticity you’re seeing in the category.

I do understand what, Jon, you just described as being a very low penetration of private label and consumers are still driving the preference for your brands, but just curious about in laundry specifically, you had some promo, and some of the things that you had discussed are not necessarily driven by [indiscernible], but just wondering how you’re seeing as we see more pricing coming through in this view.

You’re planning embedding in your base guidance, I understand it’s a balanced approach to the organic sales growth for the midpoint at 4%, but wondering if there is any way of mitigating some of the effect in some of these other places which is natural, and therefore we can see some pricing go through inflation led and some pricing also led by innovation.

Thank you..

Hey Andrea. Yes, I mean, pricing and mix have been a positive contribution to our results for 19 years. I don’t expect this year to be different. I think it will be pricing for foreign exchange headwinds in some of the enterprise markets, which is in line with what the market generally executes.

I also expect innovation base pricing and trade-up as we have a strong innovation pipeline in the year. From a promotion environment, we see stability at the moment. We have pockets of incremental promotion.

We’re still operating at about 85% versus pre-COVID levels, and we see general stability, so as I said in the guidance deconstruction on the top line, roughly we see the market half price mix driven, half volume driven.

I don’t expect our fiscal year numbers to be different than that, but they will look different obviously H1 versus H2 because of base period, but the general model is still the same as we executed over the last 19 years..

The next question comes from Filippo Falorni of Citi. Please go ahead..

Hi, good morning everyone. I wanted to ask about the commodity outlook. Andre, you mentioned $300 million in headwind expected in fiscal ’25.

Can you maybe talk about the components of the headwind, some of the key commodities including pulp, resins, and also on the transportation side, given the recent rise in ocean freight, any potential impact there? Then in terms of--I know some of the commodities, you cannot hedge, but just the level of visibility given your contracted rates on that headwind, thank you..

Yes, hey Filippo. The commodity portfolio is actually at the moment relatively stable. Most of that headwind that is in the guidance is pulp at the moment. We continue to see strong demand on some of the grades and limited supply, so that’s driving the run-up. The rest of the portfolio is actually stable.

It won’t be that throughout the year, as you know - I mean, these things change quickly, so there’s a level of variability here, obviously, and we’re forecasting a spot rate as we always do.

The commodity effect as we think through visibility, look - I mean, the flow through is different by commodity class, but I think we discussed this when we were in the middle of the commodity crisis, it generally takes three months to nine months to flow through the P&L, so I think at the end of quarter one, we probably had relatively good visibility on most of it through H1, and then we’ll go step by step.

But again, this is one that we forecast on spot, we don’t hedge, so the flow through again is the key driver of latency in terms of P&L, in terms of P&L effect. Transportation, look - generally energy, oil is relatively stable, so overall transportation is flat.

Yes, we see some impact from increased transportation on the sea routes, but it is not material in the context of the year at this point..

The next question is from Peter Grom of UBS. Please go ahead..

Thanks Operator, good morning everyone. Hope you’re doing well.

I wanted to go back to Lauren’s question on the consumer, and totally recognize that you may not be seeing some of the indicators that the consumer is under pressure today, but when we think about the 3% to 4% category growth assumptions you’re embedding for your outlook, is there any cushion for the 85% of the markets that are currently performing well to potentially slow at all? I totally get the annualization commentary on the Middle East and China, but just would love to get some perspective on what you expect maybe in North America and Western Europe from here.

Thanks..

Hey Peter. Yes, the 3% to 4% is a global number. Deconstructing that by market or by region is increasingly difficult, and we somewhat rely on the total aggregate of regions to play out in that 3% to 4% range.

To your question on the 85% of the business slowing, what we see is actually what we had expected, right, that those regions slow down from a market growth in the range of 5% to 8% to this 3% to 4$ range, because the price mix component is coming down and the volume component is coming up, and that stabilization is built into our assumption for the year, so we expect most of those regions to play out the same way that we’re projecting the global number, which is 3% to 4%, half of it volume, half of it price mix..

The next question comes from Bonnie Herzog of Goldman Sachs. Please go ahead..

Thank you, good morning. I had a question on your beauty segment. China has been a drag to your volumes for a while, as you mentioned, and we’ve been hearing about the ongoing challenges in the region. But more recently, we’re also hearing about the slowdown in the U.S.

beauty market, so curious if that’s consistent with what you’re seeing, and then how should we think about the growth potential for your beauty segment this fiscal year, and is it fair to assume that these challenges could drive a further slowdown from here? Thanks..

Hey Bonnie. If you look at the beauty results outside of China and SK-II, I think they give a better indication of the growth potential and trajectory we’re on. The business ex-SK-II is growing 6% in quarter four, 7% in the fiscal year that we just closed.

When you go through the segments and the core brands, if you look at Head & Shoulders, Pantene, Herbal Essences, for example, grew high single digits to double digits. Those were the best results in the past five years. When you look at our personal care business, Old Spice, Secret and Native, double digit growth.

We talked about--Jon talked about Native now being and reaching $700 million in sales, 10 times what we got the brand with, and our new brands, [indiscernible] are also growing double digits, so I think we see strength across the portfolio there.

North America hair care is up 12%, global hair care is up 9%, and the personal care business, as I said, is doing very well. I think the core of the piece we are annualizing is really China, both on the Olay business and on the SK-II business, and as we said, our expectation is that we’ll annualize.

We don’t yet assume a material acceleration in the fiscal year, so I’ll leave it there. But again, I think the core of the business is strong, China is the one piece we need to see annualize across the first half..

And obviously we play in--the majority of the spaces that we play in, in beauty are more foundational versus prestige, and I think where some of the commentary in the marketplace has been directed relative to slowdown is really not in the base segments that we play in and, as Andre said, have continued to see very strong growth in.

That’s why I wanted to add to the question earlier, because I think it’s somewhat lost in the aggregate numbers, but I think it’s important both for recognition of the team but also recognition of the potential..

The next question comes from Chris Carey of Wells Fargo Securities. Please go ahead..

Hi, good morning. I know we’re later in the call, so apologies for another China question, but maybe a bit more focus. It has been sluggish for a few years, which I think is why there’s been so many questions about the effect of annualizing.

You’re not the only company to see slower results in China, so I wonder if you could just maybe comment on clearly there are macro dynamics in the market versus micro parts of your portfolio which specifically need some work.

SK-II has been well covered by this point, so perhaps you can speak to some other businesses that are performing in line with your expectations or not, so that we can have a bit more of a portfolio view on why the annualization should deliver the outcomes you’re expecting into the back half of the year.

Sorry for another question on China, but it felt important. Thanks..

Hey Chris. I’ll start and Jon will add. Let me start by saying, I think the China business coming from a double-digit growth trajectory through a significant dip, and we don’t expect it to go back to double digits, we expect it over time to go to maybe mid singles, so more in line with what we see in other developed markets.

For sure, we don’t expect the return to the growth rates that we saw pre-COVID. Many of the effects specifically in China, SK-II, I think the run rate is now stable, so we’re already seeing the run rate in terms of absolute volume and absolute dollar sale flattening.

What’s not yet there is the base period in line with those run rates, so unless we see a significant run rate reduction, that gives us confidence that the annualization would take place. Maybe other point of confidence here, the toughest category to compete in, in China right now is probably baby care.

Birth rates are down 15% to 25% depending on how you define the market, and we’ve been able--the team has been able to grow sales 6% and grow share in the market.

Why? Because the portfolio and the innovation the team designed was very specific to the Chinese consumer - their needs, their preference in terms of superiority, and that’s driving results.

We’ve been able to grow the Braun business with strong innovation, so there are pockets of business where we are leading the market, and we need to find our way to that across more categories, which we’re working on.

Fabric care, as I said, is very focused on the profitable part of the portfolio which allows them to drive innovation, which allows them to drive category growth, and that’s really what’s playing out across categories.

But I think the most mechanical driver is run rates are stable and stabilizing, therefore unless we see a further decline in the market, which is entirely possible, but if those run rates hold, that will drive annualization towards the back half of the year..

Just to round that out, the largest business for P&G in China is hair care, and we spent the last year-plus as we came out of COVID ensuring that we had very strong hair care plans.

I am very pleased with the plans that we’ve put together and the execution of them on Pantene, the same on Head & Shoulders, really significantly improved propositions, significantly improved packaging, really looking strong.

Andre mentioned somewhere in our discussion that we had made the choice to exit the third brand, which was Vidal Sassoon, so that should not be a source of drag going forward. We’re still working, to be candid, on the plans for Rejoice, but the net of all of that is pretty encouraging..

The next question comes from Kevin Grundy of BNP Paribas. Please go ahead..

Great, thanks. Good morning everyone. A question for both of you, perhaps, just on some context for investment levels, specifically trade spending in advertising and marketing, which are clearly moving higher. Gross margin and expansion there has naturally been supportive.

I know it’s not lost on you guys, you’ve seen what your key competitor in oral care is doing, advertising and marketing there was the highest as a percent of sales in at least a couple decades, we’ve seen trade spending move higher there in their North America segment.

Advertising and marketing now for Procter has moved up 200 basis points this year, including a big step up of 300 basis points in the quarter, and we talked earlier on the call about [indiscernible] fabric care, so it’s kind of a big [indiscernible].

If you could offer some context here for higher investment levels broadly we’re seeing in the industry and then perhaps a push from a Procter perspective is are we satisfied with the top line payback that we’re seeing, because spending levels are moving higher and the push would be towards sales, understanding some of the idiosyncratic items in the quarter, was a little bit soft and we’re kind of guiding for growth similar to what we’ve seen historically.

Thank you for all that, but context and any color would be appreciated. Thank you..

Yes, let me start, Kevin - morning.

Generally, what I’d tell you is the--we’re happy with the payout that we’re seeing in the markets where we can read the payout cleanly, and that’s really where 95% of the investment is, meaning Europe focus markets, some of the Europe enterprise markets, Latin America and North America, and I think the top line results support the overall payout of the aggregate of the media spend.

We’ll obviously go way lower in terms of penetration, and it is probably the strongest push that both Jon and I and Shailesh have as we engage with the businesses to ensure that that spending truly is productive, truly is driving market growth and sales growth, and therefore helps us to deliver top line and bottom line for the quarter and for the fiscal year.

If that’s no longer the case, then we will change gears and adjust. In terms of overall spend, I’m actually pleased to see increase in media spend and market support that’s market constructive. I think it helps the consumer understand the category better.

It helps drive penetration, which is still a huge opportunity across multiple categories, so that’s very positive.

Again, the promotion environment in aggregate remains productive, and as long as those two results in what we see in North America, which is sustained volume growth on the category and sustained value growth on the category, I think we’re in a good place..

And you know, it’s something I’ve been pushing, we’ve been pushing for some period of time. When you have a strategy that’s centered on innovation and superiority and you have in some cases relatively low levels of advertising reach, that total equation doesn’t make sense. We used to call it--David Taylor used to call it confidential superiority.

We’re trying to, in an effective way and in the most efficient way we can, and I mentioned this earlier, increase reach so that more consumers are aware of our products and the benefits that they provide them.

Obviously that effort at some point reaches the right level of maturity, but we’re still on the incline curve in that regard right now, which I think is entirely the right thing to do. As I mentioned earlier, it takes some time temporally for the business to respond.

It does not respond overnight, again because of purchase cycles and commercialization cycles themselves, but as Andre said, take some assurance that you’ve got a former CFO in the CEO’s chair, between the two of us, we’re not interested in wasting your money..

The next question comes from Olivia Tong of Raymond James. Please go ahead..

Great, thanks. Good morning. Just a follow-up on promotions, if you could just talk about how much is competitors catching up on innovation, driving you to spend more to stay superior, versus a response to the tougher macros and needing to make yourself competitive on price.

Then more importantly, you’ve obviously done substantial innovation at the premium end. What are you doing as we think about this evolving macro in your mid tier products to remind consumers of the value proposition there? Thank you..

Hey Olivia. I think our job is to lead market growth via irresistible superiority, and that starts with product, package and communication, but it includes value as you point out. I don’t see that equation shifting. The competitive environment in terms of promotion is relatively stable.

Our approach to promotion is relatively stable across the regions where we have the highest visibility, which is Europe and North America, so I don’t view that equation as being different.

Again, I think our stance on superiority, which we’ve talked about now for almost a year, to reset the level of superiority we expect our businesses to deliver, which moves from your job is no longer to just win against the next best competitor in the market but is to create superiority at a level where consumers are drawn into the category, so we create new consumption, we create new consumers coming into the category, increasing their usage or trading up, that’s really what we are measuring ourselves against, and I think we’re making very good progress and I’m very confident in the innovation pipeline we see for the current year.

I’m sure Jon has to add more. On the mid-tier, absolutely our job is to be irresistibly superior at every tier we compete in, and that’s why the Luvs innovation is a great example, where--and it’s a great example for the strategy at work, because if we are not superior in the mid-tier, the consumer tells us and it shows in the results.

So the counter-action to innovate and drive superiority is what we do, and it’s really independent of the tier, so at any given point in time, we need to make sure that we deliver all five vectors at every tier, every pack size, every price point in every channel we compete in..

If you just assume for a minute, Olivia, that we’re wrong in the ongoing discussion that we’ve had about consumers being under pressure, and our contention is that that really hasn’t manifested itself as of yet, but just assume that we’re wrong or that that changes going forward, and to your question on innovation, it becomes very important that we’re innovating in categories that are going to become--that are going to see even higher levels of demand, if in fact there’s any kind of consumer downturn.

Andre mentioned Luvs.

Another example--I mean, what happens if there’s a consumer downturn, people eat at home more often, they’re going out less frequently, traveling less frequently, and so categories like hand dishwashing, for example, become important, and our levels of innovation in that category, just as an example, are significant between power spray on Dawn and easy squeeze, and Andre mentioned the growth rates that we’re seeing in our dish business.

Typically, and this was certainly the case in COVID, which was an extreme condition, but people use more paper products if they’re staying home more often, so things like the Charmin easy tear scallop perforation, which is driving significant levels of delight and 5% growth on the Charmin business last year, is another example of innovating, continuing to innovate in categories that are going to potentially be even more relevant in the event of a consumer downturn, and obviously just in general, that hand wash business is more of, if you will, a midtier business than the auto dish business, so there’s no discrimination in terms of our commitment to innovation..

The next question comes from Mark Astrachan of Stifel. Please go ahead..

Yes, thanks and good morning everybody. I wanted to ask about SK-II more broadly and just how do you see this part of today’s portfolio for P&G.

You know, I guess the slower improvement in China than anticipated, but just curious if you take a look over the last, call it four or five years, it does seem like the brand has grown in totality a little bit below what I’d peg as the peer group, so I guess I’m curious why you think that is, how you weave in improving trends in China with the overall expectations for the brand on a go-forward basis, and I say all that too in the context of weakness pre-dating the wastewater release in Japan, so what is there? Is there more competition, are you doing more from an innovation standpoint to broaden the appeal for the brand? Can you move it beyond prestige skin care? Just broader strokes, again in the context of how does it fit within the portfolio, thank you..

Yes, hey Mark. I think your question is specifically on China. I don’t think our brand portfolio is something that I would be unhappy with. I think the brand portfolio is strong. When we get it right and when the consumer is willing to engage, I think we show strong progress on baby care even in adverse market conditions.

Jon mentioned the progress we see on hair care, on Head & Shoulders and on Pantene. I think the parts of the portfolio where we had our doubts, we made the right choices, so we divested Vidal Sassoon and believe that was the right change in hair care.

We have trimmed the fabric care portfolio to ensure that we can focus on the part of the market where we can create value for the consumer and for the company, so I feel good about the product portfolio. The challenge, I think in China, if I may, part of that is the channel shift.

Because our footprint was disproportionately developed over 30 years to be a brick and mortar footprint and the digital acceleration obviously with COVID has shifted that into online to a large degree faster than anywhere else in the world, and within that online business, particularly to Douyin, heavily [indiscernible] led and heavily promotion led, and we’re taking our time to transition our portfolio to ensure we end up with the right balance between serving consumers in brick and mortar and creating value there, and supporting our brands with the right messaging, equity, price stability and innovation in the online channels.

That for me--that is the transition we’re still in, but I think that transition is going well and it will show that that portfolio that we operate, I think can sustain mid single growth and value creation in China..

The next question comes from Kaumil Gajrawala of Jefferies. Please go ahead..

Hey everybody, good morning. I know as we get deep into the call, it gets quite granular, but if we could bring it back a little bit on something I think might have been missed as we chat global versus domestic, which is maybe just thinking about North America specifically and the first half specifically.

What is the direction of travel that you’re assuming for the consumer, and when we think about annualization of pricing and such, should we be modeling a drag for North America in the first half that then reverses, or is it meant to be closer to that balance for the full year of 50/50?.

Kaumil, it’s very hard to predict, obviously, by quarter or H1 versus H2. I think you’re in-going hunch is what I would share, as I think the price mix neutralization will continue through H1, and the volume component, I think is relatively stable.

As I said, the market is continuing to grow at 2%, price mix has come down to about a point and a half, and I think that’s what I would expect from a market growth perspective for the front half.

Our objective is, as always, to be within that range, so that’s my view; but again, that volatility can be driven by different innovation cycles, it can be driven by different promotion cycles, by channel shifts, so there is a lot of variability within that, but purely extrapolating from what we see in the market today, I think your hunch is right..

Our last question comes from Robert Moskow of TD Cowen. Please go ahead..

Hi, thanks for the question. I guess the only thing not covered on this call is the Olympics. I think I’ve seen about 100 ads for Procter & Gamble products, some of them great, but I haven’t noticed an increase in merchandising activity in our Nielsen tracking data in the U.S. around it.

I was just wondering, do you view the Olympic sponsorship more as a brand building exercise for consumers, or have you been getting and do you expect to get a lot of merchandising activity around it in the U.S. that we’ll be able to see in our tracking? Thanks..

We definitely view support of the Olympics as a brand building opportunity, as a consumer outreach opportunity, and frankly as a customer outreach opportunity. Where you’ll see the activation in store is typically closer to the region of the event, so I wouldn’t expect it to have large activation in North America.

I’m headed to Paris overnight tonight, I do expect to see significant activation in Europe.

I’ll be meeting with many of our retail partner CEOs at the Games, we host them there and spend up to a couple days together building plans going forward, which would include both during event and post event activation of the assets that we’ve put in place for the Olympics.

Just like our earlier discussion on return, this is something that we look at annually, but thus far it’s proving to be an attractive vehicle when we focus the messaging on brands and not so much when we focus the messaging on company, simply because nobody buys P&G, they buy Tide and Ariel and Pampers, Pantene and Head & Shoulders, etc.

So all good, and I’m looking forward to being there with our customers and our European team over the balance of the week..

Before we let--not let, before we officially end the call, I just wanted to provide again some longer term perspectives, and I’m free to--I’m happy to discuss it at any point during the balance of the day.

We have been through--the collective we, including you, have been through incredible challenges the last number of years, whether that’s COVID, whether that’s inflation, whether that’s war, political divisiveness, regulation - you name it.

One of the things that I think is important to reflect on, the quarter’s important and we reflected a lot on that today, which is appropriate, but it’s also important to step back and say, how is this strategy working, not just for the quarter but for longer periods of time, as I mentioned in my remarks, pre-COVID, during COVID, post COVID, inflation, pricing, and then the big geopolitical struggles that we’re all engaged in currently.

Over that six-year period, the team has added $17 billion in sales, which puts us at the 88th percentile of the S&P 500, and at the same time they’ve added $5 billion in profit, which puts us at the 93rd percentile of the S&P 500.

They’ve built more than 200--I haven’t looked today, but before today, $200 billion in market cap in that six-year period, which is more value than most of our competitors, I think all but one, have created over their entire history as a company, so this is something that is working extraordinarily well.

I think that’s important to reflect on as we move forward. We’re in a stronger place in terms of executing against that strategy than we’ve ever been. We’ve talked about investment in innovation, we’ve talked about raising the bar on superiority, we’ve talked about the progress that we’re making on productivity.

We’ve talked about the support levels that our business has, we’ve talked about resuming volume growth in most of the major markets and doing that while building margin and simultaneously increasing our investment in these kinds of things, and I don’t see any reason in a--if we do find ourselves in a more difficult environment from a consumer economic standpoint, one of the things we talk about internally is would we change our approach if we either had confidence that things were going to get remarkably better from a consumer standpoint or remarkably worse from a consumer standpoint, would we not want to be in daily use categories where performance drives brand choice? I think that’s exactly where we’d want to be in either of those scenarios.

Would we not want to be able to delight consumers and customers with superior products? I can’t imagine how that would be a good idea.

Would we not want to have the productivity that enables us to fund those investments and accelerate innovation? Would we not want to have a more agile accountable organization structure? All these things to me, under any scenario, both because of the results that they deliver and because of the potential they hold to delight consumers, customers, employees, society and share owners, are the right path forward, which is why we talk about continuing to double down.

I have said many times, this will not be a straight line. There are all sorts of things that affect the trend line in the business, but over periods of time, this is by far--if we just look at our history as a company, it has produced significantly positive results, and I expect that to continue. I just wanted to share that as we close out the call.

Again, that is not trying to minimize some of the challenges that we’ve been discussing on the quarter and on the first half of next year. Those are real, they’re important to talk about, but I don’t think they’re controlling as we think about the mid and longer term. Have a great day, and look forward to catching up with you soon..

Thanks everyone..

That concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day..