P&G FY2022 net profit up: ‘Still, we’re very clear-eyed about the trials ahead,’ says CEO

Last week, P&G announced net sales of €79.15bn ($80.2bn) for the full fiscal year 2022, up 5% on the previous year, with net profit totting in at €14.5bn ($14.74bn), up 3% on FY2021. For the fourth quarter (Q4), the company pulled in net sales of €18.65bn ($18.9bn), up 3% on Q4 FY2021, though net sales were down 3% in grooming and down 1% in beauty. Q4 net sales were up in health care (5%), fabric and home care (4%) and baby, feminine and family care (3%).

Jon Moeller, chairman, president and CEO of P&G, said it had been “another strong year”​ for the company despite “severe cost and operational headwinds”.​

“As we look forward to fiscal 2023, we expect another year of significant headwinds. We remain committed to our integrated strategies of superiority, productivity, constructive disruption and an agile and accountable organisation structure. They remain the right strategies to step forward into the near-term challenges we are facing and continue to deliver balanced growth and value creation,” ​Moeller said.

Tackling ‘the trials ahead’ in fiscal 2023​

P&G issued a fiscal year 2023 guidance of all-in sales growth between 3-5%.

Speaking to analysts on the company’s earnings call, Moeller said: “What P&G’s people have accomplished together is truly extraordinary. Still, we’re very clear-eyed about the trials ahead. The list of challenges we face heading into our new fiscal year is longer than any I can recall.”​

The operational costs and currency challenges that had faced industry over the past two years, for example, would continue in fiscal 2023, he said, along with inflation levels for consumers “not seen in the last 40 years”. ​

Andre Schulten, chief financial officer at P&G, said foreign exchange rates, freight costs, materials, fuel, energy and wage inflation would also be “an even greater challenge”​ in fiscal 2023.

Moeller added: “We know one of the most pressing questions out there is how we plan to deal with the severe cost and currency impacts we’re facing: $6.5 billion after-tax in just two years, nearly an $8 billion hit to operating profit. I’ll repeat what I said on our April 2020 earnings call: the best response to uncertainties and challenges we face is to double down on the integrated set of strategies that are delivering very strong results.”​

The company would also continue to offset a portion of cost impacts with price increases, tailored to the market, category and brand, along with widespread innovation, he said. “…We believe this is a rough patch to grow through, not a reason to reduce investment in the long-term health of the business.”​

Supply, sustainability, digital and equality​

Looking ahead, Moeller said the company had to be “more deliberate and intentional”​ in its focus across four areas: supply, environmental sustainability, digital acumen, and employee value equation.

On supply, the CEO said it would be important P&G continued to improve and invest in capacity, agility, cost efficiency and resilience for “a new reality and a new age”.​

On sustainability, he said action had to be integrated across its entire product packaging and supply chain innovation network, with the likes of fully recyclable paper or cardboard alternatives and cold-water formulations just some examples.

In digital, he said efforts had to evolve to drive consumer and customer preferences, reduce costs and enable “rapid and efficient decision-making”. ​In addition, digital could be rolled out more widely across manufacturing lines, with more use of AI and blockchain, for example.

For employee value equation, Moeller said this had to cover all gender identities, races ethnicities, sexual orientations, ages and abilities, across all roles. Why? To ensure the company attracted, retained and developed the best talent, he said.

“Our strategic choices on portfolio, superiority, productivity, constructive disruption and organisation are not independent strategies. They reinforce and build on each other, and the four focus areas that I mentioned strengthen the execution of that strategy. When all of this is executed well, we grow markets, which in turn grow share, sales and profit. These integrated strategies are a pathway to delivering a balanced growth,”​ he told analysts.