Proctor & Gamble
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P&G is a 168 year-old multinational company that markets almost 300 brands; 16 of which are billion-dollar brands that make up more than half of the companies annual sales. Chances are that any household or personal care product you buy comes from this company. Some of their most recognized brands include Tide, Crest, Pantene, and Pampers, to name a few. Procter & Gamble sales are increasing everyday with more products reaching the billion dollar mark each year. Their annual sales amount to $51.4 billion and their net profits are $6.5 billion. Since September 2003 they have acquired two major companies — Wella and Gillette — that have significantly added to P&G’s sales and future outlook.
P&G’s main focus is on brand building which is winning over the customer during their “first moment of truth.” They are constantly promoting their brands and upgrading them to be the best quality product they can provide for their customers.
Financially, P&G is increasing its position year after year. Although their return on assets and current ratio have incurred minor declines of 0.5% and 0.46% respectively, this has been the result of recent acquisitions and informed decisions made on the basis of their projected cash flow and current earnings. Return on equity has increased by 5.5% and their net profit margin is 12.6%. More importantly, the company shows a strong commitment to its shareholders, having distributed increasing dividends in each of the last 45 years its stock has been traded. Last year alone, the company issued more than $2.54 billion to its shareholders of record.
With excellent shareholder relations and increasing returns, expansion into developing markets, lucrative acquisitions, trusted brands, and positive future expectations and trends, Procter & Gamble shares are an excellent investment opportunity.
Introduction
The purpose of the Finance Reports course, FMGT 2910, is to give students the opportunity to learn and practice communication and presentation skills. On January 5, 2005, Marc Kampschuur assigned students to complete a company analysis which would lead to a buy, hold, or sell stock recommendation. Within each set two students were chosen to manage the set, organizing and evaluating group presentations while also being exempt from their own group presentations.
On March 22, 2005, Gretchen Quiring instructed all COMM 2200 students to write a report based on their findings from FMGT 2910. Although we are set managers, we have chosen to do our report on a company, Procter & Gamble.
The goal of this analysis is to study the company and develop a final investment recommendation. This report will cover the company, its products, and its profitability. We have narrowed the report to include only these finding because we feel that these facts very strongly impact the company’s success and influence stockholders in their stock purchase decisions.
All information included within this report was obtained from the company website, www.pg.com, and the book �Rising Tide — Lessons from 165 Years of Brand Building at Procter & Gamble’ written by Davis Dyer, Frederick Dalzell, and Rowena Olegario. The report will include a company overview, products and divisions, and profitability sections, and will conclude with a stock purchase recommendation.
Company Overview
Procter & Gamble has a long history of providing consumers with excellent products to suit their diverse and changing needs. Through that time the company evolved into the huge conglomerate it has become, acquiring additional businesses and dividing into discrete divisions.
This section includes a very brief overview of the company’s history and outlines the current business divisions.
History
In 1837, William Procter and James Gamble immigrated to Cincinnati, USA and married into the same family . They decided to start a partnership together, and on October 31, 1837 they began selling soap and candles with their official trademark being Moon and Stars . More recently, in the 1980s, they opted to change their trademark to their company initials.
By their 100th Anniversary they had reached sales of $230 million. During this time they had introduced products including Ivory soap, and Crisco and had opened up their first plant outside of USA, in Canada. Over the next 50 years P&G introduced many products including Tide, Crest, Downy, Folgers, Bounce, Always, Liquid Tide, and Pampers. The company had also made $10 billion in sales and were ranked as the second oldest company among the 50 largest Fortune 500 companies. Since then P&G has acquired companies like Max Factor, Tambrands (Tampax), Clairol. In 2004, the company had 16 billion-dollar brands, which generated $30 billion of the companies total $51.4 billion annual sales. With the recent acquisitions of Wella and Gillette we can expect Procter & Gamble to continue to grow and produce high-quality products for the everyday needs of people around the world
Divisions
Currently P&G operates the following five divisions:
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PERSONAL & BEAUTY which includes Antiperspirants, Colognes, Cosmetics, Feminine Protection, Hair Care, Hair Color, Personal Cleansing, Prestige Fragrance, and Skin Care;
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HOUSE & HOME which includes Dish Care, Special Fabric Care, Laundry, Paper Products and Household Cleaners;
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HEALTH & WELLNESS which includes Health Care, Oral and Prescription Drugs;
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BABY & FAMILY which includes Baby Care and Snacks & Beverages; and
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PET NUTRITION & CARE which includes Pet Health and Nutrition.
Products
Procter & Gamble is extremely focused on brand building which includes creating products with performance features that customer’s appreciate. At P&G, brand building involves the entire organization in their ongoing mission to bring finer quality products to consumers. To keep performance levels high P&G ensures that they are constantly upgrading their products to make sure that it is the best