12 - Wealth analysis of Procter and Gamble

Abstract

Procter and Gamble (P&G) is a global leader in fast moving consumer goods sector. By 2012, P&G’s top 50 leadership brands accounted for 90% of P&G sales and more than 90% of the profits. P&G’s organizational structure consists of the Global Business Units (GBUs), Selling and Market Operations (SMOs), Global Business Services (GBS) and Corporate Functions (CF). P&G is a global leader in the beauty, hair and personal care category. In 2005, P&G acquired the Gillette Company—the largest acquisition in P&G history. During the year 2014, the company streamlined its product portfolio by divesting or consolidating about 100 nonstrategic brands. P&G is focusing on portfolio transformation to create more value. P&G is focusing on 10 product category with about 65 brands. P&G aims for improving its strategic position by focusing on more focused business portfolio. P&G believes that there are significant growth opportunities in the developed markets as well as developing markets like China, Brazil, India, Russia, and Mexico. Value creation in P&G is measured by the concept of Operating Total Shareholder Returns (TSR). P&G’s sustainability activities are directed towards preservation of resources especially renewable resources. P&G has been paying a dividend for 125 consecutive years since its incorporation in 1890 and has increased its dividend for 59 consecutive years at an annual compound average rate of over 9%. P&G had undertaken five stock splits during the period 1983–2004. Interest rate swaps are used to hedge exposures to interest rate movement on underlying debt obligations. P&G uses forward contracts to manage exchange rate risk. The stock based compensation plans of P&G offer annually grant stock option, restricted stock, restricted stock unit (RSU) and performance stock unit (PSU) to managers and directors. In 2015, equity constituted 64% while debt composed 36% of the capital structure.