Proctor and Gamble 2005 Annual Report Download - page 32
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Please find page 32 of the 2005 Proctor and Gamble annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Management’sDiscussionandAnalysisTheProcter&GambleCompanyandSubsidiaries
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membershipstoresintheU.S.Twoofourbillion-dollarbrandsarein
SnacksandCoffee–PringlesandFolgers.
Forward-LookingStatements
Wediscussexpectationsregardingfutureperformance,eventsand
outcomes,suchasourbusinessoutlookandobjectives,inannual
andquarterlyreports,press releasesand otherwrittenandoral
communications.Allstatements,exceptforhistoricalandpresentfactual
information,are“forward-lookingstatements”withinthemeaningof
the“safeharbor”provisionsofthePrivateSecurityLitigationReformAct,
andarebasedoncurrentlyavailablecompetitive,financialandeconomic
dataandourbusinessplans.Forward-lookingstatementsareinherently
uncertain,andinvestorsmustrecognizethateventscouldbesignificantly
differentfromourexpectations.
AbilitytoAchieveBusiness Plans.Weareaconsumerproducts
companyandrelyoncontinueddemandforourbrandsandproducts.
Toachievebusinessgoals,wemustdevelopandsellproductsthat
appealtoconsumersandretailtradecustomers.Ourcontinuedsuccessis
dependentonleading-edgeinnovation,withrespecttobothproductsand
operations.Thismeanswemustbeabletoobtainpatentsandrespondto
technologicaladvancesandpatentsgrantedtocompetition.Oursuccess
isalsodependentoneffectivesales,advertisingandmarketingprograms
inanincreasinglyfragmentedmediaenvironment.Ourabilitytoinnovate
andexecuteintheseareaswilldeterminetheextenttowhichweare
abletogrowexistingsalesandvolumeprofitablydespitehighlevelsof
competitiveactivity,especiallywithrespecttotheproductcategoriesand
geographicmarkets(includingdevelopingmarkets)inwhichwehave
chosentofocus.Therecontinuestobecompetitiveproductandpricing
pressuresintheenvironmentsinwhichweoperate,aswellaschallenges
inmaintainingprofitmargins.Toaddressthesechallenges,wemust
respondtocompetitivefactors,includingpricing,promotionalincentives
andtradetermsforproducts.Wemustmanageeachofthesefactors,as
wellasmaintainmutuallybeneficialrelationshipswithourkeycustomers,
inordertoeffectivelycompeteandachieveourbusinessplans.Since
ourgoalsincludeagrowthcomponenttiedtoacquisitions,wemust
manageandintegratekeyacquisitions,suchastheWellaacquisition
andthependingacquisitionofTheGilletteCompany,includingobtaining
therequiredregulatoryapprovalsandachievingthecostandgrowth
synergiesinaccordancewithstatedgoals.
CostPressures.Ourcostsaresubjecttofluctuations,particularlydue
tochangesincommodityprices,costoflabor,foreignexchangeand
interestrates.Ourcostsin2005wereimpactedbysharplyhigher
commoditycostsandweexpectthistrendtocontinuein2006.
Therefore,oursuccessisdependent,inpart,onourcontinuedabilityto
managethesefluctuationsthroughpricingactions,costsavingsprojects,
sourcingdecisionsandcertainhedgingtransactions.Wealsomust
managecurrency,especiallyinvolatilecountries,anddebt,including
debtrelatedtoourannouncedplantorepurchasesharesofCompany
commonstock.Inthemanufacturingandgeneraloverheadareas,we
needtomaintainkeymanufacturingandsupplyarrangements,including
solesupplierandsolemanufacturingplantarrangements.Wemustalso
implement,achieveandsustaincostimprovementplans,includingour
outsourcingprojects.
GlobalEconomicConditions.Economicchanges,terroristactivityand
politicalunrestmayresultinbusinessinterruption,inflation,deflation
ordecreaseddemandforourproducts.Oursuccesswilldependinpart
onourabilitytomanagecontinuedglobalpoliticaland/oreconomic
uncertainty,especiallyinoursignificantgeographicalmarkets,as
wellasanypoliticaloreconomicdisruptionduetoterroristandother
hostileactivities.
RegulatoryEnvironment.
Changesinlaws,regulationsandtherelated
interpretationsmayaltertheenvironmentinwhichwedobusiness.This
includeschangesinenvironmental,competitiveandproduct-relatedlaws,
aswellaschangesinaccountingstandardsandtaxationrequirements.
Accordingly,ourabilitytomanageregulatory,taxandlegalmattersandto
resolvependingmatterswithincurrentestimatesmayimpactourresults.
ResultsofOperations
VolumeandNetSales
Unit volume in 2005 increased 8%. Each of our three GBUs
deliveredvolumegrowthratesofhigh-singledigitsorgreaterled
byP&GBeauty,up12%.Everyoneofourgeographic-basedMDOs
postedvolumegrowth,ledbydevelopingmarketswithhigh-teens
volumegrowth. Organicvolume, which excludesthe impacts of
acquisitionsanddivestitures,alsoincreased8%.Additionalvolumefrom
theacquisitionofWella,whichwasacquiredinSeptemberof2003,was
offsetbythedivestitureoftheJuicebusinessinAugustof2004.The
increaseinvolumeversustheprioryearwasdrivenby:
• Highsingle-digitgrowthofour“billion-dollarbrand”portfolio,which
representsapproximately60%oftotalCompanyvolume;
• Growthineachofourtop16countries,representingapproximately
80%oftotalCompanynetsales;
• Marketsharegrowthineightofourtop10customers;and
• Continuedstrengthindevelopingmarkets,particularlyGreaterChina
andCentralandEasternEurope/MiddleEast/Africa.
Netsalesreachedarecordlevelof$56.74billion,anincreaseof10%
versustheprioryear.Foreignexchangecontributed2%tonetsales
growth,primarilydrivenbythestrengthoftheEuro,Britishpoundand
Japaneseyen.Higherrelativegrowthindevelopingmarkets,wherethe
averageunitsalespriceislowerthantheCompanyaverage,resultedin
anegativemiximpactof1%onnetsalesgrowth.Pricingadded1%to
salesgrowth.PriceincreasesinFamilyCare,PetHealthandNutrition,
Pharmaceuticals,CoffeeandincertainFabricCaremarketswerepartially
offsetbypriceinvestmentstakenprimarilyinEuropetoaddressthe
growthofharddiscountersandinresponsetocompetitiveactivityin
certainFabricCareandBabyCaremarkets.Netsalesexcludingforeign