Proctor and Gamble 2008 Annual Report Download - page 44

42 TheProcter&GambleCompany Management’sDiscussionandAnalysis

ForthescalyearendedJune30,2008,wedeliveredourseventh
consecutiveyearofsalesgrowthandfreecashowproductivityator
aboveourstatedtargets.
Netsalesincreased9%to$83.5billion.•
Organicsales,whichexcludetheimpactsofacquisitions,divestitures–
andforeignexchange,increased5%,inlinewithourpost-Gillette
organicsalesgrowthtargetrangeof4%to6%.
Everyreportablesegmentdeliveredyear-on-yearorganicsales–
growth.
Dilutednetearningspershareincreased20%to$3.64.•
Earningspersharegrewbehind11%operatingprotgrowth.–
Cashowfromoperatingactivitieswas$15.8billion.•
Freecashowproductivitywas106%,aheadofour90%target.–

Wediscussexpectationsregardingfutureperformance,eventsand
outcomes,suchasourbusinessoutlookandobjectives,inannualand
quarterlyreports,pressreleasesandotherwrittenandoralcommuni-
cations.Allsuchstatements,exceptforhistoricalandpresentfactual
information,are“forward-lookingstatements,”andarebasedon
nancialdataandourbusinessplansavailableonlyasofthetimethe
statementsaremade,whichmaybecomeout-of-dateorincomplete.
Weassumenoobligationtoupdateanyforward-lookingstatements
asaresultofnewinformation,futureeventsorotherfactors.
Forward-lookingstatementsareinherentlyuncertainandinvestors
mustrecognizethateventscouldbesignicantlydifferentfromour
expectations.
Ability to Achieve Business Plans. Weareaconsumerproducts
companyandrelyoncontinueddemandforourbrandsandproducts.
Toachievebusinessgoals,wemustdevelopandsellproductsthat
appealtoconsumersandretailtradecustomers.Ourcontinued
successisdependentonleading-edgeinnovationwithrespecttoboth
productsandoperationsandonthecontinuedpositivereputations
ofourbrands.Thismeanswemustbeabletoobtainpatentsand
respondtotechnologicaladvancesandpatentsgrantedtocompetition.
Oursuccessisalsodependentoneffectivesales,advertisingand
marketingprogramsinanincreasinglyfragmentedmediaenvironment.
Ourabilitytoinnovateandexecuteintheseareaswilldetermine
theextenttowhichweareabletogrowexistingsalesandvolume
protably,especiallywithrespecttotheproductcategoriesand
geographicmarkets(includingdevelopingmarkets)inwhichwehave
chosentofocus.Therearehighlevelsofcompetitiveactivityinthe
environmentsinwhichweoperate.Toaddressthesechallenges,we
mustrespondtocompetitivefactors,includingpricing,promotional
incentives,tradetermsandproductinitiatives.Wemustmanageeach
ofthesefactors,aswellasmaintainmutuallybenecialrelationships
withourkeycustomers,inordertoeffectivelycompeteandachieve
ourbusinessplans.Sinceourgoalsincludeagrowthcomponenttied
toacquisitions,wemustmanageandintegratekeyacquisitions,such
astheGilletteandWellaacquisitions,includingachievingthecost
andgrowthsynergiesinaccordancewithstatedgoals.
Cost Pressures. Ourcostsaresubjecttouctuations,particularlydue
tochangesincommodityprices,rawmaterials,costoflabor,foreign
exchangeandinterestrates.Therefore,oursuccessisdependent,in
part,onourcontinuedabilitytomanagetheseuctuationsthrough
pricingactions,costsavingsprojects,sourcingdecisionsandcertain
hedgingtransactions.Wealsomustmanageourdebtandcurrency
exposure,especiallyinvolatilecountries.Weneedtomaintainkey
manufacturingandsupplyarrangements,includingsolesupplierand
solemanufacturingplantarrangements.Wemustimplement,achieve
andsustaincostimprovementplans,includingouroutsourcingprojects
andthoserelatedtogeneraloverheadandworkforcerationalization.
Global Economic Conditions. Economicchanges,terroristactivityand
politicalunrestmayresultinbusinessinterruption,ination,deation
ordecreaseddemandforourproducts.Oursuccesswilldepend,in
part,onourabilitytomanagecontinuedglobalpoliticaland/or
economicuncertainty,especiallyinoursignicantgeographicmarkets,
aswellasanypoliticaloreconomicdisruptionduetoterroristand
otherhostileactivities.
Regulatory Environment. Changesinlaws,regulationsandtherelated
interpretationsmayaltertheenvironmentinwhichwedobusiness.
Thisincludeschangesinenvironmental,competitiveandproduct-
relatedlaws,aswellaschangesinaccountingstandardsandtaxation
requirements.Ourabilitytomanageregulatory,taxandlegalmatters
(includingproductliability,patent,intellectualpropertyandcompetition
lawmatters)andtoresolvependinglegalmatterswithincurrent
estimatesmayimpactourresults.


Netsalesincreased9%in2008to$83.5billionbehind4%unitvolume
growth,afavorable5%foreignexchangeimpactandapositive1%
pricingimpact.Favorableforeignexchangeresultedprimarilyfromthe
strengtheningofEuropeanandothercurrenciesrelativetotheU.S.
dollar.Priceincreasesweretakenacrossanumberofourbusinesses
primarilytooffsethighercommoditycosts.Mixhadanegative1%
impactonnetsalesprimarilyduetodisproportionategrowthin
developingregions,wheresellingpricesarebelowtheCompany
average.Eachreportablesegmentpostedyear-on-yearvolumegrowth,
withmid-single-digitgrowthinFabricCareandHomeCare,BabyCare
andFamilyCare,GroomingandHealthCareandlow-single-digit
growthinBeautyandSnacks,CoffeeandPetCare.Eachgeographic
regionpostedyear-on-yearvolumegrowthexceptWesternEurope,
whichwasdownlow-singledigitsduetotheimpactofdivestitures.
Excludingtheimpactofacquisitionsanddivestitures,everygeographic
regiondeliveredyear-on-yearvolumegrowth.Volumegrewprimarily
behindinitiativeactivityonkeybrandsandcontinueddouble-digit
growthindevelopingregions.Organicsalesincreased5%behind
organicvolumegrowthof5%,whichexcludestheimpactofacquisi-
tionsanddivestitures.Eachreportablesegmentpostedyear-on-year
organicsalesandorganicvolumegrowth.