5 Must-See Slides From Procter & Gamble Co's Investor Presentation

By Demitrios Kalogeropoulos Markets Fool.com

Procter & Gamble (NYSE: PG) executives last week presented at an analyst conference to update shareholders on their cost-cutting plans while laying out why they believe they're right on track to begin snatching back market share after two years of disappointing declines.

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Here are a few highlights from the consumer goods giant's presentation.

Gaining momentum

P&G recently raised its full-year sales growth outlook after its fiscal second-quarter results came in better than expected. Sure, the outperformance was modest, but it fits an encouraging pattern for the consumer goods giant: Organic volume growth trends have improved from sharply negative to solidly positive over the past 18 months.

Image source: P&G.

That shift is even more impressive when stacked up against rivals. Kimberly-Clark (NYSE: KMB), which competes against P&G in the key diaper category, has seen its organic sales growth pace slow to 2% from the 4% it initially targeted. If both companies hit their latest growth forecasts, P&G will outgrow its smaller peer for the first time in years.

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Capturing productivity

P&G may be done transforming its product portfolio, but it has only started reaping the benefits from its many cost-cutting initiatives. Executives have sliced an average of $1.4 billion out of its cost of goods sold in each year since 2012 and are targeting a further $10 billion of cuts over the next five fiscal years.

Image source: P&G.

The simplification of its business is making that cost-cutting task much easier. As just one example, management highlighted the laundry division, which now counts 40% fewer chemical formulations, half the number of manufacturing sites, and half the number of packaging solutions. That complexity-shedding strategy is being applied to every area of the operations, including advertising and supply chain, and should result in a flexible, more profitable enterprise.

Getting more profitable

Image source: P&G.

Executives highlighted P&G's improved profitability, with gross and operating margin each climbing by roughly 2 full percentage points since fiscal 2013. The company is solidly ahead of most rivals on this metric now. Its latest 22% operating margin, for example, beats Kimberly-Clark's 18%.

Thanks to these gains, P&G is on track to boost profits in 2017 after two consecutive years of earnings declines.

Innovating to win market share

Image source: P&G.

P&G can't just cut its way to sustainable growth, and so management is aiming to spur accelerating organic sales gains through innovation. Its performance has been mixed on this score lately, which left the door open for rivals like Unilever's (NYSE: UL) Dollar Shave Club to chip away at its market share.

In response, P&G has reshaped its Gillette shaving portfolio to better capture demand across all price points. The market share trend hasn't turned positive yet, but the company is inching closer to that happy result.

Try a free sample

Image source: P&G.

The company's early experiments with a ramped-up trial program have been encouraging. P&G has blanketed hospitals with free diaper samples for new moms, helping the Pampers brand widen its market share lead. While these trials carry concrete costs today and only the potential for sales growth in the future, executives are confident that the sampling program is creating millions of loyal customers, which is why the company plans to allocate more cash to the initiative this year.

Can P&G keep rising?

P&G's stock recently crossed $90 per share on optimism that its two-year growth funk is about to end. That encouraging prospect, coupled with hefty cash returns and improved profitability, points to a much better fiscal 2017 for shareholders than they've seen in years.

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Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Kimberly-Clark and Unilever. The Motley Fool has a disclosure policy.