Q4 2024 Procter & Gamble Co Earnings Call

Good morning and welcome to Procter & Gamble's quarter-end conference call. Today's event is being recorded for replay.

Operator: Today's event is being recorded for replay. This discussion will include a number of forward-looking statements. If you refer to P&G's most recent 10-K, 10-Q, and 8-K reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections. As required by Regulation G, Procter & Gamble needs to make you aware that during the discussion, the company will make a number of references to non-GAAP and other financial measures.

This discussion will include a number of forward-looking statements.

If you will refer to P&G's most recent 10-K, 10-Q, and 8-K reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections.

As required by Regulation G, Procter & Gamble needs to make you aware that during the discussion, the company will make a number of references to non-GAAP and other financial measures.

Procter & Gamble believes these measures provide investors with useful perspective on underlying business trends and has posted on its investor relations website www.pginvestor.com a full reconciliation of non-GAAP financial measures.

Operator: Procter & Gamble believes these measures provide investors with useful perspective on underlying business trends and has posted on its investor relations website, www.pginvestor.com, a full reconciliation of non-GAAP financial measures. Now, I will turn the call over to P&G's Chief Financial Officer, Andre Schulten. Good morning, everyone.

Now I will turn the call over to P&G's Chief Financial Officer, Andre Schulten.

Andre Schulten: Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I will start with an overview of results for fiscal year 24 and for the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities, and we'll close with guidance for fiscal 25, and then take your questions.

Andre Schulten: Execution of our integrated strategies enabled the company to meet or exceed going-in guidance ranges for organic sales growth, core EPS growth, cash productivity, and cash return to share owners. All this despite significant market-level headwinds that were largely unknown when we gave our initial outlook for the year. Organic sales growth for the fiscal year was 4%, our sixth consecutive year of 4% or better organic growth against a strong 7% comp in the prior year and in more challenging market conditions.

Andre Schulten: Good morning, everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and Jon Chevalier, Senior Vice President, Investor Relations.

Andre Schulten: Growth was broad-based across business units, with eight of ten product categories growing organic sales. Home care, hair care, and grooming were up higher single digits, oral care, and feminine care up mid-singles. Fabric care, family care, and personal health care grew low single digits; skin and personal care, and baby care were down low singles. Focus markets grew 4% for the year, with North America up 5% and Europe up 8%. Razer China's organic sales were down 9% versus the prior year, driven by soft market conditions and brand-specific headwinds on SK2.

Andre Schulten: I will start with an overview of results for fiscal year 24 and for the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities and will close with guidance for fiscal 25 and then take your questions.

Andre Schulten: Enterprise markets were up 6%, led by Latin America with 15% organic sales growth. E-commerce sales increased 9%, now representing 18% of the total company. Our strategy, focused on driving market growth, continues to drive share growth for P&G. All channel market value sales in the U.S. categories in which we compete grew around 5% in Fiscal 24. P&G Consumption grew ahead of our fair share of category growth, driving modest value and volume share growth for the year.

Andre Schulten: Fiscal 24 was another strong year. Execution of our integrated strategies enabled the company to lead or exceed going in guidance ranges for organic sales growth, core EPS growth, cash productivity, and cash return to share owners.

John: All this despite significant market-level headwinds that were largely unknown when we gave our initial outlook for the year.

Andre Schulten: Organic sales growth for the fiscal year was 4%, our 6th consecutive year of 4% or better organic growth against a strong 7% comp in the prior year and in more challenging market conditions.

Andre Schulten: Growth was broad-based across business units, with 8 of 10 product categories growing organic sales.

Andre Schulten: Home care, hair care, and grooming were up high single digits, oral care and feminine care up mid-singles. Fabric care, family care, and personal health care grew low single digits, skin and personal care and baby care were down low singles.

Andre Schulten: Focus markets grew 4% for the year, with North America up 5% and Europe focus markets up 8%.

Speaker Change: GrazerChina organic sales were down 9% versus the prior year, driven by soft market conditions and brand-specific headwinds on SK2.

Speaker Change: Enterprise markets were up 6%, led by Latin America, with 15% organic sales growth. E-commerce sales increased 9%, now representing 18% of the total company.

Speaker Change: Our strategy, focused on driving market growth, continues to drive share growth for P&G. All channel market value sales in the U.S. categories in which we compete grew around 5% in fiscal 24.

Speaker Change: P&G consumption grew ahead of our fair share of category growth, driving modest value and volume share growth for the year.

Andre Schulten: We grew global aggregate value share; 30 or 50 category country combinations held or grew share for the year. Importantly, the share growth is broad-based. Six of ten product categories grew share globally over the past year. Core earnings per share were $6.59, up 12% for the year. Core gross margin improved 360 basis points, and core operating margin increased 170 basis points. Over $2.3 billion of productivity improvements were enabled by a significant increase in investment in superior products. Packages and brand communication to drive market growth. On a currency-neutral basis, core EPS was up 16%, and core operating margin increased 250 basis points. The adjusted fee cash flow productivity was 105%.

Speaker Change: We grew global aggregate value share, 30 or 50 category country combinations held or grew share for the years.

Speaker Change: Importantly, the share growth is broad-based. Six of ten product categories grew share globally over the past year.

Speaker Change: Core earnings per share were $6.59, up 12% for the year. Core gross margin improved 360 basis points, and core operating margin increased 170 basis points.

Speaker Change: Over $2.3 billion of productivity improvements enabled by a significant increase in investment in superior products.

Speaker Change: Packages and brand communication to drive market growth. On a currency-neutral basis, core EPS was up 16%, and core operating margin increased 250 basis points. Adjusted free cash flow productivity was 105%.

Andre Schulten: We increased our dividend by 7% and returned over $14 billion of value to share owners, $9.3 billion in dividends and $5 billion in share repurchase. Moving on to the fourth quarter results, Organic sales round down to 2%, volume was up 2%, solid sequential progress. Pricing was up 1%, and mix was in line with prior year. Growth continues to be broad-based across categories and regions. 9 of 10 product categories grew or held organic sales in the quarter. Home care, hair care, grooming, and oral care were each up in the high single digits.

Speaker Change: We increased our dividend by 7% and returned over $14 billion of value to share owners, $9.3 billion in dividends and $5 billion in share repurchase.

Speaker Change: Moving on to fourth quarter results.

Speaker Change: Organic sales rounded down to 2%. Volume was up 2%. Solid sequential progress. Pricing was up 1% and mix was in line with prior year.

Speaker Change: Growth continues to be broad-based across categories and regions. 9 of 10 product categories grew or held organic sales in the quarter. Home care, hair care, grooming, and oral care were each up high single digits.

Andre Schulten: Feminine care up low singles, skin and personal care, fabric care, personal health care, and family care were each in line with the prior year, and baby care was down mid-singles. Five of seven regions grew organic sales, with focus markets up 2% and enterprise markets up 2% for the quarter. Organic sales in North America grew 4%, with four points of volume growth and price mix in line with prior years. In European focus markets, organic sales were up 2% against a strong 12% comp in the base period.

Speaker Change: Feminine care up low singles, skin and personal care, fabric care, personal health care and family care were each in line with prior year and baby care was down mid singles.

Speaker Change: Five of seven regions grew organic sales, with focus markets up 2% and enterprise markets up 2% for the quarter.

Speaker Change: Organic sales in North America grew 4%, with 4 points of volume growth and price mix in line with prior year.

Speaker Change: European focus markets' organic sales were up 2% against a strong 12% comp in the base period. Volume was up 3%, price mix was down a point as the region has now fully annualized prior year inflation-driven pricing.

Andre Schulten: Volume was up 3%, and price mix was down a point as the region has now fully annualized prior year inflation-driven prices. Latin America organic sales were up 8%, including high singles growth in Brazil. Of note, Argentina's overall contribution to organic sales for the region and the company was lower than in the last few quarters due to the divestiture of a portion of the business in March and a notable decline in shipment volume for the remaining categories. As was announced earlier this month, we have divested the remaining portions of our operations in Argentina. As a result, Argentina will be largely removed from our organic sales reporting in fiscal year 2025.

Speaker Change: Latin America organic sales were up 8% including high singles growth in Brazil.

Speaker Change: Of note, Argentina's overall contribution to organic sales for the region and the company were lower than in the last few quarters due to the divestiture of a portion of the business in March and a notable decline in shipment volume for the remaining categories.

Speaker Change: As was announced earlier this month, we have divested the remaining portions of our operations in Argentina. As a result, Argentina will be largely removed from our organic sales reporting in FY25. Select P&G brands will still be available in the market through a distribution and licensing agreement with the new owner of the operations.

Andre Schulten: Select P&G brands will still be available in the market through a distribution and licensing agreement with the new owner of the operation. However, China's organic sales declined 8%.

Andre Schulten: Underlying market conditions have remained weak, and the 6A team's key consumption period was down sharply versus the prior year, just as we saw in the 11-11 Chinese New Year and Valentine's Day shopping period. Also, brand-specific headwinds have continued on SK2 due to its Japanese heritage. We expect general market trends and the dynamics related to SK2 to improve over time, though it will likely be another quarter or two until we return to

Speaker Change: Great, the China organic sales declined 8%, underlying market conditions have remained weak, and the 6-18 key consumption period was down sharply versus prior year, just as we saw in the 11-11 Chinese New Year and Valentine's Day shopping periods.

Speaker Change: Also, brand-specific headwinds have continued on FK2 due to its Japanese heritage. We expect general market trends and the dynamics related to FK2 to improve over time, though it will likely be another quarter or two until we return to growth.

Andre Schulten: Volume trends in some European enterprise and Asia-Pacific, Middle East, and Africa countries such as Egypt, Saudi Arabia, Turkey, Indonesia, Malaysia, and Russia have remained soft. However, we expect these headwinds to moderate or annualize over the coming period. Global aggregate market share was down 30 basis points, as we are now annualizing very strong growth in European focus markets. 25 of our top 50 category country combinations held or grew market share for the quarter. On the bottom line, core earnings per share were $1.40, up 2% versus the prior year.

Speaker Change: Volume trends in some Europe enterprise and Asia-Pacific, Middle East, Africa countries such as Egypt, Saudi Arabia, Turkey, Indonesia, Malaysia, and Russia have remained soft. We expect these headwinds to moderate or annualize over the coming periods.

Speaker Change: Global aggregate market share was down 30 basis points as we are now annualizing very strong growth in European focus markets. 25 of our top 50 category country combinations held or grew share for the quarter.

Speaker Change: On the bottom line, core earnings per share were $1.40, up 2% versus the prior year. On a currency neutral basis, core EPS increased 6%.

Andre Schulten: On a currency-neutral basis, core EPS increased 6%. Core Growth Margin increased 140 basis points, and Core Operating Margin decreased 100 basis points. Strong productivity improvements of 250 basis points. Funding a meaningful increase in marketing investment. Currency neutral cooperating margin decreased 60 basis points.

Speaker Change: Core Growth Margin increased 140 basis points and Core Operating Margin decreased 100 basis points.

Speaker Change: Strong productivity improvements of 250 basis points, funding a meaningful increase in marketing investment, currency neutral cooperating margin decreased 60 basis points.

Andre Schulten: Adjusted free cash flow productivity was 148%. We returned nearly $4 billion of cash to share owners this quarter, over 2.4 billion in dividends, and 1.5 billion in share repurchase. In summary, we met or exceeded each of our going-in-target ranges for the year, including organic sales growth, core EPS growth, free cash flow productivity, and cash return to shareholders. Strong performance again this year in a challenging economic and geopolitical environment. With that, I'll pass it over to Jon.

Speaker Change: Adjusted free cash flow productivity was 148%. We returned nearly $4 billion of cash to shareowners this quarter, over $2.4 billion in dividends and $1.5 billion in share repurchases.

Speaker Change: In summary, we met or exceeded each of our going-in-target ranges for the year – organic sales growth, core EPS growth, free cash flow productivity, and cash return to shareholders. Strong performance again this year.

Speaker Change: in a challenging economic and geopolitical environment.

Jon R. Moeller: Thanks, Andre. I'll start with a few thoughts on results before discussing the strategy. Our team continues to execute the strategy with excellence, enabling strong results over each of the past six years. Pre-COVID, during COVID, through a historic inflationary and pricing cycle, and through geopolitical tension.

Speaker Change: With that I'll pass it over to Jon. Thanks Andre. I'll start with a few thoughts on results before discussing the strategy.

John: Our team continues to execute the strategy with excellence, enabling strong results over each of the past six years, pre-COVID, during COVID, through a historic inflationary and pricing cycle, and through geopolitical tensions.

Jon R. Moeller: Organic sales growth of plus 5, plus 6, plus 7, plus 7, plus 4, and plus 4 over the last fiscal year. Strong earnings growth and gross and operating margin. Very strong cash generation, and over $96 billion of cash returned to share owners over those six years. For Fiscal 24, going in, Organic Sales Guidance was 4-5%.

John: Organic sales growth of plus 5, plus 6, plus 6, plus 7, plus 7, and plus 4 over the last fiscal years.

John: Strong earnings growth and gross and operating margin expansion.

John: Very strong cash generation and over 96 billion dollars of cash returned to share owners over those six years.

John: From Fiscal 24, going in Organic Sales Guidance was 4 to 5 percent.

Jon R. Moeller: We delivered 4% in a very volatile environment, flat volume for the year with an improving trajectory through the year, 2% growth in the fourth quarter. Strong volume growth in North America and Europe-focused markets, offsetting soft markets in enterprise regions in China. Going in with core EPS guidance of 6-9%, delivered 12.

John: We delivered 4% in a very volatile environment.

John: Flat volume for the year with improving trajectory through the year, 2% growth in the fourth quarter.

John: Strong volume growth in North America and Europe-focused markets, offsetting soft markets in enterprise regions and China. Going in core EPS guidance of 6-9%.

Jon R. Moeller: Gross margin at a 17-year high, with strong productivity improvement funding strong marketing investment. Going in cash productivity outlook of 90%, delivered 105%, which enabled a 7% dividend increase. The 68th consecutive year of an increase and the 134th consecutive year paying a dividend.

John: Delivered 12.

John: Core gross margin at a 17-year high, with strong productivity improvement funding strong marketing investments.

John: Going In Cash Productivity Outlook of 90% delivered 105%, which enabled a 7% dividend increase, the 68th consecutive year of increase, and the 134th consecutive year paying a dividend.

Jon R. Moeller: As Andre said, strong results in a challenging environment. But to be very clear, there's still more work to do to continue improving areas in our control, which will be needed to offset the headwinds that are largely not in our control. We'll double down on superiority across all five vectors, double down on productivity, up and down the P&L and across the balance. We'll double down on enabling our organization to execute our integrated strategy with excellence to delight consumers and win in the marketplace, to deliver the level of balance growth and value creation results you and we expect.

John: As Andre said, strong results in a challenging environment.

Andre Schulten: To be very clear, there's still more work to do to continue improving areas in our control, which will be needed to offset the headwinds that are largely not in our control.

Andre Schulten: We'll double down on superiority across all five vectors.

Andre Schulten: We'll double down on productivity, up and down the P&L and across the balance sheet.

Andre Schulten: We'll double down on enabling our organization to execute our integrated strategy with excellence, to delight consumers and win in the marketplace, to deliver the level of balanced growth and value creation results you and we expect.

Jon R. Moeller: Our strategy is dynamic and sustainable. It adapts to the changing needs of consumers, customers, and society, and is focused on growing markets. Creating versus taking does, the most sustainable and typically the most profitable way to grow. A focused portfolio of daily use products in categories where performance drives brand choice.

Andre Schulten: Our strategy is dynamic and sustainable. It adapts to the changing needs of consumers, customers, and society, and is focused on growing markets, creating versus taking business, the most sustainable and typically most profitable way to grow.

Andre Schulten: A focused portfolio of daily use products in categories where performance drives brand choice.

Jon R. Moeller: The portfolio is performing, delivering broad-based growth across nearly all categories and most geographies. As you know, we are active managers of our portfolio. Over the last several years, we've made some targeted additions and subtractions to that portfolio. We've adjusted our operating model in several markets. Each of these moves was made... with a focus on long-term balance, growth, and value creation. The second strategy element, ongoing commitment to an investment in irresistible superiority through innovation across the five vectors of product, package, brand communication, retail execution, and value, holistically defined.

Andre Schulten: The portfolio is performing, delivering broad-based growth across nearly all categories and most geographies.

Andre Schulten: As you know, we are active managers of our portfolio. Over the last several years, we've made some targeted additions and subtractions in that portfolio.

Andre Schulten: We've adjusted our operating model in several markets.

Andre Schulten: Each of these moves were made with a focus on long-term balanced growth and value creation.

Andre Schulten: The second strategy element, ongoing commitment to an investment in irresistible superiority through innovation across the five vectors of product, package, brand communication, retail execution, and value, holistically defined.

Jon R. Moeller: Leveraging that superiority to delight consumers, grow markets, and our share in them, to jointly create value with retail partners. The plans across the businesses are broader and stronger than at any time in the recent past, as each team works to increase their margin of superiority and consumer delight. Superior Innovations that are Driven by Deep Consumer Insights

Andre Schulten: Leveraging that superiority to delight consumers, grow markets, and our share in them, to jointly create value with retail partners.

Andre Schulten: The plans across the businesses are broader and stronger than any time in the recent past, as each team works to increase their margin of superiority and consumer delight.

Jon R. Moeller: Communicated to consumers with more effective and efficient marketing programs, executed in stores and online in conjunction with retailer strategies to grow categories and our brand, and Price to Deliver Superior Value across each price tier where we compete. We've talked many times about the superiority-driven market growth, share growth, and sales growth we've achieved with products like Titan Aerial Pods. Downey & Lenore Laundry Scent Beads, Dawn & Ferry Easy Squeeze & Power Wash, two more examples.

Andre Schulten: Superior innovations that are driven by deep consumer insights, communicated to consumers with more effective and efficient marketing programs, executed in stores and online in conjunction with retailer strategies to grow categories and our brands.

Andre Schulten: and Price to Deliver Superior Value across each price tier where we compete.

Andre Schulten: We've talked many times about the superiority-driven market growth, share growth, and sales growth we've achieved with products like Tide and Aerial Pods, Downey and Lenore Laundry Scent Beads, and Dawn & Ferry Easy Squeeze and Power Wash.

Jon R. Moeller: Oral-B iO Power Toothbrushes deliver superior cleaning and a delightful user experience. Superior Communication includes the insight that manual brushes leave 50% of plaque behind. But Oral-B I.O. delivers 100% more plaque bacterial removal with its round head and removes plaque in hard-to-reach places.

Andre Schulten: Two more examples.

Andre Schulten: Oral-B iO Power Toothbrushes deliver superior cleaning and delightful user experience.

Andre Schulten: Superior Communication includes the insight that manual brushes leave 50% of plaque behind, but Oral-B I.O. delivers 100% more plaque bacterial removal with its round head and removes plaque in hard-to-reach places.

Jon R. Moeller: The superior proposition is accelerating PowerBrush trial and adoption, bringing new PowerBrush users into the category, driving high single-digit market growth for the PowerBrush category. Double-digit sales growth for Oral-B Power and two points of Oral-B value share growth over the past 12 months. Native, our premium personal care brand, is delivering superiority across all five vectors and across multiple product forms, including deodorants, body wash, shampoo, and conditioner. Superior performance with fewer ingredients and irresistible scents. Transparent labeling and clean white packaging.

Andre Schulten: The Superior Proposition is accelerating PowerBrush trial and adoption, bringing new PowerBrush users into the category, driving high single-digit market growth of the PowerBrush category,

Andre Schulten: Double-digit sales growth for Oral-B Power and two points of Oral-B value share growth over the past 12 months.

Speaker Change: Native, our premium personal care brand, is delivering superiority across all five vectors and across multiple product forms.

Speaker Change: including deodorants, body wash, shampoo, and conditioners.

Speaker Change: Superior performance with fewer ingredients and irresistible scents.

Jon R. Moeller: Superior retail execution and strong retailer partnerships showcase the full range of, Premium positioning within the category providing superior value for the consumer looking for an offering with more natural ingredients. Native has driven a step change in market value growth for the U.S. deodorants and personal care categories from low singles to mid-teens. Native sales have grown nearly 10 times over the last five years to over $700 million in fiscal 24.

Speaker Change: Transparent Labeling and Clean White Packaging.

Speaker Change: Superior Retail Execution, and Strong Retailer Partnerships showcasing the full range of forms and sets.

Speaker Change: Premium positioning within the category, providing superior value for the consumer, looking for an offering with more natural ingredients.

Speaker Change: Native has driven a step change in market value growth for the U.S. deodorants and personal care categories from low singles to mid-teens.

Speaker Change: Native sales have grown nearly ten times over the last five years to over 700 million dollars in fiscal 24.

Jon R. Moeller: Third strategy element, productivity improvement in all areas of our operation. In order to fund investments in innovation, brand building, and market growth, to mitigate cost and currency challenges, and to expand margins and generate cash. We delivered very strong cost savings in Fiscal 24.

Speaker Change: Third strategy element, productivity improvement in all areas of our operations.

Speaker Change: In order to fund investments in innovation, brand building, and market growth, to mitigate cost and currency challenges, and to expand margins and generate cash.

Speaker Change: We delivered very strong cost savings in fiscal 24.

Jon R. Moeller: Visibility to more savings opportunities is increasing as businesses continue to build their three-year rolling productivity master plan. We have an objective for gross savings and cost of goods sold of up to $1.5 billion before tax, enabled by platform programs with global application across categories, like Supply Chain 3.0. We're working in a new way with retailers on the totality of the supply chain, end-to-end versus simply trying to optimize our respective pieces. One example is using data and machine learning algorithms to optimize truck scheduling to minimize idle time for drivers.

Speaker Change: Visibility to more savings opportunities is increasing as the businesses continue to build their three-year rolling productivity master plans.

Speaker Change: We have an objective for gross savings and cost of goods sold of up to $1.5 billion before tax, enabled by platform programs with global application across categories, like Supply Chain 3.0.

Speaker Change: We're working in a new way with retailers on the totality of the supply chain.

Speaker Change: End-to-end versus simply trying to optimize our respective pieces.

Speaker Change: One example, using data and machine learning algorithms to optimize truck scheduling to minimize idle time for drivers.

Jon R. Moeller: We're also using digital tools to optimize fill rates and for dynamic routing and sourcing optimization. $200 to $300 million of savings opportunity across these areas. We have line of sight to savings from improved marketing productivity, more efficiency, and greater effectiveness, avoiding excess frequency and reducing waste, while increasing reach. We're taking targeted steps to reduce overhead as we digitize more of our operations.

Speaker Change: We're also using digital tools to optimize fill rates and forward dynamic routing and sourcing optimization.

Speaker Change: $200 to $300 million of savings opportunity across these areas.

Speaker Change: We have line of sight to savings from improved marketing productivity, more efficiency and greater effectiveness, avoiding excess frequency and reducing waste.

Speaker Change: while increasing reach.

Speaker Change: We're taking targeted steps to reduce overhead as we digitize more of our operations.

Jon R. Moeller: Next, constructive disruption of ourselves and our industry, a willingness to change, adapt, and create new trends, technologies, and capabilities that will shape the future of our industry and extend our competitive advantage. We continue to be a constructive disruptor in brand building, in-houseing more of the media planning and placement activity using our proprietary tools and consumer data to increase the effectiveness and efficiency of our communication. We're disrupting traditional lab-based innovation models to dramatically increase the speed and breadth of discovery.

Speaker Change: Next, constructive disruption.

Speaker Change: of ourselves and our industry, a willingness to change, adapt, and create new trends, technologies, and capabilities that will shape the future of our industry and extend our competitive advantage.

Speaker Change: We continue to be a constructive disruptor of brand building, in-housing more of the media planning and placement activity, using our proprietary tools and consumer data to increase the effectiveness and efficiency of our communication.

Speaker Change: We are disrupting traditional lab-based innovation models to dramatically increase the speed and breadth of discovery.

Jon R. Moeller: Last but not least, we've designed and continued to refine an empowered, agile, and accountable organization, an inclusive and diverse organization, enabling us to better serve an increasingly diverse set of consumers. Strong progress across all strategic pillars with significant opportunity ahead of us. No reason to stand still.

Speaker Change: Last but clearly not least, we've designed and continued to refine an empowered, agile, and accountable organization.

Speaker Change: an inclusive and diverse organization.

Speaker Change: enabling us to better serve an increasingly diverse set of consumers.

Speaker Change: Strong progress across all strategic pillars with significant opportunity ahead of us.

Jon R. Moeller: As illustrated by the four focus areas that we've outlined previously. Number 1, Supply Chain 3.0, It's delivering productivity, as you can see in the results. We're also driving improved agility, flexibility, scalability, and transparency in a rapidly evolving landscape. Optimized, sustainable, and flexible.

Speaker Change: No reason to stand still.

Speaker Change: As illustrated by the four focus areas that we've outlined previously.

Speaker Change: Number 1, Supply Chain 3.0

Speaker Change: It's delivering productivity as you can see in the results.

Speaker Change: We're also driving improved agility, flexibility, scalability, and transparency in a rapidly evolving landscape.

Jon R. Moeller: Up and down the supply chain, including our retail partners. All of this is driving higher quality, increased supply assurance, and higher on-shelf availability of our products, and, of course, Better Cash and Cost Structure. These programs improve superiority with consumers and further strengthen what is already the top-ranked supply chain by our retail partners in third-party industry surveys. Next, environmental sustainability.

Speaker Change: Optimized, sustainable, and flexible. Up and down the supply chain, inclusive of our retail partners.

Speaker Change: All of this is driving higher quality, increased supply assurance, and higher on-shelf availability of our products.

Speaker Change: And, of course, Better Cash and Cost Structures.

Speaker Change: These programs improve superiority with consumers and further strengthen what is already the top-ranked supply chain by our retail partners in third-party industry surveys.

Jon R. Moeller: Superior propositions for consumers, customers, and shareowners that are more sustainable, driving sales and profitability while reducing the footprint of our operations. Enabling Consumers to Reduce Their Footprint and Innovating to Deliver Cross-Industry Solutions for Some of Our Most Pressing Challenges. The next focus area is digital acumen. Leveraging data and digitization to delight consumers, streamline the supply chain, increase quality, drive productivity, all driving shareholder value. One example is the improvement we've delivered in ad copy qualification in Mediavine, with proprietary Digital Tools we've developed, and the digital... Molecule Development Work and Fabric Care

Speaker Change: Next, environmental sustainability. Superior propositions for consumers, customers, and shareholders that are more sustainable.

Speaker Change: Driving sales and profitability while reducing the footprint of our operations.

Speaker Change: enabling consumers to reduce their footprint.

Speaker Change: and Innovating to Deliver Cross-Industry Solutions for Some of Our Most Pressing Challenges.

Speaker Change: The next focus area is digital acumen. Leveraging data and digitization to delight consumers, streamline the supply chain, increase quality, drive productivity, all driving shareholder value.

Speaker Change: One example is the improvement we've delivered in ad copy qualification and media buying.

Speaker Change: With proprietary digital tools we've developed and the digital...

Jon R. Moeller: We've built similar tools to drive faster, cheaper, and better innovation in perfume, which benefits almost every product category in the company. We're also digitizing more of our back office work processes to lower costs and drive efficiencies while delivering higher quality output. Each of these examples has obvious cost benefits, but they're also driving product and package superiority, and superior brand communication to consumers. Unknown Attendee, Robert Ottenstein, Filippo Falorni, Callum Elliott, Procter & Gamble, tasks with greater business impact.

Speaker Change: Molecule Development Work and Fabric Care.

Speaker Change: We've built similar tools to drive faster, cheaper, and better innovation in perfume, which benefits almost every product category in the company.

Speaker Change: We're also digitizing more of our back-office work processes to lower costs and drive efficiencies while delivering higher quality output.

Speaker Change: Each of these examples has obvious cost benefits, but they're also driving product and package superiority, superior brand communication to consumers.

Speaker Change: Superior retail execution in-store and online, stronger internal controls, and jobs that enable people to focus on higher-order tasks with greater business impact.

Jon R. Moeller: Last focus area, a superior value equation for all employees, for all roles, to ensure we continue to attract, retain, and develop the best talent and our best position to serve all consumers.

Speaker Change: Last focus area, a superior value equation for all employees, for all roles, to ensure we continue to attract, retain, and develop the best talent in our best position to serve all consumers.

Jon R. Moeller: They simply strengthen our ability to execute our integrated growth strategy. Our strategic choices on portfolio, superiority, productivity, constructive disruption, and organization reinforce and build on each other. We continue to believe there's merit in doubling down on this integrated strategy, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners, fuelled by productivity. We remain as confident as ever in our strategy and our ability to drive market growth and to deliver balanced growth and value creation to delight consumers, customers, employees, society, and shareholders.

Speaker Change: These four focus areas are not separate strategies, they simply strengthen our ability to execute our integrated growth strategy.

Speaker Change: Our strategic choices on portfolio, superiority, productivity, constructive disruption, and organization reinforce and build on each other.

Speaker Change: We continue to believe there is merit in doubling down on this integrated strategy, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners fueled by productivity.

Speaker Change: We remain as confident as ever in our strategy and our ability to drive market growth and to deliver balanced growth and value creation to delight consumers, customers, employees, society, and share owners.

Andre Schulten: At the end of the day, P&G serves people with a strong desire to improve their lives and the lives of their families. I believe in the capabilities and commitment of P&G employees to serve consumers and do this in the most responsible way, consistent with P&G's values and principles. I'm excited about what lies ahead. Of course, we'll continue to face challenges, but the future holds great promise. We have many opportunities ahead to grow markets, grow our business, and create significant value for our owners. With that, I'll hand it back to Andre to outline our guidance for the New Year. Thank you, Jon.

Speaker Change: At the end of the day, P&G serves people.

Speaker Change: with a strong desire to improve their lives and the lives of their families.

Speaker Change: I believe in the capabilities and commitment of P&G people to serve consumers and to do this in the most responsible way, consistent with P&G's values and principles.

Speaker Change: I'm excited about what lays ahead.

Speaker Change: Of course, we'll continue to face challenges, but the future holds great promise.

Speaker Change: We have many opportunities ahead to grow markets, grow our business, and create significant value for our owners.

Speaker Change: With that, I'll hand it back to Andre to outline our guidance for the new year.

Andre Schulten: As we enter Fiscal 25, we continue to expect the environment around us to remain volatile and challenging, from input costs, currencies, to consumers, competitors, retailers, and geopolitical dynamics. As John said, we'll navigate these challenges with our dynamic, integrated strategy guided by consensus. Our going-in guidance for FISCA 25 is consistent with our long-term algorithm.

Andre Schulten: Thank you, Jon. As we enter Fiscal 25, we continue to expect the environment around us to remain volatile and challenging, from input costs to currencies to consumer, competitors, retailers, and geopolitical dynamics.

Andre Schulten: As Jon said, we'll navigate these challenges with our dynamic integrated strategy guided by consumers every step of the way.

John: Our going-in guidance for Fiscal 25 is consistent with our long-term algorithm. On the top line, we currently expect the markets in which we compete to deliver local currency sales growth in the range of 3-4% for the year.

Andre Schulten: We currently expect the market in which we compete to deliver local currency sales growth in the range of 3-4% for the year ahead. Our objective is to grow organic sales modestly ahead of the underlying growth in these markets. Organic Sales Growth Guidance Range of 3% to 5% for the fiscal year. Apologies, I had my mic muted.

John: Our objective is to grow organic sales modestly ahead of the underlying growth in these markets.

John: This translates to an organic sales growth guidance range of 3-5% for the fiscal year. Apologies, I had my mic muted.

Andre Schulten: On the bottom line, our algorithm calls for mid- to high-single-digit core earnings per share growth. Our core EPS guidance range for Fiscal 25 starts the year at 5 to 7 percent versus Fiscal 24 core EPS of 6.59. This guidance equates to a range of 691 to 705 per share, 698 up 6% at the center of the range. This outlook includes a commodity cost headwind of approximately $300 million after tax, and a foreign exchange headwind of approximately $200 million after tax.

John: On the bottom line, our algorithm calls for mid- to high-single-digit core earnings per share growth. Our core EPS guidance range for Fiscal 25 starts the year at 5 to 7 percent versus Fiscal 24 core EPS of 6.59.

John: This guidance equates to a range of 691 to 705 per share, 698 up 6% at the center of the range.

John: This outlook includes a commodity cost headwind of approximately $300 million after tax and a foreign exchange headwind of approximately $200 million after tax.

Andre Schulten: Combined foreign exchange and commodities are projected to be a headwind of $0.20 per share for Fiscal 25, or a 3% point drag on core EPS growth. In addition, the prior fiscal year included benefits from several minor brand divestitures, and we expect a somewhat higher tax rate in the new fiscal year.

John: Combined foreign exchange and commodities are projected to be a headwind of $0.20 per share for FY25, or a 3% point drag on core EPS growth.

John: In addition, the prior fiscal year included benefits from several minor brand divestitures, and we expect a somewhat higher tax rate in the new fiscal year. Combined, these are an additional $0.10 to $0.12 headwind to core EPS.

Andre Schulten: Combined, these are an additional $0.10 to $0.12 headwind to core EPS. We expect adjusted free cash flow productivity of 90% for the year. This includes an increase in capital spending as we add capacity in several categories. We expect to pay around $10 billion in dividends and to repurchase $6 to $7 billion of common stock. This, plus our plan to return $16 to $17 billion of cash to share owners this fiscal year.

John: We expect adjusted free cash flow productivity of 90% for the year. This includes an increase in capital spending as we add capacity in several categories.

John: We expect to pay around $10 billion in dividends and to repurchase $6-7 billion of common stock. Combine the plan to return $16-17 billion of cash to share owners this fiscal year.

Andre Schulten: While we are clear-eyed on the challenges in the market and the work needed to continue to drive the business, Fiscal 25's guidance for top-line, bottom-line, and cash is each consistent with our long-term algorithm. Here are a few items for you to consider as you build your quarterly estimate. On the top line, please keep in mind that the July to September period has the most difficult comp for the year, and many of the market level challenges we've noted will not fully annualize or improve materially in our estimate until the second half of the year. On the bottom line, the foreign exchange and commodity headwinds skew a bit toward the front half of the year.

John: While we are clear-eyed on the challenges in the market and the work needed to continue to drive the business, Fiscal 25's guidance for top-line, bottom-line and cash are each consistent with our long-term algorithm.

John: A few items for you to consider as you build your quarter-to-quarter estimates.

John: On the top line, please keep in mind that the July to September period has the most difficult comp for the year and many of the market level challenges we've noted will not fully annualize or improve materially in our estimate until the second half of the year.

John: On the bottom line, the foreign exchange and commodity headwinds skew a bit toward the front half of the year, and the back half comes include the benefit of the tax items and minor brand divestitures I mentioned earlier.

Andre Schulten: And the back half columns include the benefit of the tax items and minor brand divestitures I mentioned earlier. This outlook is based on current market growth rate estimates, commodity prices, and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, major supply chain disruptions, or store closures are not anticipated within the guidance range. With that, I'll hand it back to Jon for his closing thoughts.

John: This outlook is based on current market growth rate estimates, commodity prices, and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, major supply chain disruptions, or store closures are not anticipated within the guidance ranges.

Jon R. Moeller: We're very pleased with the strong results P&G people have delivered over the last year and, inclusive of prior years, in a very challenging and volatile environment. The earnings power and value creation potential of the company are as strong as ever. We continue to believe that the best path forward to deliver sustainable, balanced growth is to Double Down on the Strategy. Excellent execution of an integrated set of market-constructive strategies delivered with a focus on balanced top and bottom line growth and value creation, starting with an commitment to deliver irresistibly superior propositions to consumers in retail.

John: With that, I'll hand it back to Jon for his closing thoughts.

John: We're very pleased with the strong results P&G people have delivered over the last year.

John: and inclusive of prior years in a very challenging and volatile environment.

John: The earnings power and value creation potential of the company are as strong as ever.

Jon: We continue to believe that the best path forward to deliver sustainable, balanced growth

Jon: is to double down on the strategy.

Jon: Excellent execution of an integrated set of market constructive strategies delivered with a focus on balanced top and bottom line growth and value creation.

Jon: Starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners.

Jon R. Moeller: With that, we'll be happy to take your questions. If you have a question, please press the star followed by one on your phone. If your question has been answered or you would like to withdraw your question, press star followed by two.

Speaker Change: With that, we'll be happy to take your questions.

Speaker Change: If you have a question, please press star followed by 1 on your phone.

Speaker Change: If your question has been answered or you would like to withdraw your question, press star followed by 2.

Operator: The first question comes from Bryan Spillane of Bank of America. Please go ahead. Thanks, operator. And good morning, everyone. Um, I guess the question that we've fielded a few times this morning, and if you could touch on this a bit, just, you know, the last couple of quarters, you know, it seems like organic sales have come in maybe. Morning, Bryan. I'll start, and then Jon, I'm sure, will add some perspective as well.

Speaker Change: The first question comes from Bryan Spillane of Bank of America. Please go ahead.

Bryan Douglass Spillane: Thanks, Operator, and good morning, everyone. I guess the question that we've fielded a few times this morning, and if you could touch on this a bit, just, you know, the last couple of quarters, you know, it seems like,

Speaker Change: Organic sales have come in maybe

Speaker Change: slower or lower than expect than you were expecting at the start of each quarter.

Speaker Change: So maybe if you can touch a little bit on just what's developed, especially in the fourth quarter.

Speaker Change: Andre Schulten, CEO Alphabet and Google

Speaker Change: Morning, Bryan. I'll start, and then Jon, I'm sure, will add some perspective as well. I'll start back where we kind of started, the prepared remarks. I think we delivered a year where we exceeded or met all of our in-going guidance metrics.

Andre Schulten: I'll start back where we kind of started the prepared remarks. I think we delivered a year where we exceeded or met all of our in-going guidance metrics. Now, the year wasn't linear, as you highlight.

Speaker Change: Now the year wasn't linear, as you highlight.

Andre Schulten: And I distinguish between two parts of the business. 85% of the business is performing right in line with expectations and right in line with what we would have expected throughout the year. We have strong growth in North America, 4% in the quarter, 4% volume growth in the quarter, Europe-focused markets growing volumes at 3%, Europe enterprise markets growing volumes at 6%, and LA normalizing to about 8% organic sales growth. So that part of the business where the trajectory is not impacted by significant external events, I think it is moving right along. If you look at the headwinds that we started to communicate in December, they are really with us throughout the second half.

Jon: And I distinguish two parts of the business. Eighty-five percent of the business is performing right in line with expectations and right in line with what we would have expected throughout the year.

Jon: We have strong growth in North America, 4% in the quarter, 4% volume growth in the quarter. Europe focus markets growing volumes at 3%.

Jon: a Europe enterprise market growing volumes at 6%, L.A. normalizing to about 8% organic sales growth. So that part of the business...

Jon: Where the trajectory is not impacted by significant external events, I think it's moving right along. We expected the normalization and price-mix contribution as we have talked throughout the quarters.

Jon: If you look at the headwinds that we started to communicate in December , they are really still with us throughout the second half, and that's what's driving the volatility in the top-line results.

Andre Schulten: And that's what's driving the volatility in the top nine results. Those headwinds have accelerated in part, and honestly, in quarter four, some of them developed late in the quarter. So when you think about... China and SK-2 were heavily impacted by 6-18, a weaker key consumption period in China, and overall market sentiment in China has not improved throughout half two. We had highlighted that we expect the Chinese recovery to be slow and to take time, and I think that's playing out in the results we see in the second half.

Jon: Those headwinds have accelerated in part and honestly in quarter four some of them developed late in the quarter so when you think about

Jon: China and SK-2 were heavily impacted by 6-18, a weaker key consumption period in China.

Jon: and overall market sentiment in China has not improved throughout half two. We had highlighted that we expect the China recovery to be slow and to take time and I think that's playing out in the results we see in the second half.

Andre Schulten: The Middle East situation has not really improved, so we continue to see stronger impacts on Western retailers in some of these markets. And while the team has implemented many interventions, execution in stores has been limited by some of these headwinds in the Middle East.

Jon: The Middle East situation has not really improved, so we continue to see developing stronger impacts on Western retailers in some of these markets.

Jon: And while the team has implemented many interventions, the execution in store has been limited by some of these headwinds in the Middle East.

Andre Schulten: The last element, we saw a softening in Quarter 4 on Argentina volumes, driven by the general circumstances in the market and strong hyperinflation pricing in Argentina, so there was a softer contribution to organic sales growth in Quarter 4 than what we've seen in Quarter 3. If you step back, though, the performance of the business and the way we set up for 2025, I think, is very strong. 85% of the business is developing right in line with what we would have expected. We're growing our share in North America. The balance of the markets is growing volume, which is really the shift we needed to see. Our growth margin is at record levels.

Jon: The last element, we saw a softening in Q4 on the Argentina volumes, driven by the general circumstances in the market, strong hyperinflation pricing in Argentina.

Jon: So there was a softer contribution on organic sales growth in Quarter 4 than what we've seen in Quarter 3.

Jon: If you step back, though, the...

Jon: Performance of the business and the way we set up for 25 I think is very strong.

Jon: 85% of the business is developing right in line with what we would have expected.

Jon: We're growing share in North America. The balance of the markets are growing volume, which is really the shift we needed to see. Our growth margin is at record levels. Our productivity is very strong. That has enabled us to remain fully invested from a media perspective and from an innovation perspective.

Andre Schulten: Our productivity is very strong. That has enabled us to remain fully invested from a media perspective and from an innovation perspective. Going into the year, we feel all the structural elements of the business are strong. What is important to understand, and we mentioned it in the prepared remarks, those headwinds that we experienced in half two will still be with us in half one of this fiscal year.

Jon: And so going into the year, we feel all the structural elements of the business are strong. Now, what is important to understand, and we mentioned it in the prepared remarks,

Jon: Those headwinds that we have experienced in half two will still be with us in half one of this fiscal year.

Andre Schulten: So, we expect this year not to be linear, and we have to accelerate sales growth throughout the quarters as some of these headwinds annualize and we return to growth. But overall, I think we're well set up to deliver against the guidance metrics we just communicated. I agree with everything that Andre just said.

Jon: So we expect this year not to be linear and we have to accelerate sales growth throughout the quarters as some of these headwinds annualize and we return to growth. But overall, I think we're well set up to deliver against the guidance metrics we just communicated.

Jon: I agree with everything that Andre just said.

Jon R. Moeller: Relative to the comment about performing versus our own expectations. Precisely because of the volatility of the world that we all live and operate in, we don't provide quarterly guidance. We only provide annual guidance.

Speaker Change: I will remind you...

Andre Schulten: Relative to the comment of performing versus our own expectations.

Speaker Change: Precisely because of the volatility of the world that we all live and operate in, we don't provide quarterly guidance. We only provide annual guidance. And as Andre said, we met or beat each of those numbers that were provided.

Jon R. Moeller: And as Andre said, we met or beat each of those numbers that were provided. There have been two kinds of primary questions that have been, that we've all been working through. One is, can we re-accelerate volume?

Speaker Change: There have been two primary questions that we've all been working through. One is, can we re-accelerate volume?

Jon R. Moeller: And as Andre said, that is broadly happening and impressively so. So if we look at North America over the course of the fiscal year, plus three, plus three, plus four, plus three. If we look at Europe, plus 2, plus 3, plus 4, plus 2, Andre gave you figures for some of the other regions, but broadly, that question of whether volume can be re-accelerated is answered with an emphatic yes.

Speaker Change: And as Andre said, that is broadly happening and impressively so.

Speaker Change: So, if we look at North America over the course of the fiscal year,

Andre Schulten: Plus three, plus three, plus four, plus three.

Speaker Change: If we look at Europe , plus 2, plus 3, plus 4, plus 2, Andre gave you figures for some of the other regions, but broadly that question of can volume be re-accelerated is answered with an emphatic yes.

Jon R. Moeller: The second question that we've been working through is, can that happen? in the context of continued margin expansion If you look at the fiscal year numbers, top line to bottom line, that's definitely happened. If you look at gross margin in the quarter we just completed, which comes in at a 17-year high, We're certainly able to continue to re-accelerate volume growth while holding or building margin. So like Andre, I approached next year in a realistic fashion and realized that the first couple of quarters were going to look a little bit more like the one that we just completed, but with an overall belief that the fundamentals of the business are in very strong shape and that as we bring the innovation that's planned to market throughout the fiscal year, we're going to be happy with the results in line with the guidance that he's provided.

Speaker Change: The second question that at least we've been working through is can that happen in the context of continued margin expansion?

Speaker Change: If you look at the fiscal year numbers, top line to bottom line, that's definitely happened.

Speaker Change: If you look at gross margin in the quarter we just completed, which comes in at a 17-year high.

Speaker Change: We're certainly able to continue to re-accelerate volume growth while holding our building margins.

Speaker Change: So like Andre, I approached next year in a realistic fashion.

Andre Schulten: and realizing that the first couple quarters are going to look a little bit more like the one that we just completed.

Speaker Change: But with overall a belief that...

Andre Schulten: The fundamentals of the business are in very strong shape.

Andre Schulten: and that as we bring the innovation that's planned to market throughout the fiscal year.

Speaker Change: We're going to be happy with the results in line with the guidance that he's provided. One other element of the strength and health of the business fundamentally

Jon R. Moeller: One other element of the strength and health of the business fundamentally... If you look at the last fiscal year at a brand level, 21 out of 25 brands were growing, and 11 of those 25 brands were growing at high single-digit or higher rates.

Speaker Change: If you look at the last fiscal year at a brand level, 21 out of 25 brands were growing. 11 of those 25 brands were growing at high single-digit or higher rates.

Jon R. Moeller: So again, from a breadth standpoint, I think we're positioned very well and the team's doing a great job. The next question comes from Dara Mohsenian of Morgan Stanley. Please go ahead.

Speaker Change: So again, from a breadth standpoint, I think we're positioned very well and the team's doing a great job.

Speaker Change: The next question comes from Dara Mohsenian of Morgan Stanley . Please go ahead.

Operator: Hey, good morning. Actually, I just wanted to follow up on those last two points you made, Jon. On the 3% to 5% organic sales growth guidance for fiscal 25, can you just parse out a bit more detail in terms of how you're thinking about the balance between pricing and volume? I know you won't want to be exact, but how you're thinking about that and the 3% to 4% category growth assumption? Do you think there's good visibility there given the slowing price?

Dara Warren Mohsenian: Hey, good morning.

Dara Warren Mohsenian: Actually, just wanted to follow up on those last two points you made, Jon.

Dara Warren Mohsenian: On the 3-5% Organic Sales Growth Guidance for Fiscal 25, can you just parse out a bit more detail in terms of how you're thinking about the balance between pricing and volume? I know you won't want to be exact, but how you're thinking about that in the 3-4% category growth assumption.

Dara Warren Mohsenian: And then if you bless me with part B, it's just how do you think about earnings flex relative to the top line given some of the top line volatility? Obviously, there was a significant year-over-year gross margin expansion in fiscal 24, but that's been dissipating. You boosted marketing a lot. You've got strong productivity, as you mentioned.

Speaker Change: Do you think there's good visibility there given the slowing pricing?

Speaker Change: And then, if you'd bless me with a Part B.

Speaker Change: How do you think about earnings flex relative to top line, given some of the top line volatility? Obviously, significant year-over-year gross margin expansion in fiscal 24, but that's been dissipating.

Speaker Change: You boosted marketing a lot, you've got strong productivity, as you mentioned. There's a lot going on sort of in the margin line items. So just how do you think about earnings flex next year relative to top line growth given some of this volatility? Thanks.

Dara Warren Mohsenian: There's a lot going on sort of in the margin line. So just how do you think about earnings flex next year relative to top line growth given some of this volatility? Thanks.

Andre Schulten: Thanks, Dara. I'm going to turn it over to Andre to take us through some of the details, and then I'll round out the answer. But go ahead, Andre.

Speaker Change: Thanks, Dara. I'm going to turn it over to Andre to take us through some of the details and then I'll round out the answer, but go ahead, Andre.

Andre Schulten: Yeah, thanks for the question, Dara. The volume versus price mix contribution is expected to be broadly balanced. We expect markets to return to more sustainable growth rates of 3 to 4 percent. That is largely happening now, and if you look at the construction of that market growth, about half of that is driven by volume, and the other half is driven by price mix. I would expect our construct to look similar for the fiscal year. Obviously, it will differ by quarter and half, front half versus back half, but broadly balanced between volume and price mix.

Andre Schulten: Yeah, thanks for the question, Dara.

Andre Schulten: The volume versus price-mix contribution is expected to be broadly balanced.

Andre Schulten: We expected markets to return to more sustainable growth rates of 3 to 4 percent. That is largely happening now. And if you look at the construction of that market growth, about half of that is driven by volume. The other half is driven by price mix.

Andre Schulten: I would expect our construct to look similar for the fiscal year, obviously it will differ by quarter and half front half versus back half, but broadly balanced between volume and price mix.

Andre Schulten: On the margin perspective, you saw us make a choice to continue to invest fully in the business. We have delivered very strong productivity, more than $2 billion in productivity for the year, and we have significantly increased our media support. And we see the results for those investments in the strong growth we continue to deliver in North America, including share growth consistently across every period. The Strong Results in Europe focus markets, including strong volume growth consistently across the quarters. So, if you feel good about those investments,

Andre Schulten: On the margin perspective, you saw us make a choice to continue to invest fully in the business. We have delivered very strong productivity, more than $2 billion in productivity for the year, and we have significantly increased our media support.

Andre Schulten: And we see the results for those investments in the strong growth we continue to deliver in North America, including share growth consistently across every period.

Andre Schulten: The strong results in Europe , focus markets, including strong volume growth consistent across the quarters. So if you feel good about those investments.

Andre Schulten: We'll continue to be very disciplined, and as you can appreciate, not all of those investments will have paid out. So as we do our post-event analysis, we'll reassess every step of the way whether those are better flown to the P&L or reinvested somewhere else. Productivity for Fiscal 25 is also very strong, as I mentioned in my previous comments, so that will allow us to remain fully invested both in terms of market support as well as innovation, which is really the underpinning driver for our growth next year. And I would just add two or three comments.

Andre Schulten: We'll continue to be very disciplined, and as you can appreciate, not all of those investments will have paid out. So as we do our post-event analysis, we'll reassess every step of the way whether those are better flown to the P&L or reinvested somewhere else.

Andre Schulten: Productivity for Fiscal 25 is also very strong, as I mentioned in my previous comments, so that will allow us to maintain fully invested both in terms of market support as well as innovation, which is really the underpinning driver for our growth next year.

Jon R. Moeller: One, as Andre indicated, where you see the increase in marketing investment. That is largely in the geographies where we're seeing the growth accompany that from a top line standpoint. As he also said, we will continue to monitor the effectiveness of that spending, and we'll adjust either up or down accordingly.

Andre Schulten: And I would just add two or three comments. One, as Andre indicated, you know, where you see the increase in marketing investment,

Andre Schulten: That is largely in the geographies where we're seeing the growth accompany that from a top-line standpoint.

Speaker Change: As he also said, we will continue to monitor the effectiveness of that spending and we'll adjust either up or down accordingly.

Jon R. Moeller: Also, I just want to make sure we all understand that the return on those investments is not an overnight occurrence. We have a commercialization cycle that needs to run its course. We have consumer purchase cycles that can be annual in some cases. While our portfolio is constructed to focus on categories where the product is used daily, that doesn't mean it's purchased daily. And so it sometimes takes a little bit of time to evaluate and see the market response to those investments.

Speaker Change: Also, I just want to make sure we all understand that the return on those investments is not an overnight occurrence.

Speaker Change: We have a commercialization cycle that needs to run its course. We have consumer purchase cycles that can be annual in some cases. While our portfolio is constructed to focus on categories where the product is used daily, that doesn't mean it's purchased daily.

Speaker Change: And so it sometimes takes a little bit of time to evaluate and see the market response to those investments.

Jon R. Moeller: But if you look at the last several years, it's generally always been there, and it's been one of the reasons for the growth over the last, call it six years. As I mentioned in my remarks, plus 5, plus 6, plus 7, plus 7, plus four and a more challenging environment.

Speaker Change: But if you look at the last several years, it's generally always been there, and it's been one of the reasons for the growth over the last, call it six years, as I mentioned in my remarks, plus five, plus six, plus six, plus seven, plus seven.

Speaker Change: plus four in a more challenging environment.

Jon R. Moeller: So, like Andre, I feel good about the balance that's implied in the guidance and in our internal plans. But it's, you know, it's something we wake up every day and continue to re-evaluate and deliver in an optimistic way. The next question comes from Steve Powers of Deutsche Bank. Please go ahead.

Speaker Change: So, like Andre, I feel good about the balance that's implied in the guidance.

Andre Schulten: and in our internal plans, but it's something we wake up every day and continue to re-evaluate and deliver in an optimal way.

Speaker Change: The next question comes from Steve Powers of Deutsche Bank. Please go ahead.

Operator: Good morning, guys. Thank you. I was hoping that we could talk about fabric and home and baby and family specifically, because it seems like those are the two segments that drove the most disconnect, at least versus the external forecast, and the release sites, promotional spending, and at least a degree of share loss across those segments. And so maybe you could just drill down further into the headline numbers, give us a bit more context on what you're seeing, both competitively and within your own momentum, and just how we should think about both the drivers and the timing of the build back in those businesses, noting you've obviously got some challenging first half comparisons, especially in the current quarter, but you really understand where you expect those businesses to trend and land over the course of Fiscal 25. Morning, Steve.

Stephen Robert R. Powers: Good morning, guys. Thank you.

Stephen Robert R. Powers: I was hoping that we could talk about fabric and home and baby and family specifically, because it seems like those are the two segments that drove the most disconnect, at least versus the external forecast.

Speaker Change: The release cites promotional spending and at least a degree of share loss across those segments. So maybe you could just drill down further into the headline numbers.

Speaker Change: Give us a bit more context in what you're seeing, both competitively and within your own momentum, and just how we should think about both the drivers and the timing of the build-back in those businesses. Noting you've obviously got some challenging first-half comparisons, especially in the current quarter, but just you're really understanding...

Speaker Change: where you expect those businesses to trend and land over the course of fiscal 25.

Andre Schulten: Look, home care, I think it's just performing outstandingly well 9% organic sales growth year-on-year, 13 quarters of sustained share growth and gaining momentum. So I think I will focus my comments on fabric care. And I would tell you two things.

Speaker Change: Morning, Steve. Look, home care...

Stephen Robert R. Powers: I think it's just performing outstandingly well, 9% organic sales growth on the year 13 quarters of sustained share growth and gaining momentum. So I think I focus my comments on Fabricare and I would tell you two things.

Andre Schulten: Number one, we are annualizing record periods in Europe with differentiated pricing between competitors, where we had a bit of a tailwind last year that is turning into a high base comp. But structurally, the business is in great shape in Europe, and Ariel continues to perform extremely well.

Speaker Change: We are annualizing record periods in Europe with differentiated pricing between competitors where we had a bit of a tailwind last year.

Speaker Change: that is turning into a high-base comp. But structurally, the business is in great shape in Europe . Aereo continues to perform extremely well. The innovation across unit doles and the broader portfolio, including FE, is doing very well.

Andre Schulten: The innovation across unit dose and the broader portfolio, including FE, is doing very well, so I expect that business to re-accelerate very quickly. In North America, we are just launching the innovation bundle, the spring innovation bundle, which is supported with the right level of investment, including promotion, investment, and merchandising investment. And that's why you see the negative price mix component in the North American business. But the business is picking up momentum, we're growing share, so I expect North America to continue to move in the right direction on fabric care, and we're very encouraged by the innovation, both the innovation that just launched and the innovation that is in the pipeline.

Speaker Change: So I expect that business to re-accelerate very quickly.

Speaker Change: In North America, we are just launching the Innovation Bundle, the Spring Innovation Bundle, which is supported with the right level of investment, including promotion investment.

Speaker Change: and Merchandising Investment and that's why you see the negative price-mix component in the North American business.

Speaker Change: But the business is picking up momentum, we're growing share, so I expect also North America to continue to move in the right direction on fabric care. And we're very encouraged with the innovation, both the innovation that just launched and the innovation that is in the pipeline.

Andre Schulten: Last point, maybe on Fabricare in China specifically, we also made a portfolio choice to focus on the most profitable part of the business, and so there are some short-term implications in terms of the base period there. Again, for the longer-term benefit of the Chinese Fabricare business, I think that's the right decision, but it's part of the softness that you see right now in the current quarter. Baby care, I'll talk about two regions. One is North America.

Speaker Change: Last point, maybe on Fabrik here. In China specifically, we also made a portfolio choice to focus on the

Speaker Change: most profitable part of the business, and so there are some short-term implications in terms of base period there. Again, for the longer-term benefit of the China Fabricare business, I think that's the right decision, but it's part of the softness that you see right now in the current quarter.

Andre Schulten: The baby care business on the premium end continues to be doing very well. We have swaddlers growing their share by 1.4%. Cruises 360 is growing. So on the premium end of the spectrum, where we've been able to innovate over the past one to two years, we continue to see the momentum accelerate across Pampers. We have an opportunity; we had an opportunity on Love, the mid-tier brand, where we postponed innovation due to some supply chain challenges.

Speaker Change: baby care

Speaker Change: I'll talk two regions.

Speaker Change: North America, the baby care business on the premium end continues to be doing very well.

Speaker Change: We have swaddlers growing, share by 1.4%, cruisers 360 is growing, so on the premium end of the spectrum where we've been able to innovate over the past one to two years, we continue to see the momentum accelerating across Pampers.

Speaker Change: We have an opportunity, we had an opportunity on Love, the mid-tier brand, where we postponed innovation due to some supply chain challenges.

Andre Schulten: That innovation is now in the market, so again, very significant acceleration expected given the innovation just launched in the market over the next few quarters. In Europe, again, the base period is mostly in terms of share data, and that is something we'll need to work through.

Speaker Change: That innovation is now in the market, so again, very significant acceleration expected given the innovation just launched in the market over the next few quarters.

Speaker Change: In Europe , again, base period, mostly in terms of

Speaker Change: in terms of share data.

Andre Schulten: And certainly in Europe, maybe I think that's one of the areas where we're watching our sufficiency of innovation very closely, simply because the spread versus private label is the most significant. So again, the team is working through strong communication and innovation that will be launching here over the next few quarters. I'm just going to go in a slightly different direction here, Steve, which I fully agree with. This is Andre's description.

Speaker Change: And that is, you know, something we'll need to work through, and certainly in Europe , maybe I think that's one of the areas where we're watching our sufficiency of innovation very closely, simply because the spread versus private label.

Speaker Change: is the most significant. So again, the team is working through strong communication and innovation that will be launching here over the next few quarters.

Speaker Change: I'm just going to go in a slightly different direction here, Steve.

Jon R. Moeller: [inaudible] There are also categories and sectors that are making really strong progress, that as we annualize the few challenges within them, should manifest themselves more clearly than it is now. So we'll have the benefit of those as we go through the year. What am I talking about?

Stephen Robert R. Powers: There are also categories and sectors that are making really strong progress that as we annualize the few challenges within them should manifest itself more clearly than it is now.

Jon R. Moeller: If you look at beauty as an example, the aggregate results are being heavily impacted by two things, SK-II in China and the Bayer innovation, both of which should annualize by the second half of the year. If you then step back and look at the balance of the business... Head & Shoulders, in part behind the Bayer innovation, increased sales by 7% last year. Pantene, in part behind the Pantene Miracles innovation, grew 10% last year. The personal care side of the business is growing extremely well as well. So, I just want to kind of complete the picture.

Speaker Change: If you look at beauty as an example, the aggregate results are being heavily impacted by two things, SK-II in China, both of which should annualize.

Speaker Change: by the second half of the year. If you then step back and look at the balance of the business...

Speaker Change: Head & Shoulders, in part behind the Bayer Innovation, increased sales by 7% last year. Pantene, in part behind the Pantene Miracles Innovation, grew 10% last year.

Speaker Change: The personal care side of the business is growing extremely well as well.

Speaker Change: So, I just want to kind of complete the picture in terms of some of the progress that isn't as obvious in the aggregate look, but will make a difference going forward.

Jon R. Moeller: In terms of some of the progress that isn't as obvious in the aggregate look but will make a difference going forward. The next question comes from Lauren Lieberman of Barclays. Please go ahead.

Speaker Change: The next question comes from Lauren Lieberman of Barclays. Please go ahead.

Operator: Thanks. So from a consumer standpoint, we generally don't see the dynamic that some are describing. And I'm not meaning to discredit their descriptions, but...

Lauren Rae Lieberman: The Consumer Environment, it feels like in U.S. and Western Europe from what we've heard from other companies that...

Speaker Change: Transcripts provided by Transcription Outsourcing, LLC.

Speaker Change: So from a consumer standpoint, we generally don't see the dynamic that some are describing.

Jon R. Moeller: If you look at a couple of dynamics, private label shares, as an example, which typically would be increasing during a time of significant consumer pressure, that's not what we're seeing. Private label shares, generally, both in North America and Europe, are in line with pre-COVID levels, and period to period, so last quarter to this quarter, are not changing significantly. The second data point that we look at to assess the answer to your question is back to volume. Is unit growth... Unknown Attendee, Robert Ottenstein, Christopher Carey, Bryan Spillane, Robert Ottenstein, Unknown Attendee.

Speaker Change: And I'm not meaning to discredit their descriptions, but...

Speaker Change: If you look at a couple of dynamics,

Speaker Change: Private label shares, as an example, which typically would be increasing during a time of significant consumer pressure.

Speaker Change: That's not what we're seeing. Private label shares generally, both in North America and Europe , are in line with pre-COVID levels.

Speaker Change: And period to period, so last quarter to this quarter, are not changing significantly.

Speaker Change: The second data point that we look at to assess the answer to your question is back to volume. Is unit growth...

Speaker Change: declining. And that's, again, not what we're generally seeing. Now, certainly there are some consumers that are, I'm sure, under increased pressure and are probably modifying their behaviors and purchases.

Jon R. Moeller: But in our categories, and remember, of course... These are less discretionary categories. These are daily use categories where performance drives brand choice. We typically have the best performing products in the market. At least that's our objective.

Speaker Change: correspondingly. But in our categories, and remember, of course,

Speaker Change: These are less discretionary categories. These are daily use categories where performance drives brand choice. We typically have.

Speaker Change: The best performing product in the market, at least that's our objective. And as a result, we're not seeing any significant consumer-driven impact.

Jon R. Moeller: And as a result, we're not seeing any significant consumer-driven impact. I've been in Europe quite a bit recently, I'll be back there tomorrow, Andrea was there with many of you at the Deutsche Bank Conference, but also spent time with our business. I'm not seeing it there either.

Speaker Change: I've been in Europe quite a bit recently. I'll be back there tomorrow. Andrea was there.

Andre Schulten: Earlier in the month of June , with many of you at the Deutsche Bank conference, but also spend time with our business and

Jon R. Moeller: So we remain encouraged as we go forward. It's something that we're very cognizant of and watch very closely. But so far, so good.

Andre Schulten: I'm not seeing it there either, so we remain encouraged as we go forward. It's something that we're very cognizant of and watch very closely, but so far so good.

Andre Schulten: And the market growth rates, I think, substantiate the point that John made. If you look at the U.S., I think the key point is that over the past 1, 3, 6, and 12 months, category volume growth in our categories is consistently 2%. So consumers are not decelerating consumption across all categories. And similarly, if you look at value growth in Europe, it's also very consistent over the same periods.

Andre Schulten: And the market growth rates, I think, substantiate the point that John made. If you look at the U.S., I think the key point is over the past 1, 3, 6, 12 months, the category volume growth in our categories is consistently 2 percent. So consumers are not decelerating consumption across our categories.

Andre Schulten: And similarly, if you look at value growth in Europe , it's also very consistent over the same period.

Andre Schulten: As Jon said, we're watching it, but we don't see it in the data. Strong innovations. I mentioned in my remarks, Oral-B I.O.

Andre Schulten: As Jon said, we're watching it, but we don't see it in the data. And even, you know, if we look at the responsiveness to many of our

Jon R. Moeller: That's growing, which is a significant premium to the balance of the market, both within the power segment and across our manual, and it's growing at double digits. We built two SharePoints in the last year. So, just an example of responsiveness.

Speaker Change: Strong innovations. I mentioned in my remarks OLB I.O. that's growing, which is a significant premium to the balance of the market, both within the power segment and across power and manual, and it's growing at double digits. We built two share points in the last year.

Speaker Change: So, just an example of responsiveness to strong innovation in these categories where performance drives brand choice.

Jon R. Moeller: Strong Innovation, and these categories were Performance Drives Brand. The next question comes from Robert Ottenstein of Evercore ISI. Please go ahead.

Speaker Change: The next question comes from Robert Ottenstein of Evercore ISI. Please go ahead.

Operator: Great, thank you very much. There are a couple of follow-ups. Could you just talk a little bit about the enterprise markets, what they would have looked like without Argentina? And then, as you look at your guidance, how much of an actual rebound in China are you assuming? How much, if any, rebound in the Middle East issues are you assuming? And is that part of the range, or is there no rebound at all in the range, if that's clear?

Robert Edward Ottenstein: Great, thank you very much. A couple of follow-ups. Could you just talk a little bit about the enterprise markets, what they would have looked like ex-Argentina, and then as you look at your guidance.

Robert Edward Ottenstein: How much of a actual rebound in China are you assuming? How much, if any,

Robert Edward Ottenstein: Rebound in the Middle East issues are you assuming and you know is that part of the range or is there no rebound at all in the range if that's clear thank you

Andre Schulten: Thank you. Look, hey Robert, enterprise markets, I think in aggregate, are performing strongly for the year, up 6%, last year they were up, I think 10%, so I think very strong continued growth. Latin America, as we said, is growing on the year 15% and in the most recent quarter 8%. Europe Focus Markets are up 8% for the year.

Speaker Change: Latin America, as we said, is growing on the year 15% and in the most recent quarter 8%.

Andre Schulten: Where we see headwinds is in the Middle East, in line with what we have described. So you see our Asia, Middle East, and Africa markets impacted by those Middle East headwinds. And again, we expect those to be temporary. The Argentina contribution to the total number is decreasing by almost a point quarter over quarter.

Speaker Change: Europe focus markets up 8% for the year. Where we see headwinds is in the Middle East in line with what we have described. So you see our Asia, Middle East, Africa markets impacted by those Middle East headwinds.

Speaker Change: And again, we expect those to be temporary.

Speaker Change: The Argentina contribution to the total number is decreasing by almost a point quarter over quarter. So it was only 30 basis points in the current quarter.

Andre Schulten: So it was only 30 basis points in the current quarter. Most importantly, we divested the Argentina business, so that effect will not matter anymore in the current year because it will be removed from the organic sales base as we move through the quarter here. In terms of assumptions, I think that's part of the range, right?

Speaker Change: Most importantly, we divested the Argentina business, so that effect will not matter anymore in the current year because it will be removed from the organic sales base as we move through the quarter here.

Speaker Change: In terms of assumptions, I think that's part of the range, right? I would say we largely assume annualization.

Andre Schulten: I would say we largely assume annualization. The upper end of the range would assume some level of improvement. But I think the main contribution to the midpoint of the range would be a normalization, an annualization of those headwinds we were describing, including China, SK2, the Middle East, and again Argentina coming out of the base because of the divestiture of the business. And Robert, you know, my view of those things as it's reflected in guidance. Unknown Attendee.

Speaker Change: The upper end of the range would assume some level of improvement.

Speaker Change: But I think the main contribution to the midpoint of the range would be a normalization and annualization of those headwinds we were describing, including China, SK2, the Middle East, and again Argentina coming out of the base because of the divestiture of the business.

Speaker Change: And, Robert, you know, my view of those things as it's reflected in guidance.

Robert Edward Ottenstein: Generally, or indirectly, is just as Andre described, which is annualization.

Jon R. Moeller: I think if... If things improve, either in the Middle East or China, we should have the opportunity to deliver, Ceteris Paribus, even better results than the midpoint of the guidance range. On the other hand, we're not assuming, I'm not assuming, that they get worse. And that can always happen.

Robert Edward Ottenstein: I think if things improve, either in the Middle East or China, we should have the opportunity to deliver.

Robert Edward Ottenstein: etc. Paribus, even better results than the midpoint of the guidance range. On the other hand, we're not assuming, I'm not assuming that they get worse.

Jon R. Moeller: So, I think we're centered on a realistic... The next question comes from Andrea Teixeira of J.P. Morgan. Please go ahead.

Robert Edward Ottenstein: And that can always happen. So I think we're centered on a realistic expectation of outcomes.

Speaker Change: The next question comes from Andrea Teixeira of J.P. Morgan. Please go ahead.

Operator: Thank you. Good morning. I was hoping you could talk about a bit of the price analysis you were seeing in the category. I do understand what Johnny just described as being a very low penetration of private label, and consumers are still driving the preference for your brand. But just curious about in Laundry specifically, you had some promotion, and some of the things that you discussed are not necessarily driven by preferences, but just wondering how you're seeing as we see more pricing coming through and if you're planning embedded in any of these guidance.

Andrea Faria Teixeira: Thank you. Good morning. I was hoping if you can talk about a bit of the price analysis you were saying in the category.

Speaker Change: I do understand what Johnny just described as being a very low penetration of private label.

Speaker Change: And consumers is still driving the preference for your brand. But just curious about, in Moundry specifically, you had some promo and some of the things that you discussed.

Speaker Change: are not necessarily driven by price analysis, but just wondering how you're seeing as we see more pricing coming through.

Speaker Change: And if you're planning embedded in any of this guidance, I understand it's a balanced approach to the organic serious growth for the midpoint at 4%, but wondering if there is any ways of like mitigating some of the effects.

Operator: I understand it's a balanced approach to the organic sales growth for the midpoint at 4%. But I was wondering if there are any ways of, like, mitigating some of the effects in some of these other places, which is natural.

Andrea Faria Teixeira: And therefore, we can see some pricing go through inflation-led inflation, and some pricing also led by innovation. Thank you. Hey Andrea.

Speaker Change: In some of these other places, which is natural, and therefore we can see some pricing go through inflation-led and some pricing also led by innovation. Thank you.

Andre Schulten: Yeah, I mean, pricing and mix have been a positive contribution to our results for 19 years, and I don't expect this year to be different. And I think it'll be pricing for foreign exchange headwinds in some of the enterprise markets, which is in line with what the market generally does. I also expect innovation-based pricing and trade-up, as we have a strong innovation pipeline for the year. From a promotion environment, we see stability at the moment.

Speaker Change: Hey Andrea. Yeah, I mean pricing and mix has been a positive contribution to our results for 19 years. I don't expect this year to be different.

Speaker Change: And I think it will be pricing for foreign exchange headwinds in some of the enterprise markets, which is in line with what the market generally executes.

Speaker Change: I also expect innovation-based pricing and trade-up, as we have a strong innovation pipeline in the year.

Speaker Change: From a promotion environment we see stability at the moment. We have pockets of incremental promotion. We're still operating at about 85% versus pre-COVID levels and we see general stability.

Andre Schulten: We have pockets of incremental promotion. We're still operating at about 85% versus pre-COVID levels, and we see general stability. As I said in the guidance, the construction on the top line, roughly we see the market as half price mix driven, half volume driven. I don't expect our fiscal year numbers to be different than that, but they will look different obviously, half one versus half two because of the base period, but the general model is still the same as we have executed over the last 19 years. The next question comes from Filippo Falorni of Citi; please go ahead. Hi, good morning, everyone.

Speaker Change: so

Speaker Change: As I said in the guidance deconstruction on the top line, roughly we see the market half price mix driven, half volume driven.

Speaker Change: I don't expect our fiscal year numbers to be different than that, but they will look different obviously, half one versus half two, because of base period, but the general model is still the same as we executed over the last 19 years.

Speaker Change: The next question comes from Filippo Falorni of Citi. Please go ahead.

Operator: I wanted to ask about the commodity outlook, Andre. You mentioned $300 million in headwinds expected in fiscal 25. Can you maybe talk about the components of the headwinds, some of the key commodities, including port presence, and also on the transportation side, given the recent rise in ocean freight, any potential impact there? And then in terms of some of the commodities you cannot hedge, but like just the level of visibility given your contractor rates on the headwind. Thank you. Yeah, hey, Filippo.

Filippo Falorni: Hi, good morning, everyone. I wanted to ask about the commodity outlook. Andrea, you mentioned $300 million in headwinds.

Filippo Falorni: Unexpected in Fiscal 25. Can you maybe talk about the components of the headwind, some of the key commodities, including pork, raisins?

Speaker Change: and also on the transportation side, given the recent rise in ocean freight, any potential impact there. And then in terms of, I know some of the commodities you cannot hedge, but like just the level of visibility given your contractor rates on the headwind. Thank you.

Filippo Falorni: The commodity portfolio is actually relatively stable at the moment. Most of that headwind that is in the guidance is pulp at the moment. We continue to see strong demand for some of the grades and limited supply, so that's driving the run-up. The rest of the portfolio is actually stable. It won't be like that throughout the year, as you know.

Paul: Yeah, I hate Filippo.

Speaker Change: The commodity portfolio is actually at the moment relatively stable. Most of that headwind that is in the guidance is pulp at the moment. We continue to see...

Speaker Change: strong demand on some of the grades and limited supply. So that's driving the run-up. The rest of the portfolio is actually stable.

Andre Schulten: I mean, these things change quickly, so there's a level of variability here, obviously, and we're forecasting a spot rate, as we always do. The commodity effects, as we think through visibility. Look, I mean, the flow through is different by commodity class, but I think we discussed this when we were in the middle of the commodity crisis. It generally takes three months to nine months to flow through the P&L.

Speaker Change: It won't be that throughout the year, as you know. I mean, these things change quickly, so there's a level of variability here, obviously, and we're forecasting at spot rate, as we always do.

Speaker Change: The commodity effects, as we think through visibility,

Speaker Change: Look, I mean the flow through is different by commodity class, but I think we discussed this when we were in the middle of a commodity crisis. It generally takes three months to nine months to flow through the P&L.

Andre Schulten: So I think at the end of quarter one, we probably have relatively good visibility on most of it through half one, and then we'll go step by step. But again, this is one that we forecast on spot. We don't hedge.

Speaker Change: So I think at the end of quarter one, we probably have relatively good visibility on most of it through half one, and then we'll go step by step. But again, this is one that we forecast on spot. We don't hedge. So the flow-through, again, is the key driver of latency in terms of P&L.

Andre Schulten: So the flow through, again, is the key driver of latency in terms of P&L, in terms of the P&L effect. Transportation. Look, generally, energy, oil is relatively stable, so the overall temperature of transportation is flat.

Speaker Change: In terms of P&L effect, transportation, look, generally, energy, oil is relatively stable, so overall temperature of transportation is flat. Yes, we see some impact from increased transportation on the sea routes, but it is not material in the context of the year at this point.

Andre Schulten: Yes, we see some impact from increased transportation on the sea routes, but it is not material in the context of the year at this point. The next question is from Peter Grom of UBS. Please go ahead. Thanks, operator. Good morning, everyone. I hope you're doing well.

Speaker Change: The next question is from Peter Grom of UBS. Please go ahead.

Operator: I wanted to go back to Lauren's question on the consumer and totally, you know, recognize that you may not be seeing some of the indicators that the consumer is under pressure today. But when we think about the 3 to 4% category growth assumptions you're embedding for your outlook, is there any cushion for the 85% of the markets that are currently performing well to potentially slow it all down? You know, I totally get the annualization commentary in the Middle East and China, but just would love to get some perspective on what you can expect maybe in North America and Western Europe from here. Thanks. Hey Peter,

Peter K. Grom: Thanks, operator. Good morning, everyone. I hope you're doing well. I wanted to go back to Lauren's question on the consumer.

Speaker Change: and totally, you know, recognize that you may not be seeing some of the indicators that the consumer is under pressure today.

Speaker Change: But when we think about the 3% to 4% category growth assumptions you're embedding for your outlook.

Speaker Change: Is there any cushion for the 85% of the markets that are currently performing well to potentially slow it all? You know, totally get the annualization commentary in the Middle East and China, but just would love to get some perspective on what you expect maybe in North America and Western Europe from here.

Peter K. Grom: Yeah, the 3-4% is a global number. Look, deconstructing that by market or by region is increasingly difficult, and we somewhat rely on the total aggregate of regions to play out in that 3-4% range. To your question on 85% of the business slowing down, what we see is actually what we had expected, right, that those regions slow down from market growth in the range of 5-8% to this 3-4% range because the price mix component is coming down, and the volume component is coming up.

Peter K. Grom: Hey, Peter.

Speaker Change: Yeah, the three to four percent is a global number. Look, deconstructing that by market or by region is increasingly difficult and we somewhat rely on the total aggregate of regions to play out in that three to four percent range.

Speaker Change: To your question on the 85% of the business slowing down,

Speaker Change: What we see is actually what we had expected, right, that those regions slow down from a

Speaker Change: market growth in the range of 5 to 8 percent to this 3 to 4 percent range because the price mix component is coming down and the volume component is coming up.

Speaker Change: And that stabilization is built into our assumption for the year. So we expect most of those regions to play out the same way that we're projecting the global number, which is 3 to 4 percent, half of it volume, half of it price mix.

Peter K. Grom: And that stabilization is built into our assumption for the year. So we expect most of those regions to play out the same way that we're projecting the global number, which is 3 to 4 percent, half of it volume, half of it price mix. The next question comes from Bonnie Herzog of Goldman Sachs. All right. Thank you. Good morning.

Speaker Change: The next question comes from Bonnie Herzog of Goldman Sachs.

Operator: I had a question on your beauty segment. You know, China has been a drag on your volumes for a while, as you mentioned. And we've been hearing about the ongoing challenges in the region, but more recently, we've also been hearing about the slowdown in the U.S. beauty market. So curious if that's consistent with what you're seeing.

Speaker Change: We go ahead.

Bonnie Lee Herzog: Thank you. Good morning. I had a question on your beauty segment. You know, China has been a drag to your volumes for a while, as you mentioned.

Bonnie Lee Herzog: And we've been hearing about the ongoing challenges in the region, you know, but more recently we're also hearing about the slowdown in the U.S. beauty market, so curious if that's consistent with what you're seeing. And then, how should we think about, you know, the growth potential for your beauty segment, you know, this fiscal year?

Bonnie Lee Herzog: And then how should we think about, you know, the growth potential for your beauty segment this fiscal year? And, you know, if it's fair to assume that these challenges could drive a further slowdown from here? Thanks. Hey Bonnie, um...

Speaker Change: You know, if it's fair to assume that these challenges could drive a further slowdown from here. Thanks.

Andre Schulten: If you look at the beauty results outside of China and SK-II, I think they give a better indication of the growth potential and the trajectory we're on. The business ex-SK-II is growing 6% in Q4, 7% in the fiscal year that we just closed. When you go through the segments and the core brands, if you look at Head & Shoulders, Pantene, and Herbal Essence, for example, they grew in high single digits to double digits. Those were the best results in the past five years.

Bonnie Lee Herzog: Hey, Bonnie.

Bonnie Lee Herzog: If you look at the beauty results outside of China and SK-2, I think they give a better indication of the growth potential and the trajectory we're on. The business ex-SK-2 is growing 6% in Q4, 7% in the fiscal year that we just closed.

Speaker Change: When you go through the segments and the core brands, if you look at Head & Shoulders, Pantene, Herbal Essence, for example, grew high single digits to double digits. Those were the best results in the past five years.

Andre Schulten: When you look at our personal care business, Old Spice, Secret, and Native, double-digit growth. Jon talked about Native now being and reaching $700 million in sales, 10 times what we got the brand with. And our new brands, Mayel and Way, are also growing double digits. So I think we see strength across the portfolio there. North American hair care is up 12%; global hair care is up 9%.

Speaker Change: When you look at our personal care business, Old Spice, Secret, and Native, double-digit growth. We talked about, Jon talked about Native now being and reaching $700 million in sales, 10 times what we got the brand with.

John: And our new brands, Mayel and Way, are also growing double digits. So I think we see strength across the portfolio there.

Speaker Change: North American hair care is up 12%, global hair care is up 9%, and the personal care business, as I said, is doing very well. I think the core of the piece we are annualizing is really China, both on the Olay business and on the SK2 business.

Andre Schulten: And the personal care business, as I said, is doing very well. I think the core of the piece we are annualizing is really China, both for the Olay business and for the SK2 business. As we said, our expectation is that we'll annualize. We don't yet assume a material acceleration in the fiscal year. So I'll leave it there.

Speaker Change: As we said, our expectation is that we'll annualize. We don't yet assume a material acceleration in the fiscal year.

Andre Schulten: But again, I think the core of the business is strong. China is the one piece we'll need to see annualize across the first half. And obviously, you know, we play in the majority of the spaces that we play in, in beauty, are more foundational versus, you know, prestige.

Speaker Change: So, I'll leave it there, but again, I think the core of the business is strong. China is the one piece we'll need to see annualize across the first half.

Speaker Change: And obviously, you know, we play in the majority of the spaces that we play in in beauty are more foundational versus, you know, prestige.

Jon R. Moeller: And I think where some of the commentary in the marketplace is being directed relative to slowing down, is really not in the base segments that we play in, and, as Andre said, continue to see very strong growth in. That's why I wanted to add to the question earlier because, although somewhat lost in the aggregate numbers, but I think it's important. Both for recognition of the team but also for recognition. The next question comes from Chris Carey of Wells Fargo Security. Please go ahead.

Speaker Change: And I think where some of the commentary in the marketplace is being directed relative to slowdown is really not in the base segments that we play in, and as Andre said.

Andre Schulten: I've continued to see very, very strong growth in. That's why I wanted to add to the question earlier, because I think it's somewhat lost in the aggregate numbers, but I think it's important.

Andre Schulten: both for recognition of the team, but also recognition of the potential.

Speaker Change: The next question comes from Chris Carey of Wells Fargo Security. Please go ahead.

Operator: Hey, good morning. I know we're later in the call, so apologies for another China question, but maybe a bit later and more focused. China has been sluggish for a few years, which I think is why there have been so many questions about the effect of annualizing. You're not the only company to see slower results in China.

Christopher Michael Carey: Good morning.

Christopher Michael Carey: I know we're later in the call, so apologies for another China question, but maybe a bit later.

Speaker Change: More focused. It has been sluggish for a few years, which I think is why there's been so many questions about the effect of annualizing.

Speaker Change: You're not the only company to see slower results in China. So I wonder if you could just maybe comment on, clearly there are macro dynamics in the market.

Christopher Michael Carey: So I wonder if you could just maybe comment on, clearly there are macro dynamics in the market versus the micro parts of your portfolio, which specifically need some work as K2 has been well covered at this point. So perhaps you can speak to some other businesses that are performing in line with your expectations or not so that we can have a bit more of a portfolio view on why the annualization should deliver the outcomes you're expecting into the back half of the year. So sorry for another question on China, but it felt important. Hey, Chris. I'll start, and John will add.

Speaker Change: versus micro parts of your portfolio, which specifically needs some work as K2 has been well-covered.

Speaker Change: at this point. So, perhaps you can speak to some other businesses that, um...

Speaker Change: [inaudible]

Speaker Change: Hey Chris, I'll start and Jon will add.

Andre Schulten: Let me start by saying I think the Chinese business is coming from a double-digit growth trajectory through a significant dip, and we don't expect it to go back to double digits. We expect it, over time, to go to maybe mid-singles, so more in line with what we see in other developed markets. So for sure, we don't expect a return to the growth rates that we saw pre-COVID. Many of the effects, specifically in China, SK2, I think the run rate is now stable, so we're already seeing the run rate in terms of absolute volume and absolute dollar sales flattening.

Christopher Michael Carey: Let me start by saying I think the China business is coming from a double-digit growth trajectory.

Speaker Change: through a significant dip, and we don't expect it to go back to double digits. We expect it over time to go to maybe mid-singles. So more in line with what we see in other developed markets. So for sure, we don't expect the return to the growth rates that we saw pre-COVID.

Speaker Change: Many of these sectors, specifically in China, SK-II, I think the run rate is now stable. So we're already seeing the run rate in terms of absolute volume and absolute dollar sales flattening. What's not yet there is the base period in line with those run rates.

Andre Schulten: What's not yet there is the base period in line with those run rates. So unless we see a significant run rate reduction, that gives us confidence that, you know, the annualization would take place. Maybe there are other points of confidence here.

Speaker Change: So unless we see a significant run rate reduction, that gives us confidence that, you know, the annualization would take place.

Andre Schulten: The toughest category to compete in in China right now is probably baby care. Birth rates are down 15 to 25% depending on how you define the market, and we've been able, the team has been able to grow sales 6%. [inaudible] their needs, their preference in terms of superiority, and that's driving results. We've been able to grow the Braun business with strong innovation, so there are pockets of business where we are leading the market, and we need to find our way to that across more categories, which we're working on.

Speaker Change: Maybe other points of confidence here. The toughest category to compete in in China right now is probably baby care. Birth rates are down 15 to 25 percent depending on how you define the market. And we've been able, the team has been able to grow sales 6 percent.

Speaker Change: and growth share in the market. Why? Because the portfolio and the innovation the team designed was very specific to the Chinese consumer, their needs, their preference in terms of superiority and that's driving results.

Speaker Change: We've been able to grow the brawn business with strong innovation, so there are pockets of business where we are leading the market.

Speaker Change: And we need to find our way to that across more categories, which we're working on.

Andre Schulten: Fabrik here, as I said, is very focused on the profitable part of the portfolio, which allows them to drive innovation, which allows them to drive category growth, and that's really what's playing out across categories. But I think the most mechanical driver is run rates are stable and stabilizing, so unless we see a further decline in the market, which is entirely possible, but if those run rates hold, that will drive annualization towards the back half of the portfolio.

Fabrik: Fabrik here, as I said, is very focused on the profitable part of the portfolio.

Fabrik: which allows them to drive innovation, which allows them to drive category growth.

Fabrik: And that's really what's playing out across.

Fabrik: categories, but I think the most mechanical driver is

Speaker Change: Run rates are stable and stabilizing, therefore, unless we see a further decline in the market, which is entirely possible, but if those run rates hold, that will drive annualization towards the back half of the year.

Jon R. Moeller: And just to round that out, the largest business for P&G in China is hair. And we've spent, you know, the last year plus as we came out of COVID ensuring that we had very strong hair care plans. I'm I am very pleased with the plans that we've put together and the execution of them on Pantene, same on head and shoulders, really significantly improved propositions, significantly improved packaging, really looking strong. Andre mentioned somewhere in our discussion that we had made the choice to exit. The third brand, uh... which was uh... that I'll pass soon. So that should not be a source of drag going forward.

Speaker Change: And just to round that out, the...

Speaker Change: The largest business for P&G in China is hair care.

Speaker Change: And we've spent...

Speaker Change: you know, the last

Speaker Change: Year plus as we came out of COVID, ensuring that we had very strong hair care plans. I am very pleased with the plans that we've put together and the execution of them on Pantene.

Speaker Change: The same on head and shoulders, really significantly improved propositions, significantly improved packaging, really looking strong.

Speaker Change: Andre mentioned somewhere in our discussion that we had made the choice to exit the third brand, which was Vidal Sassoon.

Andre Schulten: So that should not be a source of drag going forward. We're still working to be candid on the plans for Rejoice.

Jon R. Moeller: We're still working to be candid on the plans for Rejoice, but in the net of all that, I was pretty encouraged. The next question comes from Kevin Grundy of BNP Paribas. Please go ahead.

Andre Schulten: But the net of all of that is pretty encouraging.

Speaker Change: The next question comes from Kevin Grundy of BNP Paribas. Please go ahead.

Operator: Great, thanks. Good morning, everyone. Question for both of you, perhaps, just on some context for investment levels. Specifically, trade spending and advertising and marketing, which are clearly moving higher. Gross margin and expansion there have naturally been supportive. I know it's not lost on you guys who've seen what your key competitor in oral care is doing. Advertising and marketing there were the highest as a percent of sales for at least a couple decades. We've seen trade spending move higher there in their North American segment. Advertising and marketing now for Procter & Gamble moved up 200 basis points this year, including a big step up of 300 basis points in the quarter.

Kevin Grundy: Great. Thanks. Good morning, everyone. Question for both of you, perhaps, just on some context for investment levels.

Speaker Change: Specifically trade spending and advertising...

Speaker Change: which are clearly moving higher. Gross margin and expansion there has naturally been supportive. I know it's not lost on you guys. We've seen what your key competitor in oral care is doing. Advertising and marketing there was the highest as a percent of sales in at least a couple of decades.

Speaker Change: We've seen trade spending move higher there in their North American segment. Advertising and marketing now for Procter's moved up 200 basis points this year, including a big step up at 300 basis points in the quarter. And we talked earlier in the call about Fabricare. So that's all kind of a big thing.

Kevin Michael Grundy: We talked earlier in the call about advertising fabric here. It's all kind of a big thing now. If you could offer some context here for higher investment levels broadly we're seeing in the industry, and then perhaps a push from a Procter perspective is, Are we satisfied with the top line payback that we're seeing because spending levels are moving higher, and the push would be organizational sales, understanding some of the idiosyncratic items in a quarter were a little bit soft, and we're kind of guiding for growth similar to what So thank you for all that, but your contact information and color would be appreciated.

Speaker Change: If you could offer some context here for higher investment levels broadly we're seeing in the industry, and then perhaps a push from a Procter perspective is...

Speaker Change: Are we satisfied with the top-line payback that we're seeing?

Speaker Change: Thank you.

Andre Schulten: Thank you. Yeah, let me start, Kevin. Morning. Generally, what I'd tell you is that we're happy with the payout that we're seeing in the markets where we can read the payout cleanly. And that's really where 95 percent of the investment is, meaning Europe-focused markets, some of the European enterprise markets, Latin America, and North America. And I think the top-line results support the overall payout of the aggregate of the media spend will obviously go way lower in terms of penetration.

Speaker Change: Yeah, let me start, Kevin. Morning.

Speaker Change #100: Generally, what I tell you is we're happy with the payout that we're seeing in the markets where we can read the payout cleanly, and that's really where 95% of the investment is, meaning Europe-focused markets.

Speaker Change #100: some of the Europe enterprise markets, Latin America and North America.

Speaker Change #100: and I think the top-line results support...

Speaker Change #100: The overall payout of the aggregate of the media spend will obviously go way lower in terms of penetration.

Andre Schulten: And it is probably the strongest push that both John and I and Shailesh have as we engage with the businesses to ensure that that spending truly is productive, truly is driving market growth and sales growth, and therefore helps us to deliver a top line and a bottom line for the quarter and for the fiscal year. If that's no longer the case, then we will change gears and adjust. In terms of overall spend, I'm actually pleased to see an increase in media spend and market support. That's market constructive. I think it helps the consumer understand the category better. It also helps drive penetration, which is still a huge opportunity across multiple categories.

John: And it is probably the strongest push that both John and I and Shailesh have as we engage with the businesses to ensure that that spending truly is productive, truly is driving market growth and sales growth.

Speaker Change #101: and therefore helps us to deliver top line and bottom line for the quarter and for the fiscal year. If that's no longer the case, then we will change gears and adjust.

Speaker Change #102: In terms of overall spending, I'm actually pleased to see increase in media spend and market support. That's market constructive. I think it helps the consumer understand the category better. It helps drive penetration, which is still a huge opportunity across multiple categories.

Andre Schulten: So that's very positive, and again, the promotion environment in aggregate remains productive. And as long as those two result in what we see in North America, which is sustained volume growth in the category and sustained value growth in the category, I think we're in a good place. And, you know, it's something I've been pushing for some period of time. When you have a strategy that's centered on innovation and superiority. And you have, in some cases, relatively low levels of advertising reach. The total equation doesn't make sense.

Speaker Change #102: So that's very positive, and again, the promotion environment in aggregate remains productive.

Speaker Change #102: And as long as those two result in what we see in North America, which is sustained volume growth on the category and sustained value growth on the category, I think we're in a good place.

Speaker Change #102: And, you know, it's...

Speaker Change #102: It's something I've been pushing, we've been pushing for some period of time.

Speaker Change #102: When you have a strategy that's centered on innovation.

Speaker Change #102: and Superiority.

Speaker Change #102: And you have, in some cases, relatively low levels of advertising reach.

Speaker Change #102: That total equation doesn't make sense.

Jon R. Moeller: We used to call it, David Taylor used to call it, confidential superiority. So we're trying to, in an effective way, and in the most efficient way we can, and I mentioned this earlier, increase reach so that more consumers are aware of our products and the benefits that they provide. Obviously, that effort, at some point, reaches the right level of maturity.

Speaker Change #102: We used to call it, David Taylor used to call it confidential superiority.

Speaker Change #102: So we're trying to, in an effective way, and in the most efficient way we can, and I mentioned this earlier,

Speaker Change #102: Increase reach so that more consumers are aware of our products and the benefits that they provide them.

Speaker Change #102: Obviously, that effort at some point...

Jon R. Moeller: But we're still on the incline curve in that regard right now, which I think is entirely the right thing to do. As I mentioned earlier, it takes some time temporarily for the business to respond. It does not respond overnight, again, because.

Speaker Change #102: reaches the right level of maturity. But we're on still on the incline curve in that regard right now, which I think is entirely the right thing to do. As I mentioned earlier, it takes

Speaker Change #102: some time temporarily for the business to respond. It does not respond overnight, again, because of purchase cycles and commercialization cycles themselves.

Jon R. Moeller: Purchase Cycles and Commercialization Cycles themselves. But as Andre said, and, you know, take some assurance that you've got, former CFO and the CEO's chair, between the two of us, we're not interested in wasting your money. The next question comes from Olivia Tong of Raymond James. Please go ahead.

Speaker Change #102: But as Andre said, take some assurance that you've got a former CFO and a CEO's chair between the two of us, we're not interested in wasting your money.

Speaker Change #102: The next question comes from Olivia Tong of Raymond James. Please go ahead.

Operator: Great, thanks. Good morning. Just a follow-up on promotion. If you could just talk about how much competitors are catching up on innovation driving you to spend more to stay superior, versus a response to the tougher macros and needing to make yourself more competitive on price. And then, more importantly, you know, you've obviously done substantial innovation at the premium end. But what are you doing, as we think about this, evolving macro in your mid-tier products to remind consumers of the value proposition there? Thank you, Hey Olivia, um...

Unknown Attendee: Great, thanks. Good morning. Just a follow-up on promotion.

Unknown Attendee: If you could just talk about how much is competitors catching up on innovation driving you to spend more to stay superior.

Unknown Attendee: versus a response to the tougher macros and needing to make yourself more competitive in price. And then more importantly, you know, you've obviously done substantial innovation at the premium end, what are you doing, as we think about this?

Speaker Change #104: you know evolving macro in your mid-tier products remind consumers of value proposition there. Thank you.

Unknown Attendee: I think our job is to lead market growth via irresistible superiority. And that starts with product packaging and communication, but it includes value, as you point out. I don't see that equation shifting. The competitive environment in terms of promotion is relatively stable, and our approach to promotion is relatively stable across the regions where we have the highest visibility, which is Europe and North America. So I don't view that equation as being different.

Speaker Change #105: I think our job is to lead market growth via irresistible superiority, and that starts with product package and communication, but it includes value, as you point out.

Speaker Change #106: I don't see that equation shifting. The competitive environment in terms of promotion is relatively stable, our approach to promotion is relatively stable.

Speaker Change #106: across the regions where we have the highest visibility, which is Europe and North America. So I don't view that equation as being different.

Jon R. Moeller: And again, I think our stance on superiority, which we talked about for almost a year, to reset the level of superiority we expect our businesses to deliver, which moves from your job is no longer to just win against the next best competitor in the market, but it's to create superiority at a level where consumers are drawn into the category. So we create new consumption; we create new consumers coming into the category, increasing their usage, or trading up. That's really what we are measuring ourselves against, and I think we're making very good progress, and I'm very confident in the innovation pipeline we see for the current year. I'm sure Jon has to add more.

Speaker Change #106: And again, I think our stance on superiority, which we talked about now for almost a year,

Speaker Change #106: To reset the level of superiority we expect our businesses to deliver.

Speaker Change #106: Which moves from your job is no longer to just win against the next best competitor in the market But it's to create superiority at a level where consumers are drawn into the category. So we create new consumption We create new consumers coming into the category increasing their usage or trading up

Speaker Change #106: That's really what we are measuring ourselves against and I think we're making very good progress and I'm very confident at the innovation pipeline we see for the current year. I'm sure John has to add more.

Jon R. Moeller: On the mid-tier, absolutely. Our job is to be irresistibly superior at every tier we compete in, and that's why, you know, the Loves innovation is a great example, and it's a great example for the strategy at work, because if we're not superior in the mid-tier, the consumer tells us, and it shows in the results. So the counteraction to innovate and drive superiority is what we do, and it's really independent of the tier.

John: On the mid-tier, absolutely. Our job is to be irresistibly superior at every tier we compete in. And that's why, you know, the Love's Innovation is a great example where...

John: It's a great example for the strategy at work, because if we're not superior in the mid-tier, the consumer tells us, and it shows in the results.

John: So the counteraction to innovate and drive superiority is what we do, and it's really independent of the tier. So at any given point in time, we need to make sure that we deliver all five vectors at every tier, every pack size, every price point, in every channel we compete in.

Jon R. Moeller: So at any given point in time, we need to make sure that we deliver all five vectors at every tier, every pack size, every price point, in every channel we compete in. And if you just assume for a minute, Olivia, that we're wrong.

John: And if you just assume for a minute, Olivia, that...

Unknown Attendee: We're wrong in the ongoing discussion that we've had about consumers being under pressure. Our contention is that that really hasn't manifested itself as of yet.

Jon R. Moeller: And the ongoing discussion that we've had about consumers being under pressure, and our contention is that that really hasn't manifested itself as yet. But just assume that we're wrong or that that changes going forward. And to your question on innovation, it becomes very important that we're innovating in categories that are going to become that are going to see even higher levels of demand if, in fact, there's any kind of consumer downturn. Andre mentioned love.

Unknown Attendee: But just assume that we're wrong or that that changes going forward.

Unknown Attendee: And to your question on innovation, it becomes very important that we're innovating in categories

Unknown Attendee: that are going to see even higher levels of demand if in fact there's any kind of consumer downturn.

Jon R. Moeller: Another example, I mean, what happens if there's a consumer downturn? People eat at home more often. They're going out less frequently, traveling less frequently. And so categories like hand dishwashing, for example, have become important, and our levels of innovation in that category, just as an example, are significant, between, you know, Power Spray on Dawn and Easy Squeeze. And Andre mentioned the growth rates that we're seeing in our dish business. Typically, and this was certainly the case in COVID, which was an extreme condition, but people use more paper products if they're staying home more often.

Andre Menchin: Andre mentioned Loves.

Andre: Another example, I mean, what happens if there's a consumer downturn? People eat at home more often, they're going out less frequently, traveling less frequently. And so categories like hand dishwashing.

Andre: For example, become important. And our levels of innovation in that category, just as an example, are significant.

Speaker Change #109: between Power Spray on Dawn and Easy Squeeze. And Andre mentioned the growth rates that we're seeing in our dish business.

Andre: Typically, and this was certainly the case in COVID, which was an extreme condition, but people use more paper products if they're staying home more often.

Jon R. Moeller: So things like the Charmin EasyTear scallop perforation, which is driving significant levels of delight and 5% growth in the Charmin business last year, is another example of innovating, continuing to innovate in categories that are going to potentially be even more relevant in the event of a consumer downturn. And obviously, just in general, that hand wash business is more of a, if you will, mid-tier business than the auto dish business. So there's no discrimination

Andre: So things like the Charmin EasyTear scallop perforation, which is driving significant levels of delight and 5% growth on the Charmin business last year, is another example of innovating, continuing to innovate in categories

Andre: that are going to potentially be even more relevant in the event of a consumer downturn. And obviously, just in general, that hand wash business...

Andre: is more of a, if you will, mid-tier business than the auto dish business.

Jon R. Moeller: In terms of our commitment to innovation, the next question comes from Mark Astrachan of SIPL. Please go ahead.

Andre: So there's no discrimination.

Andre: In terms of our commitment to innovation.

Andre: The next question comes from Mark Astrachan of CEPL. Please go ahead.

Operator: Yeah, thanks and good morning, everybody. I wanted to ask about SK2 more broadly and just how you see this part of today's portfolio for P&G, and I guess that the slower improvement in China than anticipated. But just curious, you know, if you take a look over the last, call it four or five years, it does seem like the brand has grown, totality a little bit below what I'd peg as the peer group. So I guess, you know, I'm curious why you think that is.

Mark Stiefel Astrachan: Yeah, thanks and good morning everybody. I wanted to ask about SK2 more broadly and just how do you see this part of

Mark Stiefel Astrachan: Today's portfolio for P&G, and I guess the slower improvement in China than anticipated. But just curious, you know, if you take a look over the last, call it four or five years,

Speaker Change #111: It does seem like the brand has grown in totality a little bit below what I'd peg as the peer group, so I guess, you know, I'm curious...

Mark Stiefel Astrachan: How you weave in improving trends in China with the overall expectations for the brand on a go-forward basis. And, you know, I say all that, too, in the context of weakness predating the wastewater release in Japan. And so, you know, what is there?

Speaker Change #112: Why you think that is, how you weave in improving trends in China with the overall expectations for the brand on a go-forward basis.

Speaker Change #113: I say all that, too, in the context of weakness predating the wastewater release.

Mark Stiefel Astrachan: Is there more competition? Are you doing more from an innovation standpoint to broaden the appeal of the brand? Can you move it beyond prestige skin care?

Speaker Change #114: Japan. And so, you know, what is there? Is there more competition? Are you doing more from an innovation standpoint to broaden the appeal for the brand? Can you move it beyond prestige skincare? I mean, just, you know, broader strokes, again, in the context of how does it fit within the portfolio? Thank you.

Mark Stiefel Astrachan: I mean, just, you know, broader strokes, again, in the context of how it fits within the portfolio. Yeah. Hey Mark, I think your question specifically refers to China. I would say, I don't think our brand portfolio is something that I would be unhappy with. I think the brand portfolio is strong when we get it right and when the consumer is willing to engage. I think we make strong progress on baby care, even in adverse market conditions.

Speaker Change #115: Hey Mark, I think you have a question specifically on China.

Speaker Change #116: is something that I would be unhappy with. I think the brand portfolio is strong. When we get it right, and when the consumer is willing...

Speaker Change #116: to engage. I think we show strong progress on baby care even in adverse market conditions. Jon mentioned the progress we see on hair care.

Mark Stiefel Astrachan: John mentioned the progress we see in hair care, on head and shoulders, and on Pantene. I think the parts of the portfolio where we had our doubts, we made the right choices, so we divested without a zoom, and believe that was the right change in hair care. We have trimmed the fabric care portfolio to ensure that we can focus on the part of the market where we can create value for the consumer and for the company.

John: on Head & Shoulders and on Pantene. I think the parts of the portfolio where we had our doubts, we made the right choices, so we divested without a zoom.

Speaker Change #117: and believe that was the right change in hair care. We have trimmed the fabric care portfolio to ensure that we can focus on the part of the market where we can create value for the consumer and for the company.

Andre Schulten: So I feel good about the product portfolio. The challenge, I think, in China, if I may... Part of that is the channel shift because our footprint was... disproportionately developed over 30 years to be a brick and mortar footprint. And the digital acceleration, obviously, with COVID has shifted that to a large degree faster than anywhere else in the world.

Speaker Change #117: So I feel good about the product portfolio. The challenge I think in China, if I may.

Speaker Change #117: Part of that is the channel shift, because our footprint was disproportionately developed over 30 years to be a brick and mortar footprint.

Speaker Change #117: and the digital acceleration obviously with COVID has shifted that into online to a large degree faster than anywhere else in the world.

Andre Schulten: And within that online business, particularly Douyin, heavily KOL-led and heavily promotion-led. And we're taking our time to transition our portfolio to ensure we end up with the right balance between serving consumers and brick and mortar and creating value there and supporting our brands with the right messaging, equity, price stability, and innovation in the online channels. So, for me, that is the transition we're still in. But I think that transition is going well. And it will show that the portfolio that we operate, I think, can sustain mid-single growth and value creation in China. The next question comes from Kaumil Gajrawala of Jeffreys; please go ahead. Everybody, good morning.

Speaker Change #117: And within that online business, particularly to Douyin, heavily KOL-led and heavily promotion-led.

Speaker Change #117: We are taking our time to transition our portfolio to ensure we end up with the right balance between serving consumers and brick and mortar and creating value there.

Speaker Change #117: Supporting our brands with the right messaging, equity, price stability, and innovation in the online channels.

Speaker Change #117: So that, for me, that is the transition we're still in, but I think that transition is going well and it will show that that portfolio that we operate, I think, can sustain mid-single growth and value creation in China.

Speaker Change #117: The next question comes from Kaumil Gajrawala of Jefferies. Please go ahead.

Operator: Um, I know, as we get deep into the call, it gets quite granular. But if we could bring it back a little bit on something I think might have been missed as we chat global versus domestic, which is maybe just thinking about North America specifically, in the first half specifically, what is the direction of travel that you're assuming for the consumer? And when we think about annualizing pricing and such, should we be modeling a drag for North America in the first half that then reverses?

Kaumil S. Gajrawala: Hey everybody, good morning. I know as we get deep into the call it gets quite granular but if we could bring it back a little bit on something I think might have been missed as we chat global versus domestic.

Speaker Change #119: Which is maybe just thinking about North America specifically, and the first half specifically. What is the direction of travel that you're assuming for the consumer? And when we think about annualization of pricing and such, should we be modeling a drag for North America in the first half that then reverses?

Operator: Or is it meant to be closer to that balance for the full year of? Koumila, it's very hard to predict, honestly, by quarter or half one versus half two. I think your Ingoing hunch is what I would share, as I think the price-mix neutralization will continue through half one. And the volume component, I think, is relatively stable.

Speaker Change #120: or is it meant to be closer to that balance for the full year of 50-50?

Speaker Change #120: It's very hard to predict, honestly, by quarter or half one versus half two.

Speaker Change #121: Ingoing hunch is what I would share, as I think the price-mix neutralization will continue through half one.

Kaumil S. Gajrawala: As I said, the market is continuing to grow at 2%. The price mix has come down to about a point and a half, and I think that's what I would expect from a market growth perspective for the first half. Our objective is, as always, to be within that range, so that's my view. But again, that volatility can be driven by different innovation cycles. It can be driven by different promotion cycles and channel shifts.

Speaker Change #121: And the volume component, I think, is relatively stable, as I said, the market is continuing to grow at 2%. Price mix has come down to about 0.5%, and I think that's what I would expect from a market growth perspective for the front half.

Speaker Change #121: Our objective is, as always, to be within that range, so that's my view. But again, that volatility can be driven by different innovation cycles, it can be driven by different promotion cycles, by channel shifts.

Kaumil S. Gajrawala: So there's a lot of variability within that, but purely extrapolating from what we see in the market today, I think your hunch is right. Our last question comes from Robert Moskow of TD Cowen. Please go ahead.

Speaker Change #121: So there's a lot of variability within that, but purely extrapolating from what we see in the market today, I think your hunch is right.

Speaker Change #121: Our last question comes from Robert Moskow of TD Cowen. Please go ahead.

Operator: Hi, thanks for the question. I guess the only thing not covered in this call is the Olympics. I think I've seen about 100 ads for Procter & Gamble products, some of them great.

Robert Moskow: Hi, thanks for the question. I guess the only thing not covered on this call is the Olympics. I think I've seen about 100 ads for Procter & Gamble products, some of them great, but I haven't noticed an increase in merchandising activity in our Nielsen tracking data in the U.S. around it.

Speaker Change #123: And I was just wondering, do you view the Olympic sponsorship more as a brand building exercise for consumers?

Speaker Change #124: Or have you been getting, and do you expect to get, a lot of merchandising activity around it in the U.S. that we'll be able to see in our tracking? Thanks.

Robert Bain Moskow: But I haven't noticed an increase in merchandising activity in our Nielsen tracking data in the US around it. And I was just wondering, do you view the Olympic sponsorship more as a brand building exercise for consumers? Or have you been getting, and do you expect to get, a lot of merchandising activity around it in the US that we'll be able to see in our tracking? Thanks. We definitely view support of the Olympics as a brand-building opportunity, as a consumer outreach opportunity, and, frankly, as a customer outreach opportunity. Where you'll see the activation in store is typically closer to the region of the event.

Speaker Change #125: So we definitely view support of the Olympics as a brand building opportunity, as a consumer outreach opportunity, and frankly as a customer outreach opportunity.

Speaker Change #125: Where you'll see the activation in store is typically...

Jon R. Moeller: So I wouldn't expect it to have a large activation in North America. I'm headed to Paris overnight tonight. I do expect to see significant activation in Europe. I'll be meeting with many of our retail partner CEOs at the games, hosting them there, and spending up to a couple days together building plans going forward, which would include both during event and post-event activation of the assets that we've put in place for the Olympics.

Speaker Change #125: Closer to the region of the event so I wouldn't expect it to have a large activation in North America I'm headed to Paris overnight tonight. I do expect to see significant activation in Europe

Speaker Change #125: I'll be meeting with many of our retail partner CEOs at the Games.

Speaker Change #125: Host them there and spend up to a couple days together building plans going forward which would include

Speaker Change #125: both during event and post-event activation of the assets that we've put in place for the Olympics.

Jon R. Moeller: Just like our earlier discussion on return, this is something that we look at annually. But thus far, it's proving to be an attractive vehicle when we focus the messaging on brands and not so much when we focus the messaging on companies, simply because nobody buys P&G; they buy Tide and Ariel and Pampers, Pantene and Head & Shoulders, etc.

Speaker Change #126: Just like our earlier discussion on return, this is something that we look at annually. But thus far, it's proving to be an attractive vehicle when we focus...

Speaker Change #127: the messaging on brands and not so much when we focus the messaging on company simply because nobody buys P&G they buy Tide and Ariel and Pampers and

Jon R. Moeller: So, all good, and I'm looking forward to being there with our customers and our European team over the balance of the week. Hey, before before I we let not let before we officially end the call. I just wanted to provide, again, some longer-term perspective, and I'm happy to discuss it at any point during the balance of the day. Uh... We have been through, the collective we, including you, have been through incredible challenges.

Speaker Change #127: Pantene and Head & Shoulders, etc.

Speaker Change #127: So, all good, and I'm looking forward to being there with our customers and our European team over the balance of the week.

Speaker Change #127: Hey, before we let, not let, before we officially end the call.

Speaker Change #127: I just wanted to provide again some some longer-term perspective and I'm free to just I'm happy to discuss it at any point during the balance of the day.

Speaker Change #127: We have been through, the collective we, including you, have been through incredible challenges the last number of years, whether that's COVID, whether that's inflation, whether that's war.

Jon R. Moeller: The last number of years, whether that's COVID, whether that's inflation, whether that's war, regulation, you name it. And one of the things that I think is important to reflect on, the quarter is important, and we've reflected a lot on that today, which is appropriate, but it's also important to step back and say, you know, how is this strategy working, not just for the quarter, but for longer periods of time? As I mentioned in my remarks, pre-COVID, and during COVID.

Speaker Change #127: Political Divisiveness, Regulation, you name it.

Speaker Change #127: And one of the things that I think is important to reflect on, the quarter is important and we've reflected a lot on that today, which is appropriate, but it's also important to step back.

Speaker Change #127: And say, you know, how is this strategy working, not just for the quarter, but for longer periods of time, as I mentioned in my remarks, pre-COVID, during COVID?

Jon R. Moeller: Post-COVID inflation and pricing, and then the big geopolitical struggles that we're all engaged in currently. Over that six-year period, the team has added $17 billion in sales, which puts us at the 88th percentile of the S&P 500. And at the same time, they've added $5 billion in profit, which puts us at the 93rd percentile of the S&P 500. They've built more than 200; I haven't looked today, but before.

Speaker Change #127: Post-COVID inflation and pricing, and then the big geopolitical struggles that we're all engaged in currently.

Speaker Change #127: Over that six-year period, the team has added $17 billion in sales.

Speaker Change #127: which puts us at the 88th percentile of the S&P 500.

Speaker Change #127: And at the same time, they've added $5 billion in profit, which puts us at the 93rd.

Speaker Change #127: percentile of the S&P 500. They've built more than 200, I haven't looked today, but before today.

Jon R. Moeller: $200 billion in market cap in that six-year period, which is more value than most of our competitors, I think all but one, have created over their entire history as a company. So this is something that is working extraordinarily well. And I think that's important to reflect on as we move forward. We're in a stronger place in terms of executing against that strategy than we've ever been.

Speaker Change #127: $200 billion in market cap in that six-year period, which is more value than most of our competitors, I think all but one, have created over their entire history as a company.

Speaker Change #127: So this is something that is working extraordinarily well. And I think that's important to reflect on as we move forward.

Speaker Change #127: We're in a stronger place in terms of executing against that strategy than we've ever been. We've talked about investment and innovation. We've talked about raising the bar on superiority. We've talked about the progress that we're making on productivity. We've talked about the support levels that our business has.

Jon R. Moeller: We've talked about investment and innovation. We've talked about raising the bar on superiority. We've talked about the progress that we're making on productivity. We've talked about the support levels that our business has. We've talked about resuming volume growth in most of the major markets and doing that while building margin and simultaneously increasing our investment in these kinds of things. And I don't see any reason why if we do find ourselves in a more difficult... The environment from a consumer economic standpoint.

Speaker Change #127: We've talked about resuming volume growth in most of the major markets and doing that while building margin and simultaneously increasing our investment in these kinds of things.

Speaker Change #127: And I don't see any reason in a, if we do find ourselves in a more difficult situation

Speaker Change #127: environment from a consumer economic standpoint.

Jon R. Moeller: One of the things we talk about internally is whether we would change our approach if we either had confidence that things were going to get remarkably better from a consumer standpoint or remarkably worse from a consumer standpoint. Would we not want to be in daily use categories where performance drives brand choice? I think that's exactly where we want to be in either of those scenarios. Would we not want to be able to delight consumers and customers with superior products? I can't imagine how that would be a good idea. Would we not want to have the productivity that enables us to fund those investments and accelerate innovation?

Speaker Change #127: One of the things we talk about internally is, would we change our approach?

Speaker Change #127: If we either had confidence that things were going to get remarkably better from a consumer standpoint or remarkably worse from a consumer standpoint.

Speaker Change #127: Would we not want to be in daily use categories where performance drives brand choice? I think that's exactly where we'd want to be in either of those scenarios.

Speaker Change #127: Would we not want to be able to delight consumers and customers with superior products? I can't imagine how that would be a good idea. Would we not want to have the productivity that enables us to fund those investments and accelerate innovation?

Jon R. Moeller: Would we not want to have a more agile, accountable organizational structure? So all these things... to me, under any scenario, both because of the results that they've delivered and because of the potential they hold to delight consumers, customers, employees, society, and share owners, are the right path forward, which is why we talk about continuing to double down. I've said many times that this will not be a straight line. There are all sorts of things that affect it.

Speaker Change #127: Would we not want to have a more agile, accountable,

Speaker Change #127: Organizational Structure. So all these things...

Speaker Change #127: To me, under any scenario, both because of the results that they've delivered,

Speaker Change #127: And because of the potential they hold to delight, consumers, customers, employees, society, and share owners are the right path forward, which is why we talk about continuing to double down.

Speaker Change #127: I've said many times, this will not be a straight line. There are all sorts of things that affect...

Jon R. Moeller: Unknown Attendee......... I guess it is, by far, if we just look at our history as a company.

Speaker Change #127: The trend line in the business, but over periods of time this is

Speaker Change #127: by far, if we just look at our history as a company.

Jon R. Moeller: It has produced significantly positive results, and I expect that to continue. So I just wanted to share that as we close out the call. Again, that is not trying to minimize some of the challenges that we've been discussing this quarter and in the first half of next year. Those are real, they're important to talk about, but I don't think they're controlling as we think about the mid and long term.

Speaker Change #127: It has produced...

Speaker Change #127: Significantly positive results and I expect that to continue. So I just wanted to share that as we close out the call. Again, that is not trying to minimize some of the challenges that we've been discussing on the quarter and in the first half of next year.

Speaker Change #127: Those are real, they're important to talk about, but I don't think they're controlling as we think about the mid and longer term.

Jon R. Moeller: Have a great day, and I look forward to catching up with you soon. Thanks, everyone. That concludes today's conference. Thank you for your participation. You may now disconnect.

Speaker Change #127: Have a great day and I look forward to catching up with you soon.

Speaker Change #127: Thanks, everyone.

Speaker Change #128: That concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.