2014 analyst meeting - presentation

2014 Analyst Meeting

November 13, 2014

1

Agenda

• Results & Outlook

• Strategic Focus Areas

• Break

• Investor Questions

• Q&A

0%

1%

2%

3%

4%

FY 2012 FY 2013 FY 2014

3%3% 3%

Fiscal Year 2014 ResultsOrganic Sales Growth*

* Restated for Pet Care* Restated for Pet Care

-2%

0%

2%

4%

6%

8%

FY 2012 FY 2013 FY 2014

-1%

6%

5%

Fiscal Year 2014 ResultsCore EPS Growth*

* Restated for Pet Care

2

-2%

0%

2%

4%

6%

8%

10%

12%

14%

FY 2012 FY 2013 FY 2014

-1%

6%5%

10%

Flat

14%

Fiscal Year 2014 ResultsCore EPS Growth*

* Restated for Pet Care

Currency Neutral Core EPS

Core EPS

FY 2014

Free Cash Flow $10bn+

Free Cash Flow Productivity 86%

Free Cash Flow Productivity excl. Voluntary Pension Contribution

94%

Fiscal Year 2014 ResultsCash Productivity

$ Billions FY 2014

Share Repurchase 6.0

Dividends 6.9

Value to Shareholders 12.9

% of Net Earnings 110%

Fiscal Year 2014 ResultsReturning Value to Shareholders

3

FY 15 vs FY 14

Organic Sales Growth +2%

Currency & Divestiture Impacts -2%

All-In Sales Growth In-Line

Core Earning Per Share Growth +2%

Currency Neutral Core EPS Growth +9%

FY 2015 Q1 ResultsOrganic Sales & EPS Growth

Q1 FY 2015

Operating Cash Flow $3.6bn

Free Cash Flow $2.8bn

Adjusted Free Cash Flow Productivity 96%

FY 2015 Q1 ResultsCash

$ Billions Q1 FY 2015

Share Repurchase 2.4

Dividends 1.8

Value to Shareholders 4.2

FY 2015 Q1 ResultsReturning Value to Shareholders

4

No impact on FY’15 organic sales growth or core EPS growth

FY 2015 GuidanceDuracell Exit

FY 2015

Organic Sales Growth Low to Mid-Single Digits

Currency ~2%

All-In Sales Growth In-Line to Low Single Digits

Core Earning Per Share Growth Mid-Single Digits

Currency Neutral Core EPS Growth Double Digit

FY 2015 Guidance – No ChangeOrganic Sales & EPS Growth

FY 2015 GuidanceRisks Not Included in Guidance

• Further currency weakness

• Further market size contraction

• Unrest in the Middle East & Eastern Europe

• Further pricing controls & import restrictions

• Business disruptions in Latin America

• Any major portfolio moves

5

FY 2015 GuidancePotential Tailwinds Not in Guidance

• Currency & commodities ease

• Market size expansion

• Easing political tensions and improved consumer confidence

FY 2015 Guidance

• Top-line comps more difficult in Q2 vs. Back-Half

• Pricing benefits build through FY

• Expect significant top & bottom-line FX headwinds in Q2

• Productivity savings build through FY

0%

15%

30%

45%

60%

75%

90%

105%

120%

FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15e

FY 2015 GuidanceAdjusted Free Cash Flow Productivity

Stretch Objective of 95-100%

6

$ Billions FY 2015

Share Repurchase 5 - 7

Dividends ~7

Value to Shareholders ~12 - 14

FY 2015 GuidanceReturning Value to Shareholders

SustainableGrowth & ValueCreation Drivers •

• •

• •

• •

Sustainable Growth & Value Creation

Goals

Strategies

Purpose,Vision & Values

Structure

Culture

Leadership

Systems

VisionTo be the leading consumer products company with consumer preferred brands and products that are winning value creators in their industry.

7

Objectives• Superior Value for Consumers

• Superior Value for Shareholders

Consumer, Customer & Shareowner Value Creation

SalesGrowth

Cash FlowGrowth

ProfitGrowth

MarginImprovement

AssetEfficiency

TotalShareholder

Return

Strategic Balance

TSR

O-TSR DriversDeveloped & Developing Markets

Category & Brand Portfolio

Short, Medium & Long Term

Innovation & Productivity

Scale & Focus

8

Where to Play• Core

– categories, segments, brands

– countries, channels, customers

• Focused, Strengthened Portfolio

– simplify, strengthen current portfolio

– selectively, strategically address new categories

– new, fast-growing channels

• Developing Markets

How to Win• Winning Consumer Moments of Truth

• Leading Innovation and Productivity

• Execute with Excellence

Recommitment to the Consumer

Zero First Second

Win the Three “Moments of Truth”

9

Strategic Focus Areas

• Portfolio

• Innovation

• Productivity

• Execution

Strategic Step Forwardto Accelerate Performance

• 70 to 80 leadership brands

• ~12 businesses / categories

• 4 industry-based sectors

Focused, Strengthened Portfolio• Core 70 to 80 brands are

leaders in their industries, categories, or segments

• Generate ~90% of salesand more than 95% of profit

10

Leading Brands• Brands that…

– Shoppers buy

– Consumers use

– Customers support

• Leaders in…

– equity, awareness, trial, purchaseand loyalty

– product performance, product innovation

– growth and value creation

Focused PortfolioTop Market ImpactScale Retained in Top Markets

• U.S.

• Greater China

• UK/Ireland

• Russia

• Germany

• Japan

Focused PortfolioDisciplined Process, Minimal Distraction

• Timing driven by ability to create value

• 90-100 brands, NOT 90-100 transactions

11

Portfolio Progress• To date, 28 brands divested,

discontinued or plans to consolidate

Pet Care Exit

Duracell Exit

Goals:

• Maximize value to P&G shareowners

• Minimize EPS dilution

Transaction 1: Sale of interest in Nanfubattery joint venture

Transaction 2: Exit of Duracell business

12

Duracell Exit

Step 2: Exit Duracell business

• Berkshire Hathaway to acquire Duracell in split in exchange for P&G stock

• ~$1.8 billion cash infusion

• Tax efficient transaction for P&G shareholders

• Valued at ~7X EBITDA – Cash sale equivalent value of ~9X EBITDA

Duracell Exit

Goals:

Maximize value to P&G shareowners

Minimize EPS dilution

Portfolio Progress• To date, 28 brands reduced

• 10 additional brands in hands of prospective buyers

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• More agile & responsive

• More flexible & faster

• Faster growing

• More profitable

• Simpler to operate

Innovation• Consumer needs and wants

• Brand promise

• Consumer-preferred product and packaging

• Sustained growth and value creation

7 of Top Ten2013 IRI Pacesetters

Innovation DrivesValue Creation

• Creates value for consumers

• Combats commoditization

• Stimulates category growth

• Builds cumulative advantage for our brands

• Creates value for shareowners

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Consumer-Driven TSR

OTSR

# ofBuyers

Price They Pay

How Often They Buy

How Much They Buy

SalesGrowth

Cash FlowGrowth

ProfitGrowth

MarginImprovement

AssetEfficiency

TotalShareholder

Return

Driven by Innovation• Consumer needs and wants

• Brand promise

• Consumer-preferred product and packaging

• Sustained growth and value creation

7 of Top Ten2013 IRI Pacesetters

Consumer-Inspired Innovation

15

Fabric & Home CareFiscal Year 2014:

Sales = $26.1bnNet Earnings = $3.0bn

Global Market Size ~$140bn

Fabric CareInnovation History

$3

$5

$7

$9

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Tide Liquidw/Bleach Alternative

TideValue Adds

Tide Pods

Tide Simply

Gain Liquid

Unstopables

Tide2x Compaction

Tide & DownyScent Line Extensions

Unit Dose Detergents

Consumer Safety Education

On-pack reminders

TV campaign

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Unit Dose Detergents

Consumer Safety Education

On-pack reminders

TV campaign

Digital campaign

Baby, Feminine, & Family Care

Fiscal Year 2014:



Health & Grooming Fiscal Year 2014:


Gross Market Size* ~$86bn

* Where P&G competes

17

Beauty, Hair & Personal Care

Fiscal Year 2014:



Beauty Care

Cost Productivity Drivers

Cost ofGoodsSold

Marketing

OTSR

Overhead

SalesGrowth

Cash FlowGrowth

ProfitGrowth

MarginImprovement

AssetEfficiency

TotalShareholder

Return

18

ProductivityCost of Goods Savings ($bn)

$1.2$1.3

$1.6 ~$1.6

FY 12 FY 13 FY 14 FY 15e

ProductivityMarketing Expense

Advertising~$9bn

Non-WorkingMarketing

~$4bn

Marketing EfficiencyTargeted Investments

Marketing % Sales(FY’14 vs. FY’13)

U.S. Tide + 60bps

U.S. Pampers +230bps

19

ProductivityOverhead

• Non-mfg enrollment down >16% (vs. 6/30/11)

• Down in Q1-FY15

ProductivityOrganization Design Choices

• 4 Sectors / 5 SMOs

• SMOs focused on selling

• BUs focused on brands

• Single Brand Management function

• Leveraging Service Centers

• Flow-to-the-Work Designs

ProductivityTop Management Efficiency

Fiscal Year

Corporate Officers Sales

2000 33 $39.9 bn

2007 44 $76.5 bn

2014 39 $83.1 bn

Target ~33 >$80.0 bn

20

ProductivityOrganization Capability Investments

• Research & Development

• Sales Coverage

• Quality

• Tax

• Legal

Core SG&A Overhead % Sales

10%

14%

18%

FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17

Cash Productivity• Supply Chain Financing

• Best-in-Class Receivables

• Inventory Reduction

• Capital Efficiency

21

ExecutionBranding

Trial Rates

Tide Pods 11%

Gain Flings 4%

Fusion ProGlide 14%

Swiffer Sweeper 10%

Metamucil 4%

ExecutionSelling

• Retail Account, Wholesaler and Distributor Strategies

• Distribution, Shelving and Merchandising In-Store

• Pricing Execution

Recommitment to the Consumer

Zero First Second

Win the Three “Moments of Truth”

22

SustainableGrowth & ValueCreation Drivers •

• •

• •

• •

Sustainable Growth & Value Creation

Goals

Strategies

Purpose,Vision & Values

Structure

Culture

Leadership

Systems

Recent Gross Margin ProgressProductivity Savings

FY 2014FY

2015

Savings Q1 Q2 Q3 Q4 FY Q1

Core +200 +230 +335 +345 +270 +260

Recent Gross Margin ProgressCore Gross Margin Change

Core GrossMargin Change

FY 2014

Q1 Q2 Q3 Q4

All In (130) (90) (120) (50)

Excluding FX & Commodities

+10 +30 +30 +110

23

Recent Gross Margin ProgressCore Gross Margin Change

Core Gross Margin Change

FY 2014 FY 2015

Q1 Q2 Q3 Q4 Q1 FYe

All In (130) (90) (120) (50) +20 +

Excluding FX & Commodities

+10 +30 +30 +110 +120 +

Enablers for Gross Margin Growth

• Cost savings


• Cost savings

• Pricing to off-set foreign exchange

24


• Cost savings


• Stabilization in commodity prices


• Cost savings



• Innovation


• Cost savings



• Innovation

• Developing Market Margins

25

Developing Market Margins Fiscal Year ‘14

% of Sales Developing

Gross Margin 44%

Operating Margin 14%

AT Margin 11%

Developing Market Margins Fiscal Year ‘14

Saudi Arabia China Philippines Russia

After-tax MarginGlobal Average ~14%

“Premiumization”Growth by Price Tier - Brazil

Market Value Split Across Tiers (%)

P&GShare

% Growth Rate IYA %

Super-premium 5 116 30

Premium 41 117 32

Mid 28 115 25

Value 26 109 22

26

“Premiumization”Growth by Price Tier - China


P&GShare

% Growth Rate IYA %


Premium 33 111 34

Mid 29 99 28

Value 18 97 18

“Premiumization”Growth by Price Tier - Russia


P&GShare

% Growth Rate IYA %


Premium 10 109 33

High 33 103 56

Mid 47 96 48

Value 7 102 12

Developing Markets OpportunityLocalizing Manufacturing

• Reduced transportation & warehousing costs

• Lower duties and indirect taxes

• Less volatility from Foreign Exchange

• Improved response time for customers & consumers

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Developing MarketsMargin Optimization

@ constant $ FY’13 FY’14 FY’15e

Sales growth 6% 7% 7%

AT Profit growth vs.Sales growth

~2x ~4x ~2x

Achieving Our ObjectivesSales

Organic Sales Growth

FY 2014 3%

Growing Premium segment

Entering, creating and growing new categories

Improving brand building and selling execution

Strengthening presence in faster growing channels

Focusing portfolio

Long-Term Objectives

Ahead of Underlying Market

Achieving Our ObjectivesEarnings Per Share

Core EPS Growth

FY 2014 5%

Top line Drivers

PLUS

Productivity Savings


High Single Digit

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Achieving Our ObjectivesAdjusted Free Cash Flow Productivity

Free Cash Flow Productivity

P3Y Average 93%

Supply Chain Redesign

Supply Chain Financing

Manufacturing Platform Standardization


90%+

Long-Term Objective

OTSRSales

Growth

Cash FlowGrowth

ProfitGrowth

MarginImprovement

AssetEfficiency

TotalShareholder

Return

Free Cash FlowCompanies Comparison

Revenue($bn)

Net Income($bn)

Free Cash Flow($bn)

Walmart 476.3 16.0 10.1

General Motors 152.1 5.3 2.8

United Health Group 122.5 5.6 5.7

Nestle 92.4 10.0 10.1

P&G 83.1 11.7 10.1

Johnson & Johnson 73.1 13.8 13.8

PepsiCo 66.4 6.7 6.9

Coca-Cola 46.9 8.6 8.0

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• 70 to 80 leadership brands

• ~12 businesses / categories

• 4 industry-based sectors

Value Eroding Pressure

$1,300

$1,350

$1,400

$1,450

$1,500

$1,550

Category Birth Rates

101.1

98.5

HHs Buying on Deal

30.0

35.0

40.0

45.0

50.0

Category $ Sales (MM)

25%

Build Relationship Create PreferenceIntroduce Brand

Point of Market Entry

30

30

32

34

36

38

40

42

44

46

01/31/09 09/27/14

PampersUS Diapers Market Share

Pampers

Huggies

• Take responsibilityfor category growth & value creation

• Play to P&G strengths

US Fabric Care Challenges

Larger Machines = Fewer Loads

Average Capacity of Machine Sold

Hi-LoEscalation

31

Trade InHH Penetration, Verticalize Portfolio

Trade UpSuperior Products, New Forms

Trade AcrossRegimen

32

Note: ‘14 share is FYTD US AOS through Sep 2014

TideUS Laundry Market Share

~62

~42

35.0

40.0

45.0

50.0

55.0

60.0

65.0

'09 '10 '11 '12 '13 '14

P&G Laundry Tide

Evolving Gillette Business Model

1. Shift from Shaving to Grooming

2. Drive big, obvious innovations

3. Transform POME

4. Drive Gillette shave club and subscription

1,500

1,700

1,900

2,100

2,300

2,500

2,700

2,900

3,100

3,300

3,500

07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15

$ MM NOS

H&S vs Pantene

33

Always Discreet Consumer Testimonials“I am 22 years old and I was born with my kidneys not connected to my bladder. The corrective surgeries sometimes cause me to have accidents at night.

Always Discreet saved me. They don’t make me feel like a senior citizen. I can

still feel like 22.”

“I like your Always Discreet. I am wearing them right now. They are very comfortable.

I have leaking problems and these do not leak. They are more comfortable than

diapers and Depends.”

“I just wanted to say these pads have been a Godsend. I am so confident

and grateful for such a great product. Not only does it hold the wetness, it

continues to feel dry as I continue to wear it. I am so glad I tried them. I will use them with confidence from now on.”

“Always Discreet Bladder Protection pads are the best discovery I have ever

made in this type of product !! I absolutely am liking very very much the thinness and

length of them.”

Certain statements in this release or presentation, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives,and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private SecuritiesLitigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generallyare identified by the words “believe,” “project,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue”,“will likely result,” and similar expressions. Forward-looking statements are based on current expectation and assumptions that are subject to risks and uncertainties which maycause results to differ materially from the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether becauseof new information, future events or otherwise. Risks and uncertainties to which our forward-looking statements are subject include: (1) the ability to achieve business plans,including growing existing sales and volume profitably and maintaining and improving margins and market share, despite high levels of competitive activity, an increasinglyvolatile economic environment, lower than expected market growth rates, especially with respect to the product categories and geographical markets (including developingmarkets) in which the Company has chosen to focus, and/or increasing competition from mid- and lower tier value products in both developed and developing markets; (2) theability to successfully manage ongoing acquisition, divestiture and joint venture activities to achieve the cost and growth synergies in accordance with the stated goals of thesetransactions without impacting the delivery of base business objectives; (3) the ability to successfully manage ongoing organizational changes and achieve productivityimprovements designed to support our growth strategies, while successfully identifying, developing and retaining particularly key employees, especially in key growth marketswhere the availability of skilled employees is limited; (4) the ability to manage and maintain key customer relationships; (5) the ability to maintain key manufacturing and supplysources (including sole supplier and plant manufacturing sources); (6) the ability to successfully manage regulatory, tax and legal requirements and matters (including productliability, patent, intellectual property, price controls, import restrictions, environmental and tax policy), and to resolve pending matters within current estimates; (7) the ability toresolve the pending competition law inquiries in Europe within current estimates; (8) the ability to successfully implement, achieve and sustain cost improvement plans andefficiencies in manufacturing and overhead areas, including the Company's outsourcing projects; (9) the ability to successfully manage volatility in foreign exchange rates, as wellas our debt and currency exposure (especially in certain countries with currency exchange controls, such as Venezuela, Argentina, China, India and Egypt); (10) the ability tomaintain our current credit rating and to manage fluctuations in interest rate, increases in pension and healthcare expense, and any significant credit or liquidity issues; (11) theability to manage continued global political and/or economic uncertainty and disruptions, especially in the Company's significant geographical markets, due to a wide variety offactors, including but not limited to, terrorist and other hostile activities, natural disasters and/or disruptions to credit markets, resulting from a global, regional or national creditcrisis; (12) the ability to successfully manage competitive factors, including prices, promotional incentives and trade terms for products; (13) the ability to obtain patents andrespond to technological advances attained by competitors and patents granted to competitors; (14) the ability to successfully manage increases in the prices of commodities, rawmaterials and energy, including the ability to offset these increases through pricing actions; (15) the ability to develop effective sales, advertising and marketing programs; (16) theability to stay on the leading edge of innovation, maintain a positive reputation on our brands and ensure trademark protection; and (17) the ability to rely on and maintain keyinformation technology systems and networks (including Company and third-party systems and networks), the security over such systems and networks, and the data containedtherein. For additional information concerning factors that could cause actual results to materially differ from those projected herein, please refer to our most recent 10-K, 10-Qand 8-K reports.

Forward Looking Statements

Regulations FD and G Disclosure

For a full reconciliation, please visit:

www.pg.com/investors

2014 analyst meeting - presentation

Documents

billions fy

billions q1 fy

share growth

resultsorganic sales

resultscore eps growth

organic sales growth

fy15 organic sales growth

q1 resultsreturning