US' P&G's Q2 FY26 organic sales flat; EPS dips on restructuring costs

Diluted net earnings per share (EPS) declined 5 per cent to $1.78, primarily due to higher restructuring charges incurred during the quarter. Core EPS, which excludes non-core items, stood at $1.88, unchanged from the prior year and broadly in line with expectations.

Operating cash flow for the quarter amounted to $5 billion, while net earnings reached $4.3 billion. Adjusted free cash flow productivity stood at a strong 88 per cent. During the quarter, P&G returned $4.8 billion to shareholders, including $2.5 billion in dividend payments and $2.3 billion through share repurchases, P&G said in a press release.

During the quarter, organic sales were unchanged as 1 per cent increase driven by pricing was fully offset by 1 per cent decline in volumes. Product mix had a neutral impact on overall sales.

By segment, Fabric and Home Care reported flat organic sales. Fabric Care saw volume growth in North America and Latin America, offset by declines in Europe and an unfavourable product mix. Home Care organic sales rose at a low single-digit pace, driven by higher pricing, mainly in North America, partially offset by lower volumes.

The Baby, Feminine and Family Care segment reported 4 per cent decline in organic sales compared with the prior year. Baby Care organic sales fell at a low single-digit rate due to lower unit volumes and an unfavourable geographic mix, partly offset by higher pricing, primarily in North America. Feminine Care organic sales also declined low single digits, reflecting weaker volumes, partially offset by innovation-led pricing and a favourable product mix, again mainly in North America. Family Care organic sales dropped at a double-digit rate, largely due to strong volume growth recorded in the corresponding quarter last year.

Profitability remained under pressure during the quarter. Reported gross margin declined 120 basis points (bps) YoY, while core gross margin fell 50 bps, or 30 bps on a currency-neutral basis. Benefits from productivity savings and pricing were outweighed by unfavourable mix, product reinvestments and higher tariff-related costs. Selling, general and administrative expenses increased due to higher reinvestment spending, leading to a decline in operating margins.

“Our results in the second quarter keep us on track to deliver within our fiscal year guidance ranges for organic sales growth, core EPS growth and adjusted free cash flow productivity in a challenging consumer and geopolitical environment,” said Shailesh Jejurikar, president and CEO at P&G. “We have confidence in our plans to deliver stronger results in the second half of the fiscal year. We remain committed to our integrated growth strategy and are excited by the opportunity ahead to reinvent P&G and create the CPG company of the future, delivering long-term balanced top-and bottom-line growth and value creation.”

Looking ahead, P&G maintained its FY26 guidance for all-in sales growth of 1 to 5 per cent, with organic sales expected to range from flat to up 4 per cent. The company revised its diluted EPS growth outlook to 1 to 6 per cent, reflecting higher restructuring charges, while maintaining its core EPS guidance range of $6.83 to $7.09 per share, added the release.

P&G expects commodity costs to be neutral for the year, with foreign exchange providing an estimated after-tax tailwind of around $200 million, partly offset by approximately $400 million in tariff-related costs. The company reaffirmed its commitment to strong cash returns, targeting adjusted free cash flow productivity of 85 per cent to 90 per cent and shareholder returns of around $15 billion through dividends and share repurchases in FY26.

Fibre2Fashion News Desk (SG)