Procter & Gamble 2011 4Q financial analysis

Companies revenue shows slight growth. Compared 2011 Q4 with 2010 Q4 it increased by +4% from 21,3 bn.$ to 22,1 bn.$ Annual revenue increased from 79,6 bn.$ to 85,1 bn.$ or by +7%. Net income was sharply decreased at 4Q by 1,5 bn.$ adjust the carrying values of goodwill in the Appliances and Salon Professional businesses. This adjustments decreased Net income by 41% compared with Q4 2010 from 4,0 bn.$ to 2,4 bn.$ If excluded this adjustments Net income before depreciation also dropped a bit from 4,0 bn.$ to 3,9 bn.$ Annual Net income before depreciation if excluded Goodwill adjustments. Hopefully this adjustment is onetime. In general sesults are slightly negative.

If you look at balance sheet things with goodwill get a bit more worried. It has decreased from 57,7 b.$ at Q2 to 54,3 bn.$ at Q4 that more then -3,3 bn.$ in last 2 quarters, and it is not included into depreciation. If you look at general long term asset change excluded depreciation you’ll get positive changes at Q3 and Q4. This change must be close monitored as it inflicts negative change in other side of balance at other equity which decreased from -2,1 bn.$ to -6,4 bn.$. Also decrease in long term liabilities was spotted at Q4, but they were just moved to short term liabilities of Y2012. Boosted by decrease of Goodwill Equity change showed high decrease due to ~1,5 bn.$/Q expenses for dividend payments and 0,7-0,9 bn.$/Q expenses for repurchase of companies own shares. If added together its ~2,2-2,4 bn.$/Q or ~60% of companies generated Net Income before depreciation, which is quit lot put together changes in goodwill and you’ll get worried sings at the balance sheet.

On the other hand despite decrease in equity its Equity level stays quit strong around 48%. But liquidity ratio is worried low just 0,8. High short term liabilities compared with short term asset is not good. ROE is aroung 20-15% and ROA is betwean 10-5% if taking into mind negative impact of goodwill adjustments 4Q are almost the same.

Inventory level is 7,4 b.$ turnover 30 days, account parables  6,9 bn.$ turnover also ~30 days Account payable is 6,7  bn.$ its turnover is ~60 days which are all in line. Account payable turnover must be on close watch as companies liquidity ratio is below 1. In general companies balance structure is a bit risky.

Share value:

Common Stocks	68,1 bn.$	2,754 bn.	24,7 $
+ Retained earnings	-3,8 bn.$	-1,4 $	23,3 $
+ 1 year Net income before Depreciation	13,5 bn.$	+4,9 $	28,2 $

 

Companies share basic value is ~23$.  Current market price is 67$ which shows that market is paying 44$ more or 8,9 years of Net income before Depreciation earnings. Share profitability (share market price/Net income before Depreciation) is 7%.

Company at the moment pays 2,1$/share annual dividends (0,525$/quarter) before tax or 3,1% investment yield.

Analysis source: Proctor & Gamble 2011 4Q 10-K financial statements

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