These are the findings of financial analyst Neil Carvin, who has published a financial analysis of the company’s September 2010 quarter on the Seeking Alpha website, showing that on most counts the company is bowing under current market conditions.
The financial gauge shows that the in all five of the principle categories used to determine the company’s financial health, the company’s rating has slipped compared to the previous quarter.
The results reflect the fact that global markets, particularly in Western Europe and North America, are once again experiencing challenging trading conditions, which are being further exacerbated by rising material and overhead costs.
Net earnings down
At the end of October, P&G revealed that emerging markets had helped to boost the company’s turnover, counterbalancing the slower movement in the more developed markets, but net earning tumbled on rising costs.
Net sales during the quarter rose by 2 percent to $20.1bn on the back of sales volume growth in most business divisions and in all geographic regions, while net earnings for the period fell by 7 percent to $3.03bn.
However, breaking the figures down, the analysis shows that the company’s cash management rating slipped one point to 17 out of 25, compared to 18 for the previous quarter, while its growth rating slipped from 13 out of 25 to just 11.
The dip in the company’s net profit also affected its profitability rating, which fell four points to 7 out of 25 compared to the previous rating, while in terms of investment the company’s rating also fell four points to 6 out of 25.
Overall this gives the company a gauge score of 37 out of 100, down from 49 out of 100 for the quarter ending in June.
The report also notes that P&Gs short-term debt has risen from $8.5bn to $11.5bn for the quarter, causing total debt to increase relative to cash-flow from operations.
Leaner inventories
However, on the plus side, the report also draws to attention the fact that the companies inventories have become much leaner in the past year, reversing the trend seen during the difficult 2009 financial year.
Likewise, the report also notes that a reason of the current quarter’s lackluster growth rates is the fact that last year the company divested its pharmaceutical business to Warner Chilcott, making comparisons difficult.
In summary the report highlights the fact that the company's gauge score has slipped primarily on profitability and in terms of value. Looking ahead Carven believes that cash flow from operations will be crucial in the next few quarters, but with warnings over costs as well as unfavorable currency exchange rates, the outlooks may remain challenging.