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Procter & Gamble’s New $50 Million Investment in Argentina

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Price movement of Procter & Gamble

Procter & Gamble (PG) has a market cap of $225.3 billion. PG rose by 0.20% to close at $83.32 per share on March 21, 2016. The price movements on weekly, monthly, and year-to-date (or YTD) bases were 2.7%, 1.9%, and 5.8%, respectively.

Currently, PG is trading 1.5% above its 20-day moving average, 3.8% above its 50-day moving average, and 9.2% above its 200-day moving average.

The iShares Russell Top 200 Value ETF (IWX) invests 3.1% of its holdings in PG. The ETF tracks an index of US large-cap value stocks. The index selects from stocks ranked 1–200 by market cap based on two style factors. The YTD price movement of IWX was 0.46% as of March 18, 2016.

The market caps of Procter & Gamble’s competitors are as follows:

  • Johnson & Johnson (JNJ): $295.9 billion
  • Colgate-Palmolive (CL): $62.9 billion
  • Kimberly-Clark (KMB): $48.8 billion
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Procter & Gamble’s new plan

Argentina’s President Mauricio Macri is working on new capital and trade controls that could boost investment and economic growth. US President Barack Obama and a delegation of business people are visiting Argentina and will meet Macri.

On the eve of Obama’s visit, Procter & Gamble announced it will invest $50 million in its local subsidiary in Argentina in 2016–2017.

Procter & Gamble’s performance in fiscal 2Q16

Procter & Gamble reported fiscal 2Q16 net sales of $16.9 billion, a fall of 8.5% compared to net sales of $18.5 billion in fiscal 2Q15. Segment sales of beauty care, grooming, health care, fabric & home care, and baby & family care fell 10%, 10%, 5%, 7%, and 10%, respectively, in fiscal 2Q16 compared to fiscal 4Q15.

Its net income and EPS (earnings per share) rose to $3.2 billion and $1.12, respectively, in fiscal 2Q16, compared to $2.4 billion and $0.82, respectively, in fiscal 2Q15.

Its cash and cash equivalents and inventories rose 37.6% and 2.9%, respectively, in fiscal 2Q16 compared to fiscal 4Q15. Its current ratio and debt-to-equity ratio rose to 1.1x and 1.07x, respectively, in fiscal 2Q16, compared to 1.0x and 1.05x, respectively, in fiscal 4Q15.

The price-to-earnings and price-to-book value ratios of Procter & Gamble are 27.5x and 3.7x, respectively, as of March 21, 2016.

Projection

The company has made the following projections for fiscal 2016:

  • all-in sales down high-single digits, which includes a -7% foreign exchange impact and 2%–3% from the combined impacts of the Venezuela deconsolidation and minor brand divestitures
  • core EPS, including foreign exchange impact, down 3%–8%
  • dividends of more than $7 billion, for a total of $15 billion to $16 billion in dividend payments, share exchanges, and share repurchases

In the next part, we’ll see what LKQ is doing to increase visibility in the European market.

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