寶潔 (PG) 2011 Q2 法說會逐字稿

Good day ladies and gentlemen.

At this time, all participants are in listen-only mode.

Later, we will conduct a question-and-answer session.

(Operator Instructions).

Before we begin, the Company has asked the following statement to be read.

Good morning and welcome to Procter & Gamble's quarter-end conference call.

Today's discussion will include a number of forward-looking statements.

If you will refer to P&G's most recent 10-K, 10-Q and 8-K reports, you will see a discussion of factors that could cause the Company's actual results to differ materially from these projections.

As required by Regulation G, P&G needs to make you aware that, during the call, the Company will make a number of references to non-GAAP and other financial measures.

Management believes these measures provide investors valuable information on the underlying growth trends of the business.

Organic refers reported results, excluding the impact of acquisitions and divestitures and foreign exchange, where applicable.

Free cash flow represents operating cash flow less capital expenditures.

Free cash flow productivity is the ratio of free cash flow to net earnings.

Core EPS refers to earnings per share from continuing operations, excluding certain items.

The effective tax rate on core earnings represents the effective tax rate on continuing operations less non-core impacts.

P&G has posted on its website, www.PG.com, a full reconciliation of non-GAAP and other financial measures.

Now, I will turn the call over to P&G's Chief Financial Officer, Jon Moeller.

Thanks and good morning, everyone.

Bob McDonald and Teri List join me this morning.

I'll begin today's call with a summary of our second-quarter results.

Teri will cover business highlights by operating segment.

I will conclude the call with guidance for both the fiscal year and the March quarter.

Bob, Teri, and I will take questions, as usual, after our prepared remarks.

Following the call, we will be available to provide additional perspective as needed.

Our second quarter was another period of solid volume and market share progress.

We grew organic sales ahead of market growth rates, we built share broadly, and we delivered core earnings per share growth above the high end of our guidance range.

Volume increased 6%.

The growth was broad-based with all regions, 16 of our top 17 countries, five of six reporting segments, and 19 of our $23 billion brands delivering volume growth versus the prior year.

Global marketshare on a constant dollar value basis grew again this quarter and is now up versus the prior year for the past 12, six and three-month periods.

Share growth in the quarter was also broad-based.

We grew market share in all geographic regions and held our built share in 12 of our top 17 countries and 16 of our $23 billion brands.

Overall market share is in line or up and businesses representing about 60% of global sales.

The strong volume in share progress continues to be driven by innovation and expansion programs that flow from our overarching growth strategy to serve more consumers and more parts of the world more completely.

We are extending our existing category portfolios to reach more consumers with innovations such as Naturella feminine care pads and Head & Shoulders shampoo in Brazil, Gain hand dishwashing liquid in North America, Naturella and the Gillette Fusion shaving system in China, and Gillette Guard in India.

We are serving consumers in more parts of the world by entering new category/country combinations such as the launch of Olay skincare in Brazil, Febreze air care in Colombia and Brazil, and Downy fabric care in Indonesia.

We are serving consumers more completely by leveraging and expanding recent innovations, such as Pampers Dry Max which we have now expanded to more than 50 countries; tide Acti-Lift, which is driving solid market share growth in the US; Crest 3D White and Crest Clinical, which have driven US toothpaste market shares to near record levels of over 38%; and Gillett Fusion ProGlide, which started shipping to Germany and France in December.

Organic sales grew more than 3%, about 1 point ahead of global market growth rates, albeit at the low end of our guidance range.

Markets for our products continue to grow at a healthy rate in developing markets in the range of 6% to 8%, consistent with our projections.

However, developed market growth rates were essentially flat for the quarter compared to our expectation for growth of about 1%.

Considering that developed markets account for two-thirds of our sales, this difference in market growth was enough to round organic sales down to 3% versus being a solid 4%.

Pricing and mix reduced sales by 2 points.

Mix reduced sales by approximately 2 points and pricing was down only slightly for the quarter.

Versus the July/September quarter, price mix improved by more than 0.5 point and price mix improved sequentially each month during the December quarter.

The price mix and related organic sales improvement was broad-based.

Five of the six reporting segments had a smaller price mix impact in the December quarter than in the September quarter, and five of the six segments delivered quarter-to-quarter improvements in organic sales growth.

The improvements in price mix came mainly from pricing as we continue to annualize adjustments taken early last fiscal year.

Pricing rounded to 0 for the quarter and will turn positive in the second half of the fiscal year.

We've now lapsed the adjustments we made to brands such as Duracell, Cheer, and the large sizes of Tide and the multiple brands in the Central and Eastern Europe, Middle East and Africa region.

The mix impact was due primarily to geographic mix of about 1 point as the developed market volume grew 3% and developing market volume grew 10%.

Product mix and price-tier mix each affected sales growth by about 0.5 points.

All-in sales grew 2%.

This includes a 2% negative impact from foreign exchange and a modest benefit from the net impact of acquisitions and divestiture.

All-in GAAP earnings per share were $1.11, down versus the prior-year GAAP earnings per share of $1.49, which included the large gain from the divestiture of the pharmaceuticals business.

Core earnings per share were $1.13, $0.02 above the top end of our guidance range and up 3% versus prior-year core earnings per share of $1.10.

Our core earnings per share results benefited from organic sales growth, cost savings, a decline in the effective tax rate, and a reduction in shares outstanding, which more than offset negative impacts from higher input costs and higher marketing and portfolio expansion investments.

The $0.02 difference between current-period GAAP and core earnings per share reflects charges taken to update legal reserve balances, which were largely offset by a non-core tax benefit from the pending settlement of tax litigation primarily related to the deductibility of technology donations.

The legal item relates to the inquiries being competition authorities in Europe, including the European Commission, which we and a number of other manufacturers in our industry have previously disclosed.

Gross margin decreased 190 basis points due to higher commodity costs.

Higher year-on-year commodity costs reduced gross margin by 160 basis points.

For perspective, on a weighted average basis, spot prices for our key materials and energy inputs are up more than 20% versus last year's levels.

Geographic and product mix reduced gross margin by approximately 100 basis points.

The higher input costs and mix impacts were partially offset by strong savings programs and cost of goods, which contributed roughly 140 basis points positive to gross margin.

Operating margin declined 210 basis points due mainly to lower gross margin.

SG&A spending as a percentage of sales increased 20 basis points versus prior-year levels due to higher investments to support our innovation and expansion plans.

The effective tax rate on all-in earnings was approximately 18%.

This includes the benefit of the non-core tax item which reduced the all-in tax rate by about 4.5 points.

The effective tax rate on core earnings was 22.4%.

This rate reflects the benefit of a favorable mix impact from the faster growth of our business in developing markets, where tax rates are generally lower, and the impact of the two-year extension of US tax laws which passed in late December.

Given our fiscal year reporting calendar, the US tax extension causes a catch-up adjustment for the September quarter to get our year-to-date rate in line with average rates expected for the full year.

The rate also reflects the successful audit defense of our tax status in several markets.

We generated over $2 billion in free cash flow in the quarter.

We continue to expect free cash flow productivity of 90% or more of net earnings for the year as operating profit growth increases in the second half.

So far this fiscal year, we've returned $6.4 billion of cash to shareholders, comprised of over $2.8 billion in dividends and over $3.5 billion in share repurchases.

In summary, we are pleased with the progress we've made in the first half of the fiscal year, despite slower-than-expected market growth rates and significant increases in commodity costs.

We are growing market share broadly behind our innovation and expansion efforts.

Volume growth remains very strong and core earnings per share growth for the first half is slightly ahead of our going-in expectations.

Now, I'll turn the call over to Teri to review highlights of the business segment results.

Thanks John.

Starting with beauty, organic sales increased by 3%.

Organic volume contributed 6 points of growth.

Developed markets were flat and developing markets increased double digits contributing to 2 points of geographic and product mix (technical difficulty) pricing was down 1 point.

Retail Hair Care shipments increased high single digits with developed markets growing low single digits and developing markets growing midteens.

Asia led the growth, increasing shipments by about 20% and growing share by over 1 point.

Both Pantene and Head & Shoulders shipments grew over 25% in China, the Philippines and India.

Latin America also had strong volume growth.

Brazil shampoo value share increased over 1.5 points with the launch of Head & Shoulders and with Pantene shipments growing more than 50%.

Female skincare volume grew double digits and market share was up nearly half 0.5 point.

Olay skincare volume in India and the Philippines more than doubled versus year ago, and Russia shipments increased by about 80%.

In Brazil, the Olay expansion continued ahead of expectations.

In developed markets, female skincare volume increased high single digits.

US Olay skincare shipments increased high single digits behind strong marketing and sales fundamentals and the launch of Olay Regenerist Night Elixer and the new Olay Pro-X cleansing device.

Female blades and razors continue to deliver strong results, growing volume by high single digits in both developed and developing markets, and increasing global market share for the third consecutive quarter.

Prestige organic shipments increased low single digits.

Prestige skincare volume was up double digits but by China, where SK-II was up more than 60%.

Prestige Fragrance organic shipments were up low single digits behind the success of recent initiatives, including Gucci Guilty and Dolce and Gabbana The One Gentleman.

Salon Professional shipments were down double digits due to the decline of nonstrategic businesses and continued streamlining of the portfolio.

The Grooming segment organic sales were up 6% and volume growth of 5%, and 1% contribution from price increases on blades and razors.

Male blades and razors global shipments increased mid-single digits, developing market volume grew high single digits led by Asia and Latin America.

India blades and razors share increased almost 4 points to over 45%, driven by continued strength of the Mach 3 brand and the Gillette Guard launch.

Mach 3 shipments grew over 70% in Mexico and over 20% in Brazil, driven by the launch of Mach 3 Sensitive as well as marketing and trade programs to increase consumer awareness.

Developed market volume was up low single digits, including the impact from constrained supply of Fusion and Fusion ProGlide.

North America shipments were down slightly with volume and share growth in Fusion offset by softness in Mach 3, in line with our trade-up strategy which delivers positive sales mix.

Western Europe volume increased high single digits driven by strong Mach 3 growth in Germany ahead of a price increase in January, and from Fusion ProGlide pipeline shipments in Germany and France prior to launch in January.

Male personal-care unit volume increased mid single digits.

North America volume increased high single digits, driven by continued strength of the Old Spice brand which shipped more than 15% ahead of year ago.

Healthcare organic sales increased 5%.

Volume grew 5% as well and pricing and mix were neutral.

Oral Care grew shipments high single digits and global value share over 0.5 point.

North America Oral Care increased volume double digits and value share by 1.5 points to over 38% behind the continued success of Crest 3D White, the Crest Clinical line, and the Crest For Me innovations.

Western Europe grew volume high single digits and value share by nearly 1.5 points, driven by Oral-B Power Brush and Oral-B toothpaste success in Benelux.

Developing market unit volume increased mid single digits.

Latin America shipments grew more than 25% versus year ago.

Brazil Oral-B volume was up nearly 50% behind the continued expansion and support of Oral-B toothpaste.

Mexico was also very strong with Crest volume up nearly 50%, Oral-B up nearly 30%, and toothpaste value share increasing over 3.5 points.

Feminine care unit volume increased mid single digits with developing markets up high single digits.

Naturella volume grew about 30%, driven by expansion into Brazil in October and China last March.

India and the Philippines both increased Always volume shipments over 35% behind recent initiatives on both mid- and premium-tier products.

Developed market shipments grew low single digits.

Western Europe shipments were up low single digits and value increased -- value share increased by 1.5 points.

Always shipments in the UK increased over 15% behind the Always Simply Fits mid-tier initiative that launched in January 2010.

Personal healthcare shipments were up low single digits with developing markets growing more than 15% versus year ago.

Both Mexico and Brazil mix shipments grew over 30% behind strong commercial innovation and expectations of a strong cold and flu season.

Snacks and Pet Care organic sales declined 8%.

The solid growth in Snacks was more than offset by sharp declines on Pet.

Organic volume was down 6% with product and geographic mix down 1%.

Snack shipments grew mid single digits and with growth across all five geographic regions.

Latin America grew volume by about 20% behind the Extreme Pringles initiatives and holiday-focused commercial innovation.

Central and Eastern Europe, Middle East and Africa region, as well as overall developing markets, grew volume nearly 20%.

Developed market shipments increased low single digits with North America returning to share growth behind improved customer support.

Pet Care volume is down due to the temporary supply disruption mentioned last quarter.

The restructuring and process improvements are nearing completion.

We expect to restore full supplies and merchandising capability within the next two months.

Fabric and Home Care organic sales increased 2%.

Organic volume growth was 5%, with developed markets up mid single digits and developing markets up high single digits.

The positive volume was partially offset by 3 points of geographic and product mix and 1 point of pricing.

Fabric Care grew unit volume mid single digits with developing markets up high single digits.

Value share grew across all geographic regions and was up 0.5 points globally.

US laundry value share increased over 1.5 points with growth in Tide, Gain an ERA.

US fabric enhancers value share increased over 2.5 points with all brands growing.

Japan also had strong growth with volume increasing over 15% due to a combination of sustaining and commercial innovations on Bold, Ariel, and Lenor.

Developing market shipments were strong in many markets.

In India, Tide shipments increased about 60% behind the continued growth of Tide Naturals and total laundry value share increased by 2 points.

In Russia, Tide unit volume was up over 35% due to strong marketing support and Lenor Fabric Enhancer unit volume was up over 50% due to a consumption increase from a product compaction introduced in October.

In Brazil, Ariel shipments almost doubled behind the growth of liquid detergents, and total laundry value share increased more than 2.5 points.

The Home Care segment increased organic unit volume high single digits, with all regions growing.

Global value share was up over 1 point to 18%.

North America grew shipments mid single digits and value share over 2 points behind the success of the recent Gain Hand Dish brand and Febreze Set 'N Refresh innovation.

Japan grew shipments about 40% and value share over 5 points to a 20 share, driving overall market growth in the region.

With success behind several Febreze product innovations and the launch of Joy Hand Renewal, P&G is now the number one company in both dish care and air care categories in Japan.

Home Care developing markets grew organic shipments in the mid teens.

The Central and Eastern Europe, Middle East and Africa region increased organic volume by more than 15% and grew value share 2 points.

Dish care was the primary driver of the growth with Russia ferry shipments increasing 25% behind the "winter hands" commercial innovation and with volume continuing to grow in recently expanded markets such as Turkey and Egypt.

The Asia region also experienced very strong growth with Philippines hand dish and Korea air care both increasing volume about 30% and share over 4 points, driven by increased levels of marketing support to drive trial and excellent in-store execution.

Battery's unit volume increased high single digits.

Developed markets shipments grew high single digits behind a very strong holiday season.

In developing markets, volume increased mid single digits.

India shipments of Duracell were up about 70% due to increased distribution to more retail outlets.

Baby and Family Care delivered 6% organic sales growth behind volume growth of 8%.

Mix reduced sales by 2 points as developing markets grew about three times faster than developed markets as well as disproportionate growth of mid-tier and large-size products.

Pricing was neutral.

Baby Care shipments were up high single digits and global value share increased more than 1 point with all regions growing share.

Developed market shipments increased low single digits.

US diaper value share was up nearly 1 point on a declining market and volume was flat.

Luvs volume was up mid single digits, driven by the "Heavy-Duty Protection" initiative.

Western Europe increased volume low single digits and value share over 1.5 points behind the Dry Max launch and an overnight dryness initiative on Pampers Baby Dry.

Baby Care increased developing market shipments in the mid teens.

India Pampers shipments grew more than 50% and share grew 1.5 points in a fast-growing market.

Papers Brazil volume grew over 25%, and China volume grew nearly 20%, driven by distribution gains, marketing investments and market growth.

Family Care grew volume high single digits and increased value share by almost 0.5 point.

Developed market shipments were up high single digits.

US Charmin volume increased over 10%, driven by success of recent product improvements, strong marketing support and distribution gains in Charmin Basic.

Developing market shipments increased more than 30% driven primarily by improved value impressions in Mexico.

That concludes the business segment review.

Now, I'll have the call back to Jon to discuss guidance for the fiscal year and the March quarter.

Thanks Teri.

Our guidance for organic sales and earnings per share growth for the fiscal year is unchanged.

Our outlook for organic sales growth remains at 4% to 6%.

We're also maintaining our guidance for all-in sales growth of 3% to 5%.

As we said last quarter, where we land within this range will be driven by two factors, underlying market growth rates and our ability to grow ahead of market rates.

As I mentioned earlier we are delivering growth ahead of the market and we are growing share.

However, underlying market growth rates in North America and Western Europe have been lower than expected so far this fiscal year.

The core earnings per share guidance range stays at $3.91 to $4.01, which equals growth of 7% to 9% versus prior-year core earnings per share of $3.67.

While we are not changing our core earnings per share guidance, there are two items worth noting.

First, we now expect commodity costs will be an earnings headwind of about $1 billion after-tax.

This is roughly double the impact we expected at the start of the year.

Second, we now expect the effective tax rate will likely be below 26% for the year, due to the ongoing shift of our geographic mix, the positive progress we've made in resolving outstanding audits, and the extension of US tax laws.

The volatility we are experiencing in market growth rates, input costs and foreign exchange drive an approach of providing reasonable and appropriately wide guidance ranges for sales and earnings per share growth.

As we've said on a number of occasions, we will not chase foreign exchange or commodities or back off on investments simply to deliver a top-of-range number or an external estimate.

Our actions will continue to be guided by our desire to advance our strategy and by our overriding objective of creating long-term value for shareholders.

On the bottom line, all-in GAAP earnings per share range is now $3.89 to $3.99, which includes the $0.02 per share impact from the non-core legal and tax items in the December quarter.

Regarding share repurchase, we continue to outlook a range of $6 billion to $8 billion for the year.

Before going into the March quarter details, I want to address a few points on front-half versus back-half trends.

Our fiscal year guidance implies acceleration in organic sales growth, operating profit, and core earnings per share in the second half.

We are comfortable with this guidance for several reasons.

On the topline, there are three factors worth noting.

First, and most important, we have strong momentum in volume and market share growth, and we are confident that our innovation and expansion plans will sustain solid volume growth rates.

We will continue to leverage the innovations and expansions that first reached the market last year, and we have plans to enter 12 new category country combinations, 40 new category price tier combinations, and 25 new category channel combinations in the second half.

Second, as I mentioned earlier, we will have a better pricing comparison than we have had over the last four quarters.

Pricing will swing from negative to positive by the end of the fiscal year, moving from a 1 point drag in the first half to up to a 1 point help in the second half.

As we discussed on the call last quarter, if we simply hold the average sales per unit flat at the level we just delivered in the December quarter, the year-on-year price and mix impact should improve by as much as 3 points by the end of the year, from down about 2.5 points this quarter to neutral to positive in the June quarter.

Third, the supply constraints that created the topline headwind in the first half of the year in oral care, blades and razors, body washes and pet care should largely be behind us.

We've announced to retailers that we should be back to full supply and merchandising capability on these businesses in the near future.

On the bottom line, we're forecasting core earnings per share growth in the range of 10% to 16% in the second half.

This rapid EPS acceleration is heavily influenced by dynamics in the base period, not by unusual trends in the current year.

In fact, the front-half versus back-half balance of earnings this year is very similar to what we've delivered on average over the past five years.

Last fiscal year was the anomaly with lower-than-normal operating profit in the second half.

The challenges we faced in the second half of last year from higher commodity costs, foreign exchange and increased marketing investments all lead to easier comparisons in the second half of this year.

Now moving to the March quarter, we are estimating organic sales growth in the range of 4% to 6%.

We expect all-in sales growth of 5% to 7%.

Within this, we expect foreign exchange to add about 1% to sales growth and the net impact of acquisitions and divestitures to be roughly neutral to sales growth.

On the bottom line, earnings per share is estimated in the range of $0.95 to $1.

This translates to core earnings per share growth of 7% to 12% for the quarter versus base period core earnings per share of $0.89.

We expect strong operating profit growth in the quarter.

In closing, as I said earlier, we're pleased with the progress we've made in the first half of this year.

We are touching and improving the lives of more consumers in more parts of the world more completely and we are seeing the result in broad-based volume and market share growth.

We are better integrating our plans across categories and geographies to operate more fully as one company, and we are simplifying our operations, reducing costs while increasing our productivity, efficiency and agility.

To be clear, there is still more work to do.

We need to deliver the price mix improvement we are forecasting while sustaining solid volume growth.

We need to grow market share on more brands and in more markets.

We need to improve our demand forecasting and supply planning so we can more fully leverage our new innovations and portfolio expansions.

And given the rising input cost environment, we need even more focus on identifying and delivering cost savings in all parts of the business.

We are confident that, through our growth and operating strategies, we will deliver the acceleration in topline and bottom-line results that we expect.

Now, Bob, Teri, and I would be happy to take your questions.

(Operator Instructions).

Lauren Lieberman, Barclays Capital.

Thank you.

Good morning.

I just wanted to ask a bit about the commodity sort of surprise, both for the rest of the year but also particularly in the quarter.

So at what point in the quarter were you guys realizing that commodities were a much bigger headwind than expected?

I would assume that's the case based on the gross margin performance.

I'd love any commentary you can offer very specifically around pricing initiatives related to the greater gross margin pressure than you'd expected before.

Thanks.

Commodities really continued to -- the pricing on commodities continued to accelerate throughout the quarter.

But I would tell you that it's more of a year-ago comparison than it is a sequential increase in commodities.

Commodity costs increased 6% versus the September quarter, but as we said earlier, they are up about 20% versus year ago.

You're absolutely right to ask the question on how we manage -- how we plan to manage those increased commodity costs going forward.

I mentioned continued focus on cost savings, which will clearly be part of this.

We'll also look at pricing in commodity exposed businesses where that's appropriate.

The last thing I would say is, as we've talked before, just on a comparative basis, we should have a much better commodity comparison in the second half than we had in the first half, as this long run up that we've been on really started in the second half of last fiscal year.

Chris Ferrara, Bank of America.

Thanks guys.

I guess I wanted to get into market growth rates.

It seems like maybe US and Western Europe I guess slowed a little bit more than you had expected in the end of the quarter, maybe in December, maybe post-analyst day.

Can you talk about how the market growth rates progressed and how you see that playing out into the beginning of the calendar year 2011?

Then I guess whether you think there are going to be tools to sort of get growth going to drive growth higher in those categories.

Thanks.

We began the fiscal year expecting a global market growth rate of 3% to 4%.

This assumed developed markets grew 1% to 2% and developing markets grew 6% to 8%.

Developing markets have grown, as we expected, but developed markets, particularly in the United States, have underperformed.

For the first half of the fiscal year, developed markets grew only about 0.5%, and we continue to expect to grow 1% to 2% above market growth rate levels due to our strong multi-year innovation program expansion programs, which Jon and Teri talked about.

For the specific quarter, in terms of value growth, North America, Western Europe and Japan were all flat.

The developing markets were up about 8%.

Importantly, we grew share in North America, Western Europe and Japan even though the -- partly because the markets were flat but also because of our high-volume growth rates.

In North America, we grew share in December higher than we've grown it in four years.

In Western Europe, we've had 12 consecutive months of share growth.

In Japan, we are the only company in our industry growing share, and we're growing share in about 90% of our business.

In terms of the evolution of the market growth through the quarter, there was a pretty significant drop-off towards the end of the quarter.

While it's qualitative judgment, it looks like what may have happened is that consumers, as you saw in the retail sales figures, actually spent on Christmas, and by the end of the month, there wasn't a lot left.

John Faucher, JPMorgan.

Thank you.

Jon, you talked a little bit about the pricing comparisons and how those are going to play out over the course of I guess calendar 2011.

It looks -- it sounds as though you're expecting a similar level of volume share performance in 2011 versus 2010.

So despite the fact that you won't have the pricing advantage, can you talk a little bit about the volume comps and the way they play out in a similar way, and how you expect your volume share performance to be in 2011 versus 2010.

Thanks.

Sure.

We do expect similar levels of volume growth in the second half as compared to the first half.

So that assumption is correct.

It really would be driven by two things, one, the continued expansion of our investment and expansion program.

I talked in my comments about the number of category country -- category price tier and channel entries, which is very significant in the second part of the year, so that will be a big driver of continued volume progress.

Then I also mentioned -- I mentioned it in the sales context but it is relevant in a volume context that we had, because of more demand than we expected for a number of our innovations, we were supply constrained pretty significantly on a number of categories in the first half.

That situation is largely behind us, so as we are able to fully leverage those innovations, we should see more growth.

I'll just give you one example.

On Fusion ProGlide, where demand was much higher than we expected in North America, we effectively had to make significant reductions in merchandising as we went through the back of the year, and will essentially be, if you will, relaunching Fusion ProGlide in North America as well as expanding it across the world.

I think I'll just comment on Fusion ProGlide, if I can, John, because if you simply look at the market share, you may get the wrong impression.

Fusion ProGlide is performing really well, and we're pleased with the initial results after only seven months in market.

The Fusion shares in the US have reached 34%, which is up 3 points versus year ago.

But regarding comparison to competitive launches, you can see where it looks like we've lost some share on blades and razors in the US.

That's because of the supply constraint and because we've had to cancel merchandising of [it exists].

But we're confident that once we put that merchandising back in place, which we are now doing, that the sales will take off.

What we know from our research is that sales of US Fusion ProGlide cartridges have been at the rate of more than six times the rate of Fusion ProGlide razors, while the competitive replacement cartridges are only selling about two times the razor sales.

That's a key metric for us.

Andrew Sawyer, Goldman Sachs.

I was hoping you guys could just talk a little bit about the Fabric and Home Care numbers, and I guess what's driving the sales slowdown there and if anything there surprises you.?

Also if you could shape up how you're performing from a market share perspective, both on the volume and the dollar sales side.

We are growing market share in Fabric and Home Care.

We have a number of terrific innovations in market, things like Ariel and Tide Acti-Lift, things like the line of additive products which we've now launched in many countries around the world.

So, we are happy with our share growth in those markets.

I think the thing that's probably affecting us more than anything else is a lack of market growth in this market because we are growing share.

Nik Modi, UBS.

Good morning everyone.

I just wanted to get a little more context on the developed markets.

You talk about market growth rates being lower than you expected.

Can you decompose that?

Is this from the unit side or is it because there are still a lot of promo spending out there that's been inefficient?

Can you provide any context on the general market growth environment in Japan, Western Europe and North America?

The promotion volume, just answer that part of the question, are -- the promotion levels are actually reducing or narrowing sequentially, so that is not what's driving this.

It's more fundamental consumer demand.

I think, for example, look at Western Europe.

When you look at the UK, for example, which had a negative economic situation, we are still growing share in the UK on a large segment of our business.

In Japan, it's basically a story.

Since the burst of the economic bubble, as you know, Japan's had trouble creating macroeconomic growth, particularly given the demographic problems they have.

But we are growing share, as I said, there.

90% of our business we're growing share, and some of the strongest growth rates that we've had in Japan since we entered Japan in 1973.

In North America, as I said, as Jon indicated, we think there was a slowdown in consumer spending on our products after the holidays.

We are seeing that pick back up, but the good news is we, again, we had our highest share growth in December in four years in North America.

So, again, we think we're doing the right things and the innovations we are marketing are selling.

On the macro level, as Bob indicated, we are seeing -- and it's early, but in January, the markets are improving a little bit, particularly in North America.

We really haven't seen the impact on market growth rates yet of the pretty significant stimulus, if you will, in the context of the income tax extension that happened at the very end of this quarter.

Bill Schmitz, Deutsche Bank.

Good morning.

Did you announce any list price increases?

I know you said if you just held the price per unit flat, you get 3 points (inaudible).

So I'm kind of confused about it also because if the price per unit is the same this year as last year, I'm not sure how you get that 3 points.

But the other question is do you have any big list price increases?

Then as a side question, housekeeping-wise, can you give us guidance for the tax rate for the March quarter?

On pricing, Bill, we recently announced pricing effective mid March on Duracell in North America.

We've taken foreign exchange related price increases to protect the structural economics of our business in places such as Venezuela.

We've increased pricing in India one Tide Plus in July, and again we did that in October.

In September, we increase prices on feminine care and diapers in India to recover changes in excise duties.

We are also taking some actions in Oral Care in Western Europe, some in Baby Care in Central Eastern Europe, Middle East and Africa.

I've talked about India laundry, and I've talked about Venezuela.

So that's generally the pricing that we have taken.

Part of the Duracell pricing is of course returning to the pre-value plan pack sizes on affected AA and AAA packs, and we are increasing the pricing across much of the balance of the battery portfolio.

The battery announcement affects about 70% of our business.

On the tax rate, Bill, the two items that I mentioned of the three that affected our tax rate in O&D, those are the core items, will carry forward.

So to the extent we continue developing disproportionately, growing disproportionately in developing markets, that will continue to have a tax benefit that is sustainable going forward.

Obviously, the US tax legislation is sustainable going forward.

We've given you a tax rate on the year.

You can get pretty close to the quarter with the actuals in that number.

Tax is an area of volatility, but I think you can get pretty close.

I just want to dwell on that point for one more minute.

If you look at the drivers of the organic tax rate on the quarter, I do want to reiterate the point that we really view two of those as completely sustainable going forward.

So really there is, if you will, a one-time item related to successful defense of tax audits.

That's $0.03 to $0.04 on the second quarter.

Joe Altobello, Oppenheimer.

Thanks, good morning guys.

I just wanted to follow-up on the answer you gave to Bill Schmitz regarding pricing.

Are those pricing changes incremental to your business model?

The reason I ask is because (inaudible) you're talking about roughly and incremental $0.16 or $0.17 headwind from commodities.

I'm just trying to figure out how you're making that up.

It doesn't sound like you're pricing commentary is all that different on a full-year basis.

So I'm just trying to figure how those two statements equate to each other.

Thanks.

We haven't taken yet -- Bill, you're absolutely right -- Joe, sorry -- commodity related pricing increases to any large extent.

Obviously, it would be inappropriate for us to comment on future pricing activities, but we'll continue to stay committed to a healthy economic structure, both through cost savings as a way to offset commodities and, where appropriate, we will take price increases.

Connie Maneaty, BMO Capital Markets.

Good morning.

Could you talk in some detail about the profit dynamics in the Fabric and Home Care segments again?

Because as I am looking at the quarter, are we headed for another period where the profit will have declined for an extended period of time?

What do you think would start to turn that in a more sustainably healthy direction?

As we tried to explain at a company level, but it's clearly true in Fabric and Home Care, we get into a much better comparative cost situation in the back half across the board.

The commodity costs index in the second quarter is much higher than it will be in the back half of the year, again because commodities in the base period started their ramp-up in the back half.

You will recall last year that we had significant -- that our marketing expense was significantly back-half loaded.

This year, it's more evenly distributed.

Foreign exchange was a hurt and the first half of this year is a help at current spot rates and the back half of next year.

What you're seeing on the income statement for Fabric and Home Care in the second quarter reflects all of those dynamics, but also reflects the fact that Fabric and Home Care is one of our most commodity-exposed businesses.

So that commodity increase that occurred has a disproportionate impact on that segment.

Typically, where we have commodity-exposed categories and at the appropriate levels of commodity price increases we would look to price to recover.

Dara Mohsenian, Morgan Stanley.

Good morning.

Clearly, you've sacrificed some profitability here in the short-term over the last few quarters as you focused on volume growth, and yet your organic sales growth is coming in at the low end of what you expected and is pretty muted on a year-over-year basis.

At the same time, commodity costs are now re-inflating.

So I'm just wondering if, conceptually, we should expect to see more of a focus on profitability and pricing going forward, and if you'd expect any adjustment to that strategy.

When we started on the strategy back in the April, May, June quarter of 2009, we talked about the fact that we needed to grow market share profitably.

At that time, we were growing market share in about a quarter of our business, and we had suffered one of the worst quarters in a few decades in our company.

What we've been doing is, following that glide path towards our guidance for this fiscal year which is 7% to 9% core EPS growth for the fiscal year and 5% to 6% -- I'm sorry, 4% to 6% organic NOS growth.

We are on that glide path.

We are now growing market share or holding market share in about 60% of our business globally, and we think the strategies are working.

Just to build on that, we are actually, on an earnings per share standpoint, ahead of the glide path in terms of slightly over-delivering the first half of the year.

So just to reiterate Bob's point, we're right on track in terms of what we expected to deliver, which involves a significant amount of earnings per share growth this fiscal year.

Doug Lane, Jefferies.

Good morning everybody.

Just looking at changes since the September quarter, I notice that, on your market share progress, there is one less of your top 17 countries and one less of your $23 billion brands growing market share.

I just wondered if you could update us on the current market share trends accounting for that differential.

What I would say is that our market share is stronger today than it even was in the last quarter.

You know, metrics may look otherwise, but the point that we made which I think it significant is for the first time in some time, we are now growing market share over the past 12 months, past nine months, past six months, past three-month period.

That's a very difficult thing to do -- and past one-month period.

If you go across our regions, every region is growing market share over every one of those time periods.

So in other words, let's take North America as an example.

The past three months, we are up 0.1%, past six months we are up 0.1%, past 12 months, Asia the past three months up 0.6%, past six months up 0.6%, past 12 months up 0.4%.

So as we look across the regions, our market share growth is strengthening.

As we look across our businesses by business unit, our Household Care market share is strengthening, our Health and Well-Being market share is strengthening, and our Beauty market share is strengthening from what we would argue was a pretty unacceptable level over a year ago now.

So, we feel like the market share is growing and that it's going to continue to grow.

Further evidence of that is the fact that private label shares are down versus year ago for three straight reporting periods in the US and six consecutive periods in Western Europe.

I understand the volume results of some of our competitors have not been very good.

Ed Kelly, Credit Suisse.

Good morning.

I'd like to get back on the commodity headwind issue.

Could you just discuss your confidence in the ability to pass through commodity-based price increases in an environment where the consumer is clearly a little bit weaker than what you thought?

Will the consumer and even the retailer for that matter accept them?

Then on the cost savings side, how much of the incremental commodity hit will be absorbed by cost saves?

Is that in COGS, SG&A or both?

Thank you.

In terms of ability to pass through, we are really in a very good position in that regard.

You may recall us talking historically about our desire always to link pricing, when it's necessary, to innovation.

With our focus on innovation and a very strong portfolio of innovation in the second half, we are actually at a pretty good place.

These commodity cost increases, where they are occurring, are broad-based.

In other words, they are affecting not just ourselves but they are affecting private label brands.

So, we don't expect there to be a surprise in the context of retailer receptivity.

They're going to have a need here as well to the extent these trends continue.

We'll obviously be working to develop substitute materials for those that are rising quickly.

Some of them are very, very specific, like lauric acid, and we know what those chemicals are and we will work to obviate the cost increases while as John says, if we can't offset it, we will price for it.

To the question of how much we can offset, if you look at the second quarter, we offset almost all of the commodity cost increase.

We had 140 basis points of savings that offset most of the 160 basis points of commodity cost increases.

As we talked about on analyst day, we will continue focusing on SG&A savings as well, so it will be a combination of all of the above.

Jason Gere, RBC Capital Markets.

Thanks.

Good morning.

Just a question I guess on total marketing spending, really tradesman versus advertising.

So we are hearing right, it sounds like you're saying that promotional spending is starting to narrow a little bit.

I was wondering if you could kind of talk about some of the categories where you are starting to see that trend.

Then just when we think about the back half, the advertising, I know you have a really tough comparison versus last year, and I don't think you were really planning on a major step-up.

Hopefully, that plays into some of the stronger operating profit in the third quarter.

But with -- it seems like there's a little bit struggling of demand in North America and your competition, as you pointed out, their volumes have not been good.

I was just wondering about the need to even increase the advertising beyond what you stated at your analyst day.

Thanks.

The marketing spend that we are seeing around the world, and I think North America is similar as well, is we are seeing somewhat of a deceleration of temporary price reduction or discounting.

We are also seeing around the world, as Jon mentioned earlier, our comparisons in marketing spend are going to work to our favor in the second half.

Certainly, that's part of the margin improvement in the second half as we come off of those higher marketing spend levels, yet we expect to tend the year about where we've ended every other year, which is about 10% or so of sales, which of course will be a higher number than the previous year since the sales number will be higher.

With the broad market share progress that Bob talked about, that's I think symptomatic of really having our marketing program where it needs to be.

So, I don't expect to see significant increases going forward.

As a result, as Bob rightly described, on a comp basis, that should pick us up some earnings headwind -- or tailwind in the back half.

I should say that our marketing effectiveness, we measure marketing ROI and marketing spend.

Our marketing effectiveness is at all-time high levels.

Part of the reason for that is we are doing a better job operating as one company, as we talked at the analyst day.

When we operate as one company and take advantage of the full portfolio of brands that we have, it results in greater growth and it results in much better efficiency of our marketing spend.

Jon Andersen, William Blair.

Good morning.

I was wondering if you could compare and contrast perhaps the performance of some of your newer premium items versus mid-tier value offerings.

I am just trying to get a sense of whether you're seeing any differences in the strength of your portfolio at a premium versus kind of value end.

Thank you.

Thank you Jon.

We already talked Fusion ProGlide, which I think is a wonderful example of, when you innovate at the high end, there is a lot of consumer demand.

Just to reiterate because it's a key metric, the sales of the Fusion ProGlide cartridges have been at a rate that's more than six times the rate of ProGlide razors.

That means people are coming back and buying more cartridges because they like the shave so much.

In fact, as Jon said, we have not been able to supply them all.

While our competitor replacement cartridges of their new item are only selling at about two times the razor sale.

Another great example is what we are doing on Crest Clinical Sensitivity and Crest Clinical Gum Protection, both of which are premium priced.

They began shipping in August, and they're off to a great start.

While early, the current in-market results have doubled our share in the sensitivity space.

As opposed to a competitive product called Pro-Relief, Pro-Health is already FDA approved, and therefore it's in the US now.

With this launch, we have two sensitivity SKUs in market, both Crest Pro-Health Sensitivity Shield and Crest Clinical Sensitivity.

Both are doing extremely well despite the fact that they are premium priced.

Pampers Dry Max is another premium priced item.

It's holding or growing share in 13 of our top 17 markets around the world.

It's now in more than 50 countries worldwide.

The results in Europe have been very strong with cumulative shipments up double digits since launch since last May, and value shares are up strongly versus year ago.

Diaper value shares in Western Europe, for example, are 58%, which is up 2 full points versus year ago.

In the US, Pampers shares are up 1.31%, and the vast majority of consumers who've tried Dry Max are very happy with it, with the comfort, with the dryness, and with their baby using it, and it's going well.

So, the premium price innovations are doing extremely well and they are doing well because there is a lot of demand out there when you innovate.

On the lower end, as Teri mentioned in some of her discussion, we are seeing significant growth, for instance, in India Fabric Care, plus 50%.

We are continuing to innovate very successfully at the low end as well.

We wouldn't be generating the kind of volume growth, 10% volume growth, in developing markets if we weren't being successful really across the portfolio in terms of our innovation efforts.

Bill Chappell, SunTrust.

Good morning.

I'm sorry if I missed this, but you talked a lot about developed markets being below expectation.

Did you say anything about developing markets, and maybe how they came in versus expectations and maybe how that's progressed throughout the quarter and into this year?

Just to make sure I'm clear on my articulation, what I said was that the market growth rate --

Right, that's what I'm talking about.

(multiple speakers) was not to as high as we expected.

In terms of developing markets, they are right on.

They grew about 8% in value terms, and pretty consistently.

Greater China was 8%; Central Eastern Europe, Middle East, Africa 6%; Latin America 8%; the Aussie end markets and Korea about 8%.

So you see a real consistency there that averages about 8%.

That is exactly what we projected at the beginning of the year.

We said at the beginning of the year 7% to 8%, and it's right about there.

It's really in the developed markets where we had projected higher numbers, and we had projected 3% to 4% and we're basically seeing, well, in the last quarter flat.

But we -- I'm sorry, 1% to 2% is what we had projected and what we are seeing is flat.

Our expectation is that chances are that will pick up in the second half because we are seeing an economic recovery in these markets.

But there still are some concerns out there, whether it's the fiscal and financial situation in places like Ireland, Spain or Greece, those are -- and the tax situation in the US, which we kind of dodged a bullet in December.

We have to work with the US government to get the US corporate tax rate down.

We now have the second highest corporate tax rate in the world.

In the spring when Japan lowers theirs, we will have the highest.

So we are working hard to help the US government understand that US companies, multinationals, need to be competitive.

Lowering the corporate tax rate is one way to do it, and moving to a territorial versus worldwide system is another way to do it.

Just a question of our own growth trends in developing market, those are accelerating as we bring more of our portfolio to bear, so we are very optimistic in our view for our business in developing markets.

Yes, when you look at the number of opportunities that Jon talked about in his message that we are closing in the next half, it speaks to the kind of fundamental systemic sustainable growth we are going to create as we enter these new category/country combinations around the world.

That's what we've done in the last six months.

We are going to continue doing that.

Tim Conder, Wells Fargo.

Thank you.

Could you give us a little more color on the developing and emerging markets?

Where are you taking share?

Is it coming from local competitors, larger competitors?

Just by region maybe answer that question.

Thank you.

With the kind of share that we are growing right now, Tim, where you're growing across all time periods, across most geographies, across most business units, the answer would have to be all of the above, because it's taking bits of share from every competitor rather than necessarily targeting a single competitor, while at the same time we have to say that our accelerated volume growth rate is also because we are in many categories where there virtually is no competitor.

If you think about India diapers, for example, the competitor there largely is the bottom that's not diapered at all.

When you think about even hair care in China, getting the consumer to wash their hair more than once a week.

There's huge opportunity out there that isn't about just share growth, and that's why the 8% growth in developing markets is so critical.

Caroline Levy, CLSA.

Good morning.

Thank you.

I'm looking at price mix, and I'm wondering if you can articulate -- and I'm sorry if you have already -- but how much of the negative was country-driven versus the faster growth in lower-priced items.

I'm also wondering, with Wal-Mart's announcement about its desire for more low-priced product, if you feel you are already where you need to be, or if that's going to put more pressure in the US and other developing -- developed markets on you needing to innovate in the lower price point.

First, on the specific question on the components of mix, mix had a 2 point negative impact.

Half of that or 1 point was country mix.

The rest was split across other forms of mix, but it's largely country mix, given the disproportionate growth in developing markets that we've been talking about this morning.

Relative to Wal-Mart, we are growing the business very well in Wal-Mart International and Sam's.

The place where we are focusing to help Wal-Mart grow more is in US stores.

The issue in US stores is not, for our business, is not largely SKU or price or even brand portfolio driven as much as it is sheer execution.

We have partnered with Wal-Mart to create Family Movie Nights, which is a great thing.

Our feedback from consumers is outstanding on this.

They want to have a night they can get the family together and watch a movie and not have to have the remote in their hands to change channels.

But our execution of that has not been as good as we would like.

There have not been as many items in the tab as there should be; there haven't been as many displays in-store.

Another example of that is Wal-Mart took the decision some years ago to remove battery centers from their stores, and they lost quite a bit of business in the battery business.

We are now working with Wal-Mart to reinstitute those battery centers.

Not surprisingly, they are gaining back their closure rate and their market share on batteries.

So it's really about our execution with Wal-Mart, Wal-Mart's execution with us, than it is about introducing a bunch of new low-priced SKUs.

Ali Dibadj, Bernstein.

Thanks for taking the question.

I would love I guess some help maybe, because on the one hand, I'm hearing you saying that the consumer will actually be able to absorb price increases from commodities.

But on the other hand, you painted this picture that the consumer found it difficult to buy shampoo or diapers even after Christmas.

So I guess, in that context and in the context of all your peers accelerating their own cost cutting to the level that's in line if not more than yours proportionally, I kind of want to ask about one potential way of plugging a hole, which is acquisitions.

It seems like you've gone more open about acquisitions over the past little while, so 18 months ago, it was I would be more of a seller than the buyer.

12 months ago, is was bolt-on.

In December, it was we would not rule out a big acquisition.

It sounds like, this morning, correct me if I'm wrong, it sounds like there was more discussion about we are looking to add to our portfolio.

So in all of that, how should we think about acquisition risk, and that essentially when we see that your buybacks dropped off last quarter versus this quarter pretty precipitously?

So there's a lot in there, but that's what I'm thinking about.

Yes.

First of all, acquiring to fill a hole implies you have a hole.

As we've been trying to describe, we don't feel we have a hole.

We are well on track with our plan at the present point.

In terms our general stance to acquisition, we talked probably four years ago about being a net seller, so that was quite a while ago.

We have been focused on acquisitions, which allow us to realize our purposeness by our growth strategy.

Ambi PUR is a very good example, allowed us to get from 17 countries in air care to 84 countries serving more consumers around the world.

Those are opportunities that we are open to.

I continue to believe that a large acquisition, while never -- while you'd never write it off completely, is not a highly probable event.

The buyback pattern really reflects simply our pattern of cash flow across the year.

We expect, as I said in my comments, cash flow to accelerate as operating and earnings growth accelerates in the back half of the year.

Having said that, we have purchased $3.5 billion of shares against a target of $6 billion to $8 billion, which would lead you right to the middle of the range on a prorated basis.

So we are largely, again, on track.

The way I think of it, and I know Jon shares this, is that we should have growth plans to achieve our goals and our strategies without acquisitions.

That's why one of the things we tried to communicate during the analyst day, and I remember you where there sitting in about the third or fourth row, is we now have detailed plans to enter 250 new category country white space opportunities, enter 750 new category country price tiers, enter 950 new category country channels by fiscal year 2015.

This is not pie in the sky; this is not something we dream about.

These are hard and fast plans and we put up copies of those plans during the meeting.

So, any acquisition we would consider has to be measured as a use of cash against those opportunities that we already have.

That is a relatively high bar, because we've been so deliberate in following this strategy and staging those opportunities.

Alice Longley, Buckingham Research.

Hi, good morning.

I have some follow-up questions on the mix, and this is separate from the geographic mix.

Can you tell us within the quarter in which regions your mix was negative?

Was it negative within all of the major regions?

Number two, in which regions do you expect region mix, excuse me, to improve in the second half?

Then thirdly, you said one of the offsets to commodity cost pressures is innovation.

How can this be helpful if the mix is still negative?

Thank you.

First of all, as we just stated, the country price mix being 1 point, that leaves 1 point of mix across the geographies that isn't related to differential sales growth across those geographies.

That is fairly consistent across the world.

There are major differences in countries that we are seeing in terms of either brand mix or size mix that drives the rest of that.

As I mentioned earlier, on our premium items, we've actually been supply constrained, which has held back our ability to fully leverage those initiatives both from a topline and a bottom-line standpoint.

Now, we expect that to improve starting now, so that should be a help to price mix going forward.

Linda Bolton Weiser, Caris.

Hi.

It just strikes me that your commentary about your earnings performance in general from a big picture perspective really relates a lot more to macro factors these days than it did ten years ago, you know, commodities and overall category growth.

On the idea of category growth in developed markets, the only way to do that is through innovation, to expand the categories and then you'll have category growth.

So can you -- it seems the innovations you are coming out with are not truly innovations in the sense like when you first came up with teeth whitening.

That was expanding the Oral Care category.

3D White Express is not really a true innovation, just as an example.

Can you kind of give us some comfort that, in FY 12 or FY 213, there's going to be more category expanding innovation that will help the growth in developed markets?

Well, the way we look at it is that we need to innovate in everything we do.

So many of the innovations we do are category expanding.

In other words, if you can get someone to wash their hair one more time a week -- for example, Head & Shoulders works better to prevent dandruff and to take care of your scalp the more frequently you use it.

So as we advertise Head & Shoulders around the world, the number one selling shampoo around the world, we obviously work to get people to wash their hair more frequently because they get a better end result and the product works better.

So we do work in existing categories to expand them.

Separately, we work to create new categories.

We said in our analyst day that we are really ramping up our efforts to do more discontinuous innovation.

Bruce Brown talked about this.

We set up new business development units under each one of the vice chairs, and we are doing a lot of work.

In fact, you may have seen the Fortune magazine article about the $2 a day consumer in China.

We're doing a lot of work to figure out how to create new categories where categories don't exist.

I think, frankly, we would all argue with you a little bit as to whether something like Crest Pro-Health or 3D white is an innovation.

I would simply point to the way the consumer votes, which is look at our market share, look at our volume results, look at our profit result in Oral Care, and that's how the consumer is voting.

I think they are voting it's an innovation.

Mark Astrachan, Stifel Nicolaus.

Thanks and good morning everyone.

I'm curious whether the supply constraints in the December quarter were more pronounced than they were in the September quarter.

Then just unrelatedly, curious how you can effectively balance these rising commodity costs and your need to offset those cost savings with your focus on going after market share.

It would seem like, to some extent, it sort of constrains one versus the other, so any sort of color there would be helpful.

Thank you.

On the supply constraints, it would be true that, over the time that you're supply constrained, you're exacerbating the volume versus the potential because you're cutting featuring, you're cutting merchandise, you're cutting displays.

That obviously has a cumulative impact.

So could we -- if we could have, for example, have the features on Fusion ProGlide in the United States, certainly the business in December would've looked much better than it does today.

Relative to cost savings, cost savings is endemic in our culture.

We talked at the analyst day about simplifying the organization.

We talked about simplifying the number of SKUs, simplifying the number of colors of plastic, operating in different ways in logistics.

So simplification is big for us.

The other thing that's big for us is digitization, where we are doing more of our R&D using simulation and modeling.

We are doing more of our demand planning using simulation and modeling.

We're doing a lot more in digitizing our business from end to end, from molecule creation to running our plants off of the point-of-sale data of our retailers.

So that's critically important to us.

Then the third area of cost savings that we are working as well is to get more from the size of our company as operating as one company, because there is tremendous synergy in a company this size, and have not mined at all.

So we are working to do that.

So we've got quite a strong program within the Company around simplification, around savings, and that's enabled by digitization.

We're going to keep after that.

Basically, the way we look at it is are those things that Bob described provide the financial fuel to invest, and commercializing and marketing our products.

So I would not expect us, as part of squaring this circle, to be reducing investments in that area.

We plan to continue to invest very strongly there, fueled by cost savings in other areas.

Only one other point that I would give you, Mark, to your question on the supply constraint, just trying to dimensionalize that, we think that was about 30 to 40 basis point impact on the topline in the second quarter.

So that is significant.

That's the difference between, in our case, a 3 and a 4.

Again, it should turn into a tailwind in the second half.

Alec Patterson, RCM.

Thank you for hanging in there.

Just as you guys are trying to illustrate how you believe you're succeeding on your long-term goals of growing in excess of the categories and filling out white space and all that, it would be helpful if you could provide some sort of measurement of that success in market share and category growth that aligns with the way you guys report your results.

So I was wondering.

Do you have market share and category growth rates by your GBUs, by the six basic segments, that you can share with us?

We have -- I'm sorry Jon, go ahead.

No, go ahead.

Alec, we have market share by GBU, and I tried to refer to that earlier, that it's an improving situation across each one of the GBUs.

Household Care, for example, has gone from plus 0.6 over the past 12 month to plus 0.8 over the past three months.

Health and Well-Being has gone from flat to plus 0.1, flat over the past 12 months to plus 0.1 over the past three months.

Beauty and Grooming has gone from flat to positive over the past six months plus 0.1 to about flat now, but they are impacted probably more than the other GBUs by lack of supply.

We talked about Fusion ProGlide as an example.

So, that's becoming more and more positive, particularly as I look at the numbers by country around the world.

So those are the shares by business unit.

This is John.

I think that you ask a good and fair question.

I think that where we can help you and others more in the future is to build in some of the commentary you're suggesting in Teri's segment commentary.

There's no reason we can't talk about market sizes and market share in that context.

So thanks for raising that as an opportunity, and we will follow-up on it.

Ladies and gentlemen, that concludes the question-and-answer session.

I would like to turn the conference over to Jon Moeller for closing remarks.

I would just reiterate what we've been talking about all morning.

In our view, we had a very strong quarter, strong volume and market share momentum, sales growth within our guidance range, albeit at the low end, earnings per share ahead of guidance albeit with some tax help.

We continue to feel we are right on track towards delivering 4% to 6% organic growth sales growth on the year, 7% and 9% core earnings per share growth, and 90% or better free cash flow productivity.

Thanks for your time this morning.

Thank you.

Ladies and gentlemen, that concludes today's conference.

Thank you for your participation.

You may now disconnect and have a great day.