寶潔 (PG) 2011 Q4 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).

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 to 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, good morning, everyone.

Bob McDonald and Teri List join me this morning.

I'll begin today's call with a summary of our fiscal year and fourth-quarter results.

Teri will cover business highlights by operating segment.

Then Bob will provide his thoughts on our strategy and focus areas going forward.

And I'll conclude the call with guidance for fiscal year 2012 and the September quarter.

We'll take questions after our prepared remarks and we'll be available following the call as always to provide additional perspective, if needed.

We entered fiscal year 2011 with 3 clear objectives.

First, to continue executing our purpose-inspired growth strategy to touch and improve more consumers' lives in more parts of the world, more completely.

Second, to grow market share.

By growing organic sales 1 to 2 percentage points ahead of underlying global market growth rates.

Third, to grow core earnings per share in the range of 7% to 9%.

We delivered on each of these objectives, despite significant external challenges including a rapid increase in commodity and energy costs, little to no market growth in developed regions, and market disruptions ranging from political instability in the Middle East and North Africa to the natural disaster in Japan.

And we did this while strengthening investments in our innovation and advertising programs.

First, relative to our strategy, we've accelerated the expansion of our product portfolio vertically, horizontally and into new geographies.

We entered 32 new category country combinations last year.

We entered 78 new category price tier combinations.

And we entered 75 new category channel combinations.

In addition, we launched a large number of important product upgrades across the world.

Each of these moves enables us to serve more consumers in more parts of the world more completely.

We generated strong organic volume growth, growing 5% for the fiscal year.

The growth was broad-based, with increases in 5 of 6 reporting segments, 21 of 24 billion-dollar brands and 15 of our top 17 countries.

On a 2-year cumulative basis volume growth is up 10%, ranking P&G toward the top of our global competitive peer group.

We grew organic sales over 4% for the fiscal year, roughly 1 point ahead of underlying market growth of about 3%.

This top line growth rate was ahead of last fiscal year's growth rate and generally ahead of the growth rate of our competitive set.

Global market share was up for the year, with 4 of our 5 regions holding or growing share.

We held or built market share in businesses representing about 60% of sales, on 17 of our 24 billion-dollar brands, and in 11 of our top 17 countries.

All-in earnings per share was $3.93 for the year.

Core earnings per share was $3.95, up 8%.

At the midpoint of our initial guidance range for the fiscal year, and consistent with our long-term target range for earnings per share growth.

We delivered on each of our key objectives, strategy, share growth, and earnings per share growth, in a very difficult operating environment.

Commodity costs were a year-on-year headwind of more than $1.8 billion before tax.

This was about $1 billion higher than we expected at the beginning of the year.

And created an earnings per share headwind of about $0.25 per share, or nearly a 7 percentage point drag on earnings per share growth versus our going-in expectations.

Said differently, absent these commodity cost increases, core earnings per share would have been up strong double digits.

Global market growth came in at the low end of our initial expectations due to slow growth in developed regions.

For the year, developing markets grew about 8%, but developed markets grew only about 1% on a value basis.

Despite the cost and market growth challenges, we remain committed to the execution of our strategy.

We continue to invest in new innovations and market expansions that will deliver long-term growth for the business and returns for our shareholders.

We invested $2 billion this past year in research and development.

A figure that's increased for the past 2 years, even as we've improved productivity.

We invested $9.3 billion in advertising, or 11.3% of sales, to communicate the benefits of our brands to consumers.

Advertising spending has also increased each of the last 2 years and is now $1.8 billion or 24% above what we were investing just 2 years ago.

The combination of substantial cost savings, and both cost of goods and SG&A, and a lower than expected tax rate enabled us to maintain investments in our growth strategy and to offset the rapid increase in commodity costs without sacrificing earnings per share growth.

The all-in effective tax rate for the year was 22.3%, and the core rate was 23.5%.

These rates were below historic levels due to a number of successful audit resolutions and the mix benefit from faster growth in developing markets where tax rates are generally lower.

Free cash flow for the year was $9.9 billion, yielding free cash flow productivity of 84%.

This was a few points below our target level of 90% of net earnings.

Inventory values were up for the year due to the impact of higher commodity costs.

Also we saw an increase in trade receivables due to strong shipments ahead of our price increases toward the end of June.

In April we declared a 9% increase in the quarterly dividend, marking the fifty-fifth consecutive year of dividend increase and one hundred twenty-first consecutive year in which we paid a dividend.

We paid $5.8 billion in dividends to shareholders last fiscal year.

We also repurchased $7 billion in P&G stock at the midpoint of our going-in guidance range of $6 billion to $8 billion.

Over the past 3 years P&G has returned over $35 billion or about 105% of net earnings from Continuing Operations to shareholders through dividends and share repurchase, generating an effective annual cash return of nearly 7%.

In addition to delivering on our growth objectives we, took meaningful steps to focus and improve our portfolio of businesses.

The ones which more fully leverage P&G's core strengths, are demographically advantaged and are in higher-growth, more asset-efficient categories.

Early last fiscal year we completed the acquisition of the Ambi Pur business.

This acquisition accelerated our expansion of air care products into about 70 new markets and creates a platform for growth to build on the billion dollars of annual sales generated by the Febreze brand.

In March, we announced plans to create a partnership with Teva Pharmaceuticals, which will enable us to expand both the categories and the markets in which we participate in the consumer healthcare space.

We're excited about the prospects for our partnership.

Teva brings industry-leading capabilities in product development, drug registration, manufacturing, and pharmacy channel sales to the partnership.

We bring our core strengths in consumer and shopper understanding, brand building, and go-to-market capabilities in mass, grocery and high-frequency stores.

We think this combination of capabilities is unmatched in the consumer healthcare industry and may be unmatchable.

We continue to pass important milestones toward closing the transaction, including the signing of several key contracts in the last few weeks.

We divested several smaller regional businesses including the Zest and Infasil brands which didn't fully leverage P&G's global scale.

In April we announced plans to exit the snacks business, our last remaining food and beverage category.

Pringles will be an excellent fit with Diamond Foods.

And P&G shareholders will benefit from the value derived from this tax-efficient transaction.

We expect to complete both the Teva and Pringles transactions by the end of this calendar year, and for both to be value accretive for shareholders.

Moving now to fourth-quarter results, organic volume growth was 3%, comparing against a base period where organic volume was up 8%.

On a 2-year stacked basis, organic volume is up 5.5%, in line with the strong pace of the last 2 quarters.

Volume progress continued to be broad-based with growth in 5 of 6 reporting segments, 16 of 24 billion-dollar brands, and 13 of our top 17 countries.

All-in sales grew 10% including a 5% benefit from foreign exchange, and a roughly neutral impact from acquisitions and divestitures.

Organic sales grew 5%, our strongest quarter this year.

We implemented a number of price increases in the June quarter.

As expected, we saw a spike in sales during the month of June due to retailer inventory increases ahead of our price increases.

We estimate that this dynamic increased organic sales for the quarter by about 1 point, which will obviously have the opposite effect on the September quarter.

Pricing added 3 points to sales growth, due a combination of price increases and reductions in promotional spending, mainly to offset rising input costs.

The mix reduced sales by a point as developing markets continued to grow substantially faster than developed markets.

Earnings per share were $0.84 for the quarter, up 18% versus last year.

Earnings growth benefited from strong sales growth, operating profit margin improvement and the profit from a minor brand divestiture.

Operating profit margin was up 10 basis points versus the prior year.

Gross margin was down 120 basis points due to higher input costs.

Commodity and energy costs hurt gross margin by approximately 350 basis points, but were largely offset by pricing, cost savings, productivity improvements and volume leverage.

SG&A spending as a percentage of sales was down 130 basis points.

While advertising spending was up more than $700 million for the fiscal year, fourth-quarter spending compared to a very strong base period that included investments behind a series of product launches including Gillette ProGlide and Crest 3D White.

Productivity improvements, cost savings and sales leverage also reduced SG&A as a percentage of sales in the quarter.

The effective tax rate for the quarter was 21.7%, about 2 points below our going-in expectations for the quarter.

But still more than 5 percentage points higher than last year's rate of 16.5%.

Stepping back, we're very pleased with our fiscal year results and the trend of the business.

We've made significant steps in advancing our strategy and further strengthening our portfolio of businesses.

We delivered strong volume, sales and market share growth.

We grew core earnings per share within our guidance range, within our long-term target range and at a higher rate than the prior year.

While investing in both our innovation and advertising programs, and despite significant cost and market growth headwinds.

We had a solid cash year and returned through dividends and share repurchase more than 100% of net earnings to shareholders.

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

Given the amount of information we would like to cover during the call, I'll keep the business comments relatively brief, focusing primarily on the results in the biggest businesses.

As Jon indicated, we delivered strong top line growth across our businesses this quarter.

And very importantly, we returned to positive price mix.

We had requests for a bit more perspective on market growth rates below the Company level.

In the last quarter, beauty and grooming market was up about a little more than 4%, while household care grew a little bit below 3%.

This averages out to the underlying market growth of about 3% that Jon mentioned earlier.

Touching on each of the segments briefly.

Organic sales in beauty grew 3%, on 2% organic volume growth.

2% positive pricing was offset by geographic and product mix.

Within the segment, retail hair care volume increased low single digits with value share up nearly half a point.

Volume declines in North America were more than offset by mid single digit volume increases in developing markets, with Asia and Latin America both up double digits.

In Latin America, Brazil had another strong quarter with shampoo and conditioner value share increasing more than 3 points, and Pantene shipments growing more than 30%.

Female skin care shipments grew mid single digits with strength in developing markets offsetting modest declines in developed markets.

North America volume declined low single digits primarily due to the Olay UV reformulation and restate that began in the March quarter.

We now have all Olay UV SKUs back to full supply.

In developing markets, Olay volume nearly doubled in India and Saudi Arabia and more than doubled in the Philippines behind Olay Regenerist and Natural White.

Our Prestige business was mixed.

SK-II grew high teens with strong growth in China behind distribution expansion into 5 additional cities.

Prestige fragrance volume was flat following the strong sell-in from product launches in the March quarter.

The launches are all doing well, contributing to our leadership position in global Prestige fragrance.

Grooming organic sales and volume grew 1%.

2% of pricing health was offset by geographic and product mix.

Male blades and razors volume was flat as developed markets declined high single digits but was offset by volume increases in developing markets.

Asia volume grew high teens led by 25% growth in India.

Growth was across the price tiers with Gillette Guard now reaching nearly a 4% share and adding 11 million new users.

North America volume was down double digits due to the high base period that included the Fusion ProGlide launch.

Western Europe volume was down mid single digits.

Continued growth in Fusion from the recent ProGlide launch was more than offset by declines in Mach 3 due to increased competitive activity.

Moving to healthcare, organic sales were up 7%, behind organic volume growth of 4%.

Pricing contributed 4 points with 1% unfavorable product mix.

Global oral care volume increased low single digits with North America up mid single.

The Crest 3D White regimen continues to be a key contributor to the growth, increasing to nearly 9% of the US oral care market.

Western Europe volume was flat with softness in manual toothbrushes offsetting growth from our Oral-B toothpaste expansion market.

These markets continue to perform well with value share up more than 2 points.

While it's still early, our UK Oral-B toothpaste launch is off to a strong start with week-3 shares above 16%, and more positive news even this morning.

Developing markets shipments increased low single digits.

In Brazil, Oral-B volume was up over 65%, and value share grew for the ninth consecutive month to about 5% on a national basis.

Asia volume was up low single digits, led by India, where Oral-B toothbrush shipments increased nearly 30%.

Feminine care volume was up mid single digits with double-digit growth in developing markets, offset by a modest decline in developed markets.

Latin America volume was up double digits behind strong growth in Venezuela and in Brazil behind the Naturella launch.

Greater China was particularly strong where we recently relaunched Always, and introduced a Whisper line extension.

Naturella volume in Central and Eastern Europe, Middle East, Africa grew nearly 20%.

North America and Western Europe volume is flat while Japan shipments were down behind accelerated market decline from the recent natural disasters.

In snacks and pet care, organic sales and volume were down 1%.

Pricing behind increased promotions in the snacks business was negative 1.

Mix added 3%, largely from the Natura business.

Snack shipments increased high single digits with developing markets growing over 30%, and developed markets growing low single digits.

Latin America volume increased more than 50%, primarily behind distribution expansion into new channels and customers.

Pet care organic volume decreased double digits as we continue to rebuild consumer and customer support after several months of supply constraints.

Fabric and home care organic sales grew 4% on a 3% organic volume increase.

Pricing contributed 3%, while product mix was negative 1.

Fabric care shipments were up low single digits with balanced growth across developed and developing regions.

In developed markets, Japan volume increased double digits, primarily behind pipeline volume from the launch of our super-compacted Ariel in June.

North America volume increased mid single digits.

The main drivers were powdered detergent forward-buying related to the June price increases and Downy fabric enhancer volume increases behind the Clean Sheet Week campaign.

Western Europe volume decreased mid single digits, due to increased competitive activity and market decline.

In developing markets, Latin America grew double digits, primarily behind liquid detergent growth in Brazil, Argentina and Chile.

Asia volume also increased double digits with India laundry volume growing nearly 20% and value share up nearly 3 points.

Shipments in the CEEMEA region declined mid single digits, primarily due to larger price gaps versus competition from recent price increases.

Home care organic volume increased mid single digits with all regions growing.

North America volume grew low single digits, driven by gain in dish care which is approaching a 5% value share in the US, as well as some forward buying by customers due to the June price increase.

Developing market organic shipments grew double digits.

Central and eastern Europe, Middle East, Africa all-in volume increased 20% with growth divided between dish care expansion and the Ambi Pur acquisition.

Latin America growth continues to be strong behind the Febreze introduction into Mexico, Brazil and Columbia.

Batteries volume was flat on a global basis as value share increased half a point.

Strong volume growth and distribution gains in greater China and CEEMEA was offset by volume declines in Western Europe and Latin America, due to competitive activity.

In baby and family care, organic sales increased 10%.

Volume grew 8%; price increases added 3%; geographic mix was a negative 1%.

Baby care shipments increased high single digits and global value share was up 1.5 points with all regions growing.

Developed market volume was down slightly behind continued diaper market softness.

Developing market volume grew about 20%.

In greater China, India and the Philippines, volume was up over 25%, driven by marketing investments in the Golden Sleep initiative, deeper distribution and market growth.

In Venezuela, volume grew over 50%, with increased local product capacity supporting strong consumer demand.

In Brazil volume grew over 30% behind distribution gains and increased marketing support.

Family care shipments were up high single digits.

North America Charmin was up double digits and Bounty grew high singles.

The volume increases were due to a combination of product innovation, and customer forward-buying related to the price increases effective in June.

That concludes the business segment review.

I'll hand the call over to Bob.

P&G is focused on touching and improving lives, now and for generations to come.

This purpose is tightly linked with our financial goal of sustainably delivering total shareholder return in the top third of our peer group.

It also informs our strategic choices.

Our overarching growth strategy is to touch and improve the lives of more consumers in more parts of the world more completely.

This is a demanding aspiration.

There are nearly 7 billion people on the planet today and we want to reach all of them with products and services that make their everyday lives just a little bit better.

This strategy is fundamentally right for P&G because it inspires our people and our partners, it focuses us on the greatest growth opportunities and it leverages our core strengths of consumer understanding, innovation, brand building, go-to-market capability, and global scale.

We know that if we execute this strategy well, we will be rewarded with sales and profit growth, market share leadership, a strong Company reputation that attracts partners, employees, and consumers.

Ultimately, we will create value that allows our people, our shareholders, and the communities in which we live and work to prosper.

There are 3 important enablers of this strategy, enablers we call How To Win Choices.

And they are innovation, integration, and simplification.

Innovation continues to be at the heart of our success.

It's how we serve consumers and it's the engine that drives our growth.

We spend about $2 billion a year on research and development.

This is about 60% more than our next closest competitor and more than most of our competitors combined.

We are constantly working to increase the benefits of our brands and the benefits that they provide to consumers, serving them more completely.

In 2011, we launched many important product upgrades which drove growth.

These included Crest 3D White, which was rated the most successful new product launch in the United States last year by Symphony IRI in terms of 1-year sales.

3D White is one of the key reasons we have been able to expand our market share leadership in the United States toothpaste category.

We quickly globalized the Pampers Dry Max absorbency and thinness upgrade from last year.

This year we added new 3-way fit upgrade that includes new softness, comfort and aesthetic benefits.

This combination of upgrades helped Western Europe Pampers add 2 share points to its market-leading position last fiscal year.

We launched new Pantene upgrades in Asia, that have driven brand past $1 billion in sales in the Asia region alone.

Innovation also enables portfolio expansion to new price tiers.

In April, we introduced Pampers Economus in Indonesia to add a mid-priced offering to our diaper portfolio.

Last August, we launched Gain hand dishwashing liquid to expand our offerings in the United States.

In November, we launched Head & Shoulders in Brazil at a 25% price premium above Pantene and an even higher premium than market average.

We also introduced Head & Shoulders in Indonesia just a few weeks ago, again at a significant premium to the market average.

In blades and razors, we continued the expansion of Fusion ProGlide our premium-priced shaving system.

ProGlide is now available in 20 markets and we have plans to add many more countries this year.

In India, we introduced Gillette Guard, the lower entry price point for Gillettte shaving systems.

We estimate that more than 11 million new consumers tried Gillette Guard within the past 8 months after launch.

We're serving more consumers in more parts of the world by expanding our innovations to new markets.

In 2011, we expanded Olay to 16 new countries, including 2 of the largest facial skin care markets in the world, Brazil and South Korea.

In December, we launched Downy fabric enhancers into Indonesia, our first entry in the fabric care category in this market.

We also launched Downy in Brazil in early June.

Last July, we closed the acquisition of Ambi Pur which accelerated our air care expansion by several years.

We have quickly moved from playing in just 17 markets to nearly 90 markets through a combination of organic expansions of the Febreze brand and the addition of Ambi Pur.

We took another significant step in the globalization of our oral care portfolio with the June launch of Oral-B toothpaste in the UK.

Where, as Teri said, we reached above a 16% share in just 3 weeks.

And, we launched in July in Nigeria.

Our innovation is winning.

In calendar year 2010, P&G launched 4 of the top 10, and 8 of the top 25 most successful new products in the consumer products industry in North America, as measured by Symphony IRI.

For the past 16 years, P&G has had 132 products on the top 25 pacesetter list.

That's more than our 6 largest competitors combined.

We're improving the creativity and effectiveness of our advertising, which supports our innovation.

At the Cannes Festival of Creativity, P&G earned 32 awards, or Lions, nearly doubling our previous record of 17.

And more than double the combined number of Lions awarded to our 6 closest competitors.

P&G was also recognized as the most effective advertiser in the world by Effie Worldwide.

As Jon mentioned, we invested 11.3% of sales or about $9.3 billion last year to build awareness, drive trial, and create long-lasting loyalty between consumers and our brands.

Most importantly, we continue to have a robust multi-year pipeline of innovation.

Some of the new products coming soon are Downy Unstoppables, Tide Pods, Ariel with micro boosters, and the launch of Lenor laundry detergent in Western Europe.

These are just a few examples of new products that we'll launch this fiscal year in the fabric category alone.

We have strong innovation plans across all of our businesses.

To maximize the impact of our innovation and to create competitive advantage, we are integrating to operate more fully as one Company.

This is the way we turn our size into scale and our scale into faster growth at a lower cost.

One way we're driving integration is the development of strategic coordinated innovation plans across categories and countries.

We have integrated strategic plans for our top 11 emerging markets, several of which are just now entering the first stages of execution.

This integrated strategic planning is enabling us to do integrated manufacturing capacity planning.

At any point in time, we have roughly 20 new manufacturing plants in some stage of design or construction.

Today, all of these plants are being designed based on the expectation of multi-category production.

This wasn't true before we started our integration work.

So far, the business units impacted by our integrated one Company growth plans are growing organic sales at nearly twice the rate they were over the prior 3 years.

To continue investing behind our growth strategy while also delivering solid operating profit growth, we know we must improve productivity in everything we do.

Simplification is a critical driver of productivity improvement and we are pursuing opportunities in a wide range of areas.

We're working to simplify the business and the processes that support the business.

We know we can grow faster and more profitably with fewer manufacturing platforms, fewer material specifications, fewer brands, and with lower overhead spending as a percentage of sales than we have today.

To enable simplification, we are making P&G the most technology-enabled Company in the world.

This will enable us to collaborate more effectively and efficiently, inside the Company and outside the Company, with customers, suppliers, innovation partners, and most importantly, with our consumers.

We are entering fiscal 2012 in a strong position.

We delivered organic sales growth and core EPS growth consistent with our initial guidance ranges for the year.

And we grew market share globally.

We are now reaching roughly 4.4 billion consumers, an increase of about 200 million from this time last year.

And 400 million since we began following this strategy 2 years ago.

We increased global household penetration of P&G products to approximately 63%, up about 5 percentage points over the last 2 years, and on track toward our goal of 70% by the year 2015.

While we are pleased with progress we made last year, there's still work to do.

We want to accelerate operating earnings growth next fiscal year, while maintaining investments in growth to drive total shareholder return.

We are focused on 3 simple priorities to do that.

First, we need to deliver our top line growth objectives.

This includes restoring growth in the parts of the portfolio that lagged last year, and maintaining momentum in the parts of the portfolio that are already delivering strong growth.

Second, we need to get our price increases executed in the market.

In most categories, P&G is the first Company to increase prices or reduce promotion levels, which creates volume and market share risk and volatility.

We need to manage through this intelligently.

Third, we need to continue to improve productivity in all that we do and accelerate our cost-saving efforts across all areas of costs.

If we execute our purpose-inspired growth strategy with excellence, build on our successes, take the steps necessary to deal with increasing costs and address our execution shortfalls, we should deliver top and bottom line growth at levels necessary to generate leadership returns for our shareholders.

Thank you for listening.

And now I'll turn the call back over to Jon to wrap up with our guidance.

Before getting into the guidance details, just a few points of context to discuss.

This is the first guidance we've provided for fiscal year 2012 and the July-September quarter.

We're providing guidance on the basis of our current operations.

We have 2 pending transactions, exiting the snacks business, and creating the new OTC partnership with Teva Pharmaceuticals which will impact fiscal 2012 results.

We'll update guidance for these transactions when the deals close.

Our guidance ranges will be a little bit wider than normal this year, reflecting broad policy uncertainty, ongoing high levels of volatility in market growth rates, input costs and foreign exchange.

As well as uncertainty, both upside and downside, related to pricing across the portfolio.

For fiscal year 2012, we expect organic sales growth in the range of 3% to 6%.

This is based on the assumption of global market value growth of 3% to 4%, comprised of 1 to 2 points of value growth in developed markets and 6 to 8 points of growth in developing markets.

We expect to grow ahead of underlying market levels and build global market share.

We estimate the net impact from pricing and mix will contribute between 1 and 3 points of sales growth for the year.

Within this, we expect pricing and lower promotion levels will add 3 to 4 points to sales growth, and that mix will continue to be a sales growth headwind of 1 to 2 points.

We estimate foreign exchange will add 2 to 3 points to sales for the year.

Which will bring all-in sales growth guidance to a range of 5% to 9%.

On the bottom line, we expect earnings per share in the range of $4.17 to $4.33 for the fiscal year.

This equates to earnings per share growth of 6% to 10%, versus base period core earnings per share of $3.95.

We feel this wide range appropriately and responsibly reflects the range of possible outcomes.

But we would not assign the same probability to all points in the range.

Based on current spot prices, we're anticipating a commodity cost increase of about the same level we faced in fiscal 2011.

The combination of pricing, cost savings, and use of alternative materials will offset a large portion of the input cost impacts, but we will still expect to see gross margin contraction for the year.

Our approach, as we've described in the past, is to price for the dollar value impact of cost increases.

We do not price to cover the margin impact of cost increases.

I can provide a simple example.

If you start with our $82.6 billion in sales from last year, and our $40.8 billion in cost of goods, we have a gross margin of 50.6%.

If you add $2 billion to both costs and sales, gross margin declines to 49.4%.

Or 120 basis point margin headwind, despite fully recovering the cost increases on a dollar basis.

We're continuing to increase our focus on productivity and we expect to make solid progress on SG&A costs as a percentage of sales.

We will maintain strong investment levels in innovation and advertising, while continually looking for ways to make these investments yield higher returns.

Taking all these parts together, we expect to see solid operating profit growth in fiscal 2012.

We expect an effective tax rate of approximately 25% in fiscal-year 2012, compared to the fiscal 2011 rate of 23.5%.

The higher tax rate creates a 2 percentage point earnings per share growth headwind.

At a flat year-on-year tax rate our core earnings per share growth guidance will be approximately 8% to 12%.

We're forecasting a modest increase in capital spending to between 4 and 5 percentage points of sales.

The increase is due mainly to new capacity being installed in developing countries and to support the current growth trends being driven by our innovation and expansion plans.

We still expect free cash flow productivity of around 90% of net earnings, but this will be a more challenging year due to the increase in capital spending.

We expect to continue our track record of providing a strong effective cash yield to our shareholders through a combination of dividends and share repurchase.

Based on the trends of the past few years, we'll likely pay out around $6 billion in dividends, and we're estimating that we will repurchase around $6 billion in stock during fiscal 2012.

This figure excludes the expected reduction in shares implicit in the Pringles reverse Morris trust split merge.

At our current market capital of about $170 billion, the combination of base dividends and share repurchase should generate an effective cash return of about 7% for our shareholders before including any upside potential from stock price appreciation.

Before moving to the September quarter, I want to remind you again that the guidance I've just provided excludes the impacts of Teva and Pringles.

As we did with Folgers, we're evaluating a range of options for our base restructuring plan and potential incremental restructuring, which could offset ongoing earnings dilution from the exit of the Pringles business.

We'll update guidance for all of the impacts of these deals including our restructuring plans after these transactions close.

Moving to July-September quarter guidance, there are several factors impacting our view of likely top line outcomes.

We're building our plans on the assumption of declining decline unit volume in developed markets being roughly offset by higher pricing leading to essentially flat category value growth.

In developing regions we expect market value growth in the range of 6% to 8%, consistent with recent trends.

Combined, we expect global market value growth of about 2 to 3 points for the September quarter.

As I mentioned in the discussion of the June quarter results, volume shift related to recent pricing actions helped the June quarter by about 1 point.

September quarter guidance includes the offsetting decline.

You should note we're up against our most difficult volume comparison for the year.

Volume was up 8% in the September quarter last year, driven in part by strong shipments of big innovations in baby care, hair care and blades and razors.

Taking all these factors into account, we're estimating organic sales growth in the range of 2% to 4%.

We expect pricing and mix to provide combined net benefits of 1 to 2 points.

And we're estimating that foreign exchange will help sales by 4 to 5 points, which leads to all-in sales growth guidance in the range of 6% to 9%.

We expect to hold or build market share in the majority of our businesses, but as I mentioned we're planning on an increased level of share volatility due to pricing changes.

In most cases P&G will be the first Company in our product categories to increase pricing which may temporarily put our brands at a consumer value disadvantage.

We believe the pricing changes we've announced or will soon announce are necessary to recover higher input costs; however, we won't put our brands at long-term competitive value disadvantage.

If we see this happening, we'll take corrective action.

This could include temporarily spending back a portion of the price increase to close a consumer value gap.

Or in the most extreme scenario it could include fully rescinding a previously implemented price increase.

On the bottom line, the September quarter will be the most challenging period of the year.

We'll face the most difficult commodity cost comparisons without having fully realized the offsetting benefits from pricing.

And we will likely have our smallest quarterly benefit from volume leverage.

We expect September quarter earnings per share to be roughly in line with last year, so we're providing a range of $1 to $1.04, or down 2% to up 2% versus the base period of $1.02 per share.

As we look beyond the September quarter we expect profit growth to accelerate throughout the year.

We will have an increasing benefit from pricing, an accelerating contribution from savings and the year-on-year gap in commodity costs will narrow, assuming prices stay near current market rates.

For example, we expect resins to be up 20% to 30% in the first half of the fiscal year, but we expect these to be up only low single digits toward the end of the fiscal year.

Also, key surfactants used in detergents will be up as much as 40% early in the year but should be up only modestly by the end of the year.

As you know, we faced a similar dynamic going into last fiscal year with low earnings per share growth forecast in the first half and higher growth in the back half.

We delivered at the midpoint of our initial guidance range despite several unforeseen significant headwinds; we're confident we can deliver this year.

That concludes our prepared remarks and now Bob, Teri and I would be happy to take your questions.

(Operator Instructions).

Bill Smith from Deutsche Bank.

Good morning.

Can you just talk about the difference between the US growth and the emerging markets growth?

Because it seems like most of the margin challenges relate to the US just being really soft.

Because market share-wise, it seems like things are pretty good but then you look at some of the reports of sales growth in the US and it's pretty disappointing.

So is there a way to triangulate that because we all know that the US is a very, very high margin business?

I can comment on the market sizes and maybe Jon can talk about the margins.

In the fourth quarter, we said the global market value growth was about 3% based upon our geographic mix of business.

Developed markets were flat to slightly positive for the quarter and developing markets continue to have solid growth of about 8% on average.

Our expectations for 2012 are to have global market value growth of 3% to 4%, Bill.

This assumes developed markets grow 1% to 2%, and developing markets grow 6% to 8%.

So we're expecting essentially no growth in developed markets on a volume basis, with any value growth driven by higher pricing, as Jon discussed in his remarks.

If you just look at sales for the last quarter, Bill, your observation would be correct.

In developed markets we grew about 1 pont.

Developing markets, we grew about 14 points.

And so that is part of the dynamic going forward.

Nik Modi of UBS.

At a very high level, P&G stock is up about 5% in total over the past 5 years.

Granted, the environment's been tough but the stock's underperformed almost every one of its peers and the broader staples universe.

Do you think more drastic actions need to be taken to deliver the type of returns you aspire to?

Can you just provide any general context around that?

Nik, I think we have the right strategies now and I think you're seeing them have an impact in the marketplace.

Our purpose has always been to touch and improve lives, but I think now we are much more deliberate about executing our strategy in order to reach more consumers, more parts of the world, more completely.

And in areas where you see that we're doing that, we're being very successful.

As Jon talked about, over the last year we've entered 32 new category country combinations.

Wee entered 78 new category price tier combinations.

And we've entered 75 new category channel combinations.

In addition to that, we launched a number of upgrades.

And these things are having a dramatic impact on the competitive situation in the marketplace.

We talked about the recent launch of oral care in the United Kingdom and we talked about the fact that the week 3 share was about 16%.

We just got the week 4 share this morning and it's 19.5% for paste, which takes us to leadership of the oral care category for the first 4 weeks with our share up 30%.

So these things take time to have action but we're being much more deliberate about it.

I'm quite encouraged, actually.

We're also, as I mentioned, Nik, looking at opportunities relative to the Pringles divestiture to increase the savings component that's delivered by restructuring.

So we're very cognizant of that opportunity, as well.

And I apologize, this will sound a little bit defensive, but I can't leave out our significant dividend as you think about returns from our stock.

So it's more than just price appreciation.

We're throwing off a pretty large chunk of cash here.

John Faucher with JPMorgan.

So Jon, in terms of looking at your guidance, there's no question you highlighted the fact that the raw materials should end up being a negative on the gross margin line.

And you've got all these below the line items which have been favorable in terms of tax and corporate, and which will probably be less favorable looking forward.

So what it really boils down to is FX a little bit but mostly the SG&A ratio.

So can you talk to us a little bit about how we should map out the SG&A ratio over the next year in terms of how much leverage do you think you can get there and what's the brand investment growth like relative to some of the cost saves that you think you can pull out?

Thanks.

I would expect, John, that in terms of -- the last couple years you've seen increases in investment levels in the advertising component of SG&A that are disproportionate to sales growth.

Those should be proportionate going forward.

So we'll continue to maintain very strong levels of support.

But it shouldn't be a drag on SG&A leverage.

And then we're going to continue, as we've talked about, to focus on productivity and we expect to be reducing the non-advertising, non-R&D portions of SG&A as a percentage of sales fairly significantly as we move forward here.

And then there's obviously sales leverage that drives all of that.

So we would expect the SG&A as a percent of sales number to continue to come down pretty meaningfully.

Lauren Lieberman from Barclays Capital.

Just to follow up on that, when we think about developed markets, when you think beyond 2012, because I know you guys think about the business in more than 1-year increments, for sure, are you starting to build into your assumptions that we are in a sustained very low single digit volume growth, or flat to 2% volume growth environment going forward in developed markets, and that that would inform how you want your cost structure to look going forward?

Thanks.

Thanks, Lauren.

We're actually working against 2 plausible scenarios.

The obvious thing we're doing is we're continuing to invest in innovation.

We talked about that, the $2 billion we spend in R&D which is much more than our competition.

And we're working to develop new categories that we aren't even in today.

And we know when we do that, our North American, Western European and Japanese businesses grow very strongly.

So we are working to innovate in order to get top line growth.

At the same time, we're looking at no market growth kinds of scenarios and making sure we put together a cost structure that would allow us to deliver our profit guidance if there is no market growth in these markets.

As you know, our goal is to grow 1 and 2 points above the market.

But if the market doesn't grow, we've got to have a cost structure that allows us to deliver the kind of returns we're promising.

Chris Ferrara from Merrill Lynch.

So Jon, the language you used around the pricing struck me a little and I just wanted to see if it should.

The fact that you're reiterating that or noting that you would deal some of this stuff back or you would even rescind the price increases if necessary.

So, can you characterize what you've encountered so far?

Has pricing been a tougher go than what you thought it would be or has it not?

Thanks, Chris.

There's been no change in terms of our expectations.

So I apologize if I unintentionally communicated that.

I'm just stating our 2 points of intentionality.

One is to get price increases reflected which we're working to do and making good progress on.

And second, that over reasonable periods of time, we have to continue to make sure that we remain competitive in the marketplace.

Those 2 things are not opposed to each other.

They're part of 1 activity system.

And I just thought it was important that both parts be understood.

Things are going pretty much as we expected so far.

But it's early.

Chris, as you reiterated the alternatives for effectively moving pricing up, one that you left out is reducing promotion spending.

And we are doing that in parts of our business, as well.

Ali Dibadj from Bernstein.

I just have a quick modeling question and then a real one.

On the modeling question, given the kind of repeated, at least for us, unexpected importance of nonoperating drivers like taxes and nonoperating income to your EPS delivery, could you maybe give us more guidance about those going forward?

That's the modeling part.

Then the real question is, you're big, you're supposed to get scale, but relative to your competitors who are leaner, you're not really on a cost base.

So have you thought about going the other direction in terms of becoming more focused?

And I understand this is topical.

So, in other words, you can choose to get scale leveraged through something like a cost cutting restructuring above what your competitors are doing.

That sounds like you're finally contemplating.

Or you can choose to be more focused by breaking up.

How do you think about that trade-off to better touch and improve investors' lives as well?

Let me start with the second part and maybe Jon will want to talk about the modeling, Ali.

One of the things that we've done over the last few years is we've become much more deliberate about turning our size into scale and turning that scale into growth.

I talked about in my remarks integration and the fact that we're going to market as 1 Company.

In the categories in country combinations where we've done that, we basically have doubled the growth versus historic levels.

I also talked about the fact that now when we build a new factory, and we have 20 under construction, roughly, that they're multi-category factories rather than single category.

We're at the early stages of this and I think what you're going to see over time is that this is going to become more and more important to our business.

For example, in 2012, we have our sponsorship of the London Olympics.

We'll be sponsoring every Olympic team in the world.

We'll be thanking mothers all over the world.

And when we did that in Vancouver it was our highest rate of return marketing activity virtually ever.

So I think you're going to see accelerated growth.

At the same time, we're working very hard to get this Company restructured and ready for the future.

Last year's restructuring spending I think was about $250 million or so.

That was relatively low.

But we're always looking to flatten the hierarchy of the Company.

If you look at what we've done relative to the hierarchy of the Company, we've flattened the hierarchy of the Company.

We're trying to simplify our operations.

And as I said, we're trying to deliver profitability, TSR in the top third of our peer group, even in a no market growth scenario in developed markets.

So I think in the end we will convince you by the numbers we deliver rather than the statements that we make.

But we are very serious about becoming the most productive Company and taking advantage of that size to turn in higher growth rates.

In terms of the first part of your question, Ali, I talked in my remarks about the impact of tax year to year and the rate that we're forecasting for next year which is 25%.

John Chevalier can walk you through more of that as you both have time.

And from an other nonoperating income standpoint, we'll continue to have some level of minor brand divestiture activity as we have for each of the last 10 years, so there will be nonoperating income there.

I don't expect it to be a big driver of our growth in any way going forward.

If anything, it should be down a little bit.

Again, John Chevalier can take you through that.

Ali, maybe give you some more facts on what I was describing.

Over the last 3 years we've reduced our general management by about 16%.

The next level down, we reduced by about 10%.

Certainly we've got more work to do to become more productive.

But we've reduced our enrollment by about 5% over the past 5 years.

And I think you're going to see us work very, very hard on productivity as we go forward in the future.

Joe Altobello from Oppenheimer.

Just a couple quick questions.

First for Jon.

I'm just trying to put together a few things you said this morning about the higher tax rate next year, et cetera.

And Bob mentioned earlier one of his goals this year is to accelerate operating income growth.

It was down a little bit last year.

It sounds like what you're saying is you're actually expecting operating income growth for fiscal '12 to actually exceed EPS growth.

Is that the case?

And secondly you mentioned promotion spending is going to be down this year.

Can you quantify for us how much roughly promotion spending will be down?

On the first one, we would expect operating earnings growth to be about in line with earnings per share growth.

Tax will be a headwind and then share repurchase a tailwind to get you back to the EPS numbers.

And then we're not going to comment on line items within line items.

So we're not going to give guidance on promotion.

What I would tell you is that generally we would expect promotion levels to come down as part of the pricing mechanism that Bob described.

The reason I'm hesitant to give you an exact number, though, is this is something we look at on a daily basis and it's going to depend in part on how competitors respond to our price increases.

There may be situations, as I detailed in my remarks, where we might have to temporarily increase promotion to stay price competitive.

So it's something we look at on a daily basis.

The general directional trend, certainly the desired trend is down.

As we're fond of saying, promotion wins quarters and innovation wins decades.

We would much rather spend a dollar on innovation or equity building than we would on promotion.

Connie Maneaty from BMO Capital.

One simple question first and then a real question.

What was battery sales growth in the US?

I didn't see it in the press release or hear it in the comments.

Then on the simplification effort you're going through, what level of restructuring is already embedded in the fiscal '12 outlook?

And is it likely that as you close Teva and Pringles, you get to a level of restructuring that envisions a separate restructuring charge?

Okay.

First, on batteries in North America, I honestly don't know that number.

Jon will so feel free to follow up with him.

In terms of restructuring, as I indicated in my remarks, we're still formulating our restructuring thoughts for the year ahead.

I mentioned Folgers for a reason.

You'll remember that at that point when we divested the Folgers business we increased restructuring fairly significantly and we did have a separate non-core charge as a result of an effort to eliminate the stranded overhead and minimize dilution.

And we're contemplating something similar on Pringles.

We don't have it fully baked yet but we'll update you on that when we announce the closure of that deal.

I don't think there's any question, given the number of questions we've gotten about this, but I don't think there's any question and if someone looks back at our Company 10 years from now, they'll wonder if the leadership of the Company at this time took the right steps to move the center of gravity of the Company more toward Asia, more toward Africa, where the babies are being born, where the new households are being formed.

And certainly we've been in the midst of that and you're going to continue to see us make announcements and do things to get ready for the future, because that's where the future is as we try to get to all the people on the planet and have products for them to improve their lives.

Jason Gere from RBC.

I wanted to talk about the reduction in the trade spending and obviously it's part of the driver to getting net pricing.

Can you talk maybe a little bit about the laundry category?

I know that's one area where you're trying to reduce the levels.

One of your competitors showed some doubt, whether that's coming through.

It's possible that might be just at the low end of the spectrum.

But I just wanted to get your thoughts on your goal to reduce some of the trade spending in laundry and how that's playing out.

Thanks, Jason.

I think you're referring to a conversation with Church & Dwight yesterday.

They did cite increasing promotion in the liquid section of the laundry market.

I believe they attributed that to Henkel.

Our desire continues to be, again, from a strategic standpoint, to prioritize investments in equity building and innovation.

And really saying anything more than that on a very specific granular question would be inappropriate.

Javier Escalante from Consumer Edge Research.

If you could please revisit the SG&A line for us for 2011 and what's your plan for 2012.

You took out already of advertising, about 8% to 9% in '11, you didn't trigger the volume lift that you expected given the lack of market growth in the US and Europe so that is over.

But I would like you to discuss more about the strategic more long-lasting investment that you are making in go-to-market capabilities, as you enter a new channel of categories, all these matrix that you talk about it.

And the push in Brazil and India that I believe may not be for free in the SG&A line.

So if you could ballpark for us the growth in selling and distribution expenses as opposed to G&A itself in 2011, and how we should think about that in 2012.

Thank you.

I think in terms of total go-to-market expenses, the selling portion of SG&A, you're absolutely right that we're increasing our investments in markets where we're expanding distribution, expanding our portfolio.

You mentioned India.

You mentioned Brazil.

Those are clearly 2 cases where that's true.

We're also working on productivity initiatives, though, in markets that are slower growth.

And so net, we would expect to see selling costs increase in line with sales or maybe fall a little bit below the sales line, while building the infrastructure that we need in developing markets.

[Pur Osman], Jefferies & Company.

Jon, I wonder if you could just provide a little bit of an order of magnitude on the commodity cost headwind.

I think on the March quarter report I think you characterized it as about $1.8 billion aftertax hit.

I'm just curious as to maybe where that came in for the year and then how you look ahead at where that shapes up currently for fiscal '12.

And then where your confidence lies in terms of how it improves in the second half, vis-a-vis the first.

Thanks.

So, first of all, as has been pointed out many times internally here, I misspoke on last quarter's call and referred to a BT number as an AT number.

So the $1.8 billion is the correct number.

That's a BT number.

My fault for confusing you.

We're looking at the same type of impact 2012 versus 2011.

So another $1.8 billion, roughly $2 billion, before tax.

In terms of how that falls out by quarters, I took you through some of the specific input cost dynamics and how those play through.

We basically base our forecasts on spot markets.

I'm not talking about spot that happened yesterday but maybe spot of last week.

And if you just do the math and take spot in a quarter this year, first through fourth, and compare it to first through fourth last year, you still have a very negative comparison in the first quarter and a very benign comparison in the fourth quarter.

One additional piece of perspective, as we mentioned, the commodity cost impact in the quarter we just completed was 350 basis points negative on gross margin.

That's the same kind of dynamic you're dealing with in our first quarter.

But it should be, again, very minor or even positive by the time we get to the fourth quarter.

Tim Conder from Wells Fargo Securities.

Just broadly a clarification, Jon.

In the guidance that you gave you're saying again that you should see operating profit growth in line with EPS.

And, therefore, implying operating margin expansion and that is prior to anything that you're doing with Pringles or Teva.

So just more of a clarification from that perspective, if you could, sir.

Given the gross margin dynamic, while we're expecting operating earnings increases along the lines that you cited, we're not expecting operating margin expansion, again, held back by that gross margin line.

Alice Longley from Buckingham Research.

My question is about the nature of innovation that you're planning in developed regions where the markets aren't doing so well and the consumer's weak.

You've done well over the last couple of years in some categories like tissue, towel, by putting out value versions along with your premium-priced versions.

What are you thinking about doing something similar to that in some of your other categories?

Blades comes to mind because you're doing so badly in blades now.

Also, detergents and shampoos.

Might you push mid-priced or value versions ahead more than you have?

I think, Alice, what we said is we have a stated strategy of our Company to have a value tier of portfolio.

So no matter the price point, the consumer wants to spend, we have something there.

In the case of blades, we do have a full portfolio, from Fusion ProGlide on the top to disposables on the bottom.

All priced very differently.

I think what we've done in the past is we've supported the high end probably more than the low end and what we need to do is make sure that we get appropriate support across that portfolio so that every consumer we want to reach gets the appropriate blade and razor.

On that one, I think we have the portfolio.

But we may not have executed the marketing yet to grow share consistently.

Secondly, in laundry, again, as I said in my remarks, we've got Tide Total Care on the top.

We've got Cheer and Era on the bottom.

Again, we have the portfolio there.

Again, what we need to do is develop the big ideas to get that portfolio into the hands of consumers and grow that business.

So in those cases, I think we have the portfolio.

In hair care, we probably have the portfolio of brands but I think we need to separate the pricing a little bit more because I think the pricing is probably too bunched up.

So it's rather a 3-step process.

One is get the portfolio in, number of brands, number of selections.

Number 2, spread the pricing enough that consumers see the difference.

And number 3, market those discrete items to the consumer group that it's attractive to.

And as you say, that's what we've done in tissue, towel and many of our other categories quite successfully.

Jon Andersen from William Blair.

I just had a quick question on the multi-year innovation pipeline.

Bob, you talked about the new category, country combinations, price tier combinations and channel combinations achieved in 2011.

I was wondering if you could characterize the portfolio expansion plan for fiscal 2012, both in terms of the quantity and the quality relative to what we saw in the last year.

Thank you.

Thank you, Jon.

It's very similar to what we have this year.

And as we laid out in our analyst meeting, by the time we get to 2015, the average number of categories in each country in Procter & Gamble territory will go from 19 to 24.

And we'll be reaching 5 billion people versus the 4.4 billion we're reaching today.

And as we increase the number of categories in each country, you should assume that that is a full vertical portfolio of priced products, not just a single product.

At the same time, we're also working our innovation program to develop wholly new categories, similar to when we launched Swiffer some years ago.

Linda Bolton-Weiser from Caris & Company.

Just one quick question on guidance clarification.

You had said for FY '12 that operating income growth would be roughly in line with EPS growth.

How does that work out for the first quarter?

Is that the same for the first quarter of FY '12?

Also, a bigger picture question, more on M&A.

Bob, I was interested in your thoughts on how your home care business ranks these days in terms of strategic priority.

Clearly, Beauty and personal care continues to be the top strategic priorities.

But given that Clorox seems to be a little bit more in play here, do you think you have adequate scale in home care with the Ambi Pur acquisition?

Or do you think that there could be other things that would add scale to that business, which is less big than the other strategic areas?

And also, on M&A, maybe you could comment on your organic growth efforts in Prestige color cosmetics and whether you're happy with those efforts or whether you could use some more M&A activity there.

There are a lot of brands in that universe and maybe you need to pick up the acquisition activity to start building more presence in Prestige cosmetics.

Thanks.

So I'll handle the first part of the question.

Then I'll turn it back to Bob.

We would expect operating margin to be down in the first quarter.

And operating earnings to be growing, not as well as on a fiscal year basis, again, given that significant gross margin impact.

John can help you more with that as we go through the day.

Linda, relative to M&A, we don't comment on specific opportunities of either acquisitions or divestitures.

What I can tell you is this, is that we work hard to develop growth plans that meet our goals, long-term goals organically.

And when I look at the growth potential of the plans we've got, I'm very happy with it.

When I look at the innovation program, we've got, I'm very happy with it, as well.

While we do do acquisitions, and certainly Ambi Pur was a wonderful acquisition for us because it expanded our footprint in air care from roughly 17 countries to over 80, the acquisitions are difficult for us to do.

Typically, we don't do hostile takeovers.

Number 2, the value's got to be right because we try to be good stewards of the cash that our shareholders give us.

And number 3, it's got to make strategic sense for our business.

So acquisitions tend to be a relatively high bar for us.

We do do them.

But it's a relatively high bar.

And certainly it's not an excuse for any of our businesses not to have growth plans that deliver the growth goals organically.

Mark Astrachan from Stifel Nicolaus.

One clarification and one question.

Jon, is it fair to assume that input cost pressure peaks in the September period?

And then on the Beauty business, can you talk a bit about, in the context of mixed results and turnover in personnel, how you think about whether P&G is a net share gainer or loser longer term?

So on the first question, yes, the comparison on commodities should be the worst in the first quarter.

And then it should improve from there forward.

Relative to the Beauty business, Mark, I would never say we're doing well enough in any of our businesses, whether it's Beauty or Household.

Beauty has delivered 8 consecutive quarters of organic sales growth.

Our big brands grew globally in 2011, including Pantene, Head & Shoulders, Olay, Venus and SK-II.

Importantly, the global Pantene business continues to perform well.

Global shipments grew mid single digits over the year with double-digit growth in developing regions.

And market share's growing on a global basis including good share progress in Japan, Brazil and India.

And in Japan Pantene just became the leading hair care brand.

Olay is also driving strong results outside North America where, of course, we had the UV recall.

Skin Care shipments in developing markets increased double digits in the June quarter.

As the geographic and portfolio expansions of Olay continue to deliver strong growth.

In the US, where we had a few design and assortment issues on Pantene, we responded by launching 7 new 2-in-1 SKUs and 5 new large size SKUs with a new marketing campaign, which have all gotten strong retailer support so far.

And we're also working to rebuild the Pantene equity.

But that will take time and it will take time to return share and consumption to historic levels.

Olay's driving strong results outside of North America.

Skin Care developments in developing markets increased double digits in the June quarter.

As the geographic and portfolio expansions of Olay, as I said, delivered strong growth.

And as I said, the reason US Olay declined in AMJ was due to the Olay UV reformulation restage that began in the March quarter.

But we resumed those Olay UV product shipments by the end of June.

So I think overall, we will be a net share gainer in Beauty and Grooming, no question in my mind.

Caroline Levy from CLSA.

I was just was wondering if I could have a little color on China overall.

You did give some category growth.

But really if you would compare and contrast China, Russia, Brazil, the total portfolios, if you could talk about how you're doing in those 3 major growth markets.

In China, Caroline, we are the leading consumer goods company with about, in greater China, about $5 billion in sales.

That's about 3.5 to 4 times the next largest competitor.

Having said that, we're only in about 15 categories in China.

I think we entered 3 over the last year and we have plans to continue to enter new categories there.

And the average Chinese spends less than $3 a year on Procter & Gamble products.

But in the United States, the average American spends nearly $100.

So while we're leading, while we're growing, we're growing strong double digits, we still have work to do to get the rest of our categories in there and to accelerate the growth.

Do you want to go market by market?

Brazil and India also continue to be extremely quickly growing.

They're growing actually faster than China.

Think of that as 20% plus growth rates where China's somewhere in the low double-digit to mid-teens level and we continue to see all 3 of those markets as offering significant opportunities for profitable growth going forward.

Ladies and gentlemen, that concludes today's conference.

Thank you for your participation.

You may now disconnect.

Have a great day.

Thanks, everybody.