Fellow Shareholders, P&G is delivering broad-based, organic growth driven by clear strategies and a unique combination of P&G strengths. The Company’s performance has accelerated over the past three years, and we are confident double-digit earnings-pershare growth is sustainable for the foreseeable future. P&G’s goals are to deliver 4%–6% sales growth (excluding the impact of foreign exchange), 10% or better earningsper-share growth, and free cash flow equal to 90% or more of net earnings.1 We know we have to earn your trust every year by meeting or exceeding these goals consistently and reliably. P&G exceeded all its financial goals in fiscal 2004. • Volume is up 17%. Organic volume is up 10%.2 • Sales are $51.4 billion, up 19%. Organic sales are up 8%.3 • Earnings are $6.5 billion, up 25%. Earnings are up 13%
• Earnings per share have grown over 40%, cumulatively, from core results three years ago.4 • P&G businesses have generated more than $20 billion in cumulative free cash flow. • Most important, P&G has delivered a cumulative shareholder return of 81% over the past three years, and the price of P&G’s stock has increased more than 70%. (In fact, over the past four years, cumulative shareholder return is above 100%.) Three years of strong performance is a good start. But we know it’s only that – a start. Necessary, but not sufficient. It’s consistent long-term performance that counts, and consistent performance is not easy. Growing P&G sales 4%–6% per year, for example, is the equivalent of adding a business the size of P&G’s total business in the U.K. or a brand the size of Tide – every year.
P&G is delivering broad-based, organic growth driven by clear strategies and a unique combination of P&G strengths. P&G’s performance has accelerated over the past three years, and we are confident double-digit earnings-per-share growth is sustainable for the foreseeable future.
versus prior-year core earnings.4 • Earnings per share are $2.32, up 25%. Earnings per share are up 14% versus prior-year core earnings per share. • Free Cash Flow is $7.3 billion, or 113% of earnings. • Dividends are up 13%, annualized. • Total Shareholder Return is 24%. Growth was broad-based. All five Global Business Units delivered at or above the sales goal; four of five were at or above the earnings goal. Every Market Development Organization delivered sales and volume growth at or above Company targets. P&G brands grew share in categories accounting for more than two-thirds of total Company sales. This year’s results culminate increasingly strong performance over the past three years. Since July 2001: • P&G cumulative sales have grown 30%. Fiscal 2004 marked the first time in P&G history that sales exceeded $50 billion. 1 2 3 4
Sustaining P&G’s Growth
The challenge is significant, and we don’t take it lightly, but I’m confident P&G can reliably deliver the balanced, consistent growth to which we’ve committed. There are three reasons for my confidence: 1. P&G strategies are working, and there is still considerable room for growth. 2. P&G strengths give us the ability to respond to major external trends and challenges. 3. Systemic and structural changes implemented over the past several years are improving the consistency and reliability of P&G performance. When combined with the strength of P&G’s culture and P&G people, these three factors make P&G a better investment proposition today than we have been in many years. Growth Strategies Are Working In my 2001 Letter to Shareholders, I outlined five growth
This Annual Report contains a number of forward-looking statements. For more information, please see page 32. Organic volume excludes the impact of acquisitions and divestitures. Organic sales exclude the impact of acquisitions, divestitures and foreign exchange. Core earnings exclude restructuring charges of $538 million in 2003 and $1.48 billion in 2001.