Income Taxes
Income taxes increased to $3.3 billion due to increased earnings and an increase in the effective tax rate. The effective tax rate increased 130 basis points to 18.5% in 2021 due to:
• a 135 basis-point increase related to the prior year tax benefit arising from transactions to simplify our legal entity structure, and
• a 15 basis-point increase from unfavorable impacts from the geographic mix of current year earnings.
These increases are partially offset by:
• a 20 basis-point decrease from discrete impacts related to uncertain tax positions (5 basis-point favorable impact in the current year versus a 15 basis-point unfavorable impact in the prior year period).
Net Earnings
Operating income increased 15%, or $2.3 billion, to $18.0 billion due to the net sales increase and the increase in operating margin, both of which are discussed above.
Earnings before income taxes increased 11%, or $1.8 billion, to $17.6 billion, as the increase in operating income was partially offset by the current period charges of $512 million for the early extinguishment of debt. Net earnings increased 10%, or $1.2 billion, to $14.4 billion due to the increase in earnings before income taxes, partially offset by the increase in the effective income tax rate discussed above. Foreign exchange impacts reduced net earnings by approximately $108 million in fiscal 2021 due to a weakening of certain currencies against the U.S. dollar. This impact includes both transactional charges and translational impacts from converting earnings from foreign subsidiaries to U.S. dollars.
Net earnings attributable to Procter & Gamble increased $1.3 billion, or 10%, to $14.3 billion.
Diluted net EPS increased $0.54, or 11%, to $5.50 due primarily to the increase in net earnings and, to a lesser extent, a reduction in shares outstanding.
Core EPS increased 11% to $5.66. Core EPS represents diluted net EPS from continuing operations excluding the current year charge for the early debt extinguishment and incremental restructuring charges in the base year related to our productivity and cost savings plans. The increase was primarily driven by the increase in net sales and the increase in operating margin, both of which are discussed above.
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SEGMENT RESULTS
Segment results reflect information on the same basis we use for internal management reporting and performance evaluation. The results of these reportable segments do not include certain non-business unit specific costs which are reported in our Corporate segment and are included as part of our Corporate segment discussion. Additionally, we apply blended statutory tax rates in the segments. Eliminations to adjust segment results to arrive at our consolidated effective tax rate are included in Corporate. See Note 2 to the Consolidated Financial Statements for additional information on items included in the Corporate segment.
Net Sales Change Drivers 2021 vs. 2020
Volume with Acquisitions &
Divestitures
Volume Excluding Acquisitions &
Divestitures Foreign
Exchange Price Mix Other Net Sales Growth
Beauty 3 % 3 % 2 % 2 % 1 % — % 8 % Grooming 3 % 3 % — % 2 % 1 % — % 6 % Health Care 6 % 6 % 1 % 1 % 2 % — % 10 % Fabric & Home Care 5 % 5 % 1 % 1 % 3 % — % 10 % Baby, Feminine & Family Care — % — % 1 % 1 % 1 % — % 3 %
TOTAL COMPANY 3 % 3 % 1 % 1 % 2 % — % 7 %
Net sales percentage changes are approximations based on quantitative formulas that are consistently applied.
Other includes the sales mix impact from acquisitions and divestitures and rounding impacts necessary to reconcile volume to net sales.
BEAUTY
($ millions) 2021 2020 Change vs. 2020
Volume N/A N/A 3% Net sales $14,417 $13,359 8% Net earnings $3,210 $2,737 17% % of net sales 22.3% 20.5% 180 bps
Beauty net sales increased 8% to $14.4 billion in fiscal 2021 on a 3% increase in unit volume. Favorable foreign exchange impacts increased net sales by 2%. Higher pricing increased net sales by 2%. Favorable product mix added 1% to net sales due to the disproportionate growth of the SK-II brand, which has higher than segment-average selling prices. Organic sales increased 6% on a 3% increase in organic volume. Global market share of the Beauty segment decreased 0.4 points.
• Hair Care net sales increased mid-single digits due to a low single digit increase in volume and increased pricing. Organic sales also increased mid-single digits. Volume growth was driven by a double digit increase in Greater China (due to market growth and increased distribution), a high single digit increase in IMEA (due to innovation and the low base period due to pandemic-related shutdowns) and a mid-single digit increase in Latin America (due to product innovation), partially offset by a low single digit decrease in Europe due to pandemic-related category declines in certain markets. Global market share of the hair care category was unchanged.
• Skin and Personal Care net sales increased high single digits due to a low single digit volume increase, favorable mix due to the disproportionate growth of the super premium SK-II brand, increased pricing and favorable foreign exchange impacts. Organic sales also increased high single digits. Volume increased double digits in Greater China and increased low single digits in North America driven by increased consumption of personal care products due to the pandemic. This volume growth was partially offset by a double digit decrease in IMEA and a low single digit decrease in Asia Pacific due to pandemic-related market contractions. Global market share of the skin and personal care category decreased nearly half a point.
Net earnings increased 17% to $3.2 billion in fiscal 2021 due to the increase in net sales and a 180 basis-point increase in net earnings margin. Net earnings margin increased due to an increase in gross margin and a decrease in SG&A as a percentage of net sales. The gross margin increase was mainly driven by manufacturing cost savings and increased selling prices, partially offset by the negative impacts of unfavorable mix (due to the decline of the skin care category which has higher than segment-average margins and to a lesser extent the disproportionate growth of Latin America and IMEA, which have lower than segment-average margins) and increased commodity costs. SG&A as a percentage of net sales decreased primarily due to the positive scale impacts of the net sales increase.
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GROOMING
($ millions) 2021 2020 Change vs. 2020
Volume N/A N/A 3% Net sales $6,440 $6,069 6% Net earnings $1,427 $1,329 7% % of net sales 22.2% 21.9% 30 bps
Grooming net sales increased 6% to $6.4 billion in fiscal 2021 on a 3% increase in unit volume. Increased pricing had a 2% positive impact to net sales. Favorable mix had a 1% positive impact to net sales due to the disproportionate growth of the Appliances category, which has higher than segment-average selling prices. Foreign exchange had no net impact on net sales. Organic sales also increased 6%. Global market share of the Grooming segment decreased 0.6 points.
• Shave Care net sales increased low single digits driven by a low single digit increase in volume and increased pricing, partially offset by unfavorable mix impacts due to the disproportionate growth of lower priced products in IMEA and Latin America. Organic sales also increased low single digits. The volume increase was driven by a mid- teens increase in IMEA (due to innovation and a low base period due to pandemic-related shutdowns), a high single digit increase in Greater China (due to innovation and market growth) and low-single digit increases in Latin America (due to innovation and distribution increases in certain markets) and in North America (due to innovation and a lower base period due to pandemic-related consumption declines), partially offset by a mid-single digit decline in Asia Pacific and a low single digit decline in Europe due to pandemic-related consumption declines. Global market share of the shave care category was unchanged.
• Appliances net sales increased more than 20% primarily due to a high teens increase in volume, favorable foreign exchange impacts, favorable mix impact due to the disproportionate growth of premium shaver and styling products and increased pricing. Organic sales also increased more than 20%. Volume increased in all regions led by high teen increases in Europe and Greater China and double digit increases in North America and Asia Pacific, all driven by innovation and increased consumption of at-home grooming and styling products due to the pandemic. Global market share of the appliances category increased more than a point.
Net earnings increased 7% to $1.4 billion in fiscal 2021 due to the increase in net sales and a 30 basis-point increase in net earnings margin. Net earnings margin increased due to a decrease in SG&A as a percentage of net sales partially offset by a decrease in gross margin. Gross margin decreased due to the negative impact of unfavorable mix (due to the disproportionate growth of the appliances category and the IMEA region, both of which have lower than segment-average margins) and unfavorable foreign exchange impacts, partially offset by the positive impacts of manufacturing cost savings and increased selling prices. SG&A as a percentage of net sales decreased primarily due to the positive scale
impacts of the net sales increase and reductions in overhead costs due to productivity savings, partially offset by the impact of a favorable legal settlement in the base period.
HEALTH CARE
($ millions) 2021 2020 Change vs. 2020
Volume N/A N/A 6% Net sales $9,956 $9,028 10% Net earnings $1,851 $1,652 12% % of net sales 18.6% 18.3% 30 bps
Health Care net sales increased 10% to $10.0 billion in fiscal 2021 on a 6% increase in unit volume. Favorable foreign exchange impacts increased net sales by 1%. Favorable product mix increased net sales by 2% due to the disproportionate growth of premium power brush and paste products. Increased pricing had a 1% positive impact on net sales. Organic sales increased 9%. Global market share of the Health Care segment increased 1.8 points.
• Oral Care net sales increased double digits driven by a high-single digit volume increase, favorable mix impacts from the disproportionate growth of premium power brush and paste products, favorable foreign exchange impacts and increased pricing. Organic sales also increased double digits. Volume increased in all regions led by around 20% growth in IMEA, high single digit growth in North America, mid-single digits growth in Greater China and in Asia Pacific and low single digit growth in Europe due to product innovation, increased marketing spending and a low base period in certain markets due to pandemic-related shutdowns. Global market share of the oral care category increased more than a point.
• Personal Health Care net sales increased mid-single digits driven by a mid-single digit increase in volume and increased pricing. Organic sales also increased mid-single digits. Volume increased mid-teens in Asia Pacific, increased double digits in Latin America and in IMEA, and increased mid-single digits in North America due to product innovation, increased marketing spending and increased consumption of certain health care products including supplements and pain relief. Global market share of the personal health care category increased more than a point.
Net earnings increased 12% to $1.9 billion in fiscal 2021 due to the increase in net sales and a 30 basis-point increase in net earnings margin. Net earnings margin increased due a decrease in SG&A as a percentage of net sales partially offset by a decrease in gross margin. Gross margin decreased due to unfavorable mix impacts (due to the decline of higher-margin respiratory products and the disproportionate growth of oral care category, which has lower than segment-average margins) and unfavorable foreign exchange impacts, partially offset by manufacturing cost savings and increased selling prices. SG&A as a percentage of net sales decreased primarily due to the positive scale impacts of the net sales increase, partially offset by increased marketing spending.