Departing CFO Cites P&G’s Crisis Resilience

Clayton Daley, who hands over the post to John Moeller on Jan. 1, uses the earnings-call forum to discuss how the consumer-product giant's range of...
Roy Harris and Kate PlourdOctober 29, 2008

September-quarter earnings calls have taken on a new complexion this year for consumer-products-company CFOs — but doubly so for Clayton C. Daley, vice chairman and finance chief of Procter & Gamble Co. Today’s call was the last as CFO for the veteran of 10 years in the job, whose retirement, effective Jan. 1, was announced on Tuesday.

Daley, a 34-year veteran at P&G who will be succeeded as CFO by current vice president and treasurer Jon R. Moeller, won’t retire completely from the company. That final step will come next September.

“I didn’t plan to announce my retirement during a credit crisis, but the fact that I’m doing so is a testimony to the confidence I have in the next set of leaders,” Daley told analysts. Indeed, during the quarterly earnings call, Daley said that his retirement is part of the Cincinnati-based company’s long-term succession plan to bring in the next generation of executive leadership.

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P&G makes products under such brand names as Pampers, Tide, Gillette, Braun, Crest, Pantene, Bounty, Dawn, Pringles, Charmin, Downy, Duracell, and Crest — which certainly gives it a wide window on the consumer world at this precarious time.

The company said that profit rose 9 percent rise for the fiscal first quarter, when the company earned $3.35 billion, or $1.03 a share, up from $3.1 billion or 92 cents per share. Net sales growth was 9 percent, to $22.0 billion, and organic sales were up 5 percent, about at the mid-point of its 4 percent to 6 percent target range. Sales growth was led by strong growth in the Beauty, Fabric Care & Home Care, and Baby Care & Family Care segments.

Still, its operating margin declined 60 basis points for the quarter, reflecting a reduction in selling, general, and administrative expenses that was more than offset by higher commodity costs.

Operating cash flow rose 1 percent to $3.3 billion for the quarter, with free cash flow of $2.6 billion representing 76 percent of net earnings. The company reiterated that it maintains its credit ratings in the top five percent of all publicly traded companies, which it expects to allow P&G to continue accessing credit markets without issue.

“This quarter was yet another example of the strength of P&G’s balanced brand and geographic portfolio,” A.G. Lafley, chairman and CEO, said. “We continue focusing on leading innovation and improving productivity to deliver superior consumer and shareholder value. This focus on delighting consumers with trusted household and personal care products that consumers purchase weekly and use daily gives me continuing confidence P&G will deliver target growth over the long term, even in a challenging economic environment.”

Appearing on CNBC’s early morning television show Squawk Box, Daley noted that the company was “certainly seeing some reduction in volume growth in the market while dollar-sales growth numbers in the market have stayed up in the levels that we’ve seen in the last couple years.” He attributed some of P&G’s sales resilience to its having “brands in multiple price tiers — we sell Tide and Gain, we sell Pampers and Luvs,” for example. “We have a number of products that are priced in a mid-priced point, where even if consumers try to trade down they’re very likely to trade down to one of our products.”

He also used the CNBC forum to praise Moeller as “a fabulous guy,” and the perfect replacement. “He’s got great experience, including having worked in China for several years,” Daley said.

Moeller, 44, has been with P&G for 20 years, serving across a broad range of products and businesses. In his role leading merger and acquisition operations, Moeller oversaw the recent divestiture of Folgers. In addition to his role as treasurer, he leads P&G’s investor relations department.

Daley also noted that, while he is retiring from P&G he’s not retiring all together. “I’m not one of those guys who is going to end up on the golf course.” From January, until his September exit from P&G, Daley will serve as advisor to the Lafley, counseling him on strategy, portfolio management, and acquisitions and divestitures. He also continues to serve as a board member for Nucor Corp.