Proctor and Gamble 2003 Annual Report Download - page 28

26The Procter & Gamble Company and SubsidiariesFinancial Review
were negatively impacted by 2% of foreign exchange, pricing of 1% and
product mix of 3%, driven by lower revenue per unit for the Clairol
brands and higher volume growth in developing regions. Earnings were
$1.61 billion, up 18%, driven by more efficient marketing spending
against a growing business and a continued focus on cost reductions.
Baby and Family Care
Baby and Family Care delivered volume growth of 7%. Baby care
growth was driven by the continued success of the Baby Stages of
Development initiative launch. Family care growth was driven by
strength in the North American Bounty and Charmin businesses. Net
sales grew 8% to $9.93 billion as 3% positive foreign exchange impact
and 1% positive mix impact were partially offset by a 3% negative
impact from pricing. Positive mix was driven by increased sales of high-
er priced, premium tier diapers behind the Baby Stages of Development
initiative launch. The pricing impact was driven by targeted investments
to match competitive pricing and merchandising across the segment,
primarily in North America and Western Europe.
Net earnings grew 20% to $882 million behind continued cost reduc-
tions, primarily achieved through increased scale from volume growth
and lower product cost behind base business and restructuring savings.
In 2002, Baby and Family Care delivered earnings progress driven by
volume growth and extensive cost reductions. Volume grew 5%, with
increases in both baby care and family care. Net sales for the year were
essentially flat at $9.23 billion versus 2001 as volume growth was
offset by commodity driven price declines and pricing adjustments on
Luvs in North America and diapers in Western Europe and a negative
2% impact from foreign exchange. Net earnings were $738 million, up
12%, behind an ongoing program of product and overhead cost reduc-
tions, including benefits from restructuring activities that streamlined
manufacturing operations.
Health Care
Health Care delivered 18% volume growth with every geographic
region and category contributing, led by oral care and pharmaceuticals.
Oral care grew behind Crest Whitestrips and Crest Night Effects. Phar-
maceutical volume growth continued behind Actonel, including the
Once-a-week dosage. Net sales for the year were $5.80 billion, an
increase of 16% as compared to 2002. A favorable foreign exchange
impact of 2%, driven primarily by the strength of the Euro, was more
than offset by a negative pricing impact of 2%, primarily driven by
lower pricing on Crest Whitestrips to match a competitive entry, and a
Net earnings were up 12% to $2.06 billion, driven primarily by strong
volume growth, with additional benefits from lower manufacturing
costs. Approximately half of the manufacturing cost savings were ach-
ieved from restructuring and base cost reduction programs, with the
remainder coming from a combination of lower material costs and com-
modity prices. The impact of strong volumes and lower manufacturing
costs on earnings was partially offset by increased marketing spending
in support of new product launches and expansion of existing brands,
including Bold in Japan, Mr. Proper in Western Europe, and Tide with
Bleach and Swiffer in North America.
For fiscal year 2002, unit volume grew 3%, with growth across every
geographic region. Net sales for the year were flat at $11.62 billion,
and were negatively impacted by 1% of foreign exchange and 2% of
negative price and mix. The negative price and mix was the result of
growth in lower-priced products, including mid-tier brands, larger sizes
and developing market business. Net earnings were $1.83 billion in
2002, up 11% behind lower material prices, cost savings from product
reformulations and manufacturing plant efficiencies.
Beauty Care
Beauty Care delivered double-digit unit volume, sales and net earnings
growth in 2003. Unit volume grew 15%. Excluding the impacts of the
Clairol acquisition, unit volume increased 8% behind solid growth in
hair care. Net sales grew 14% to $12.22 billion, as volume and a posi-
tive 3% impact from foreign exchange were partially offset by a nega-
tive 2% impact from pricing and 2% from mix. The pricing impact was
driven by price reductions taken to expand the Company’s portfolio of
hair care brands to consumers that shop within the category’s lower
priced, mid-tier brands. The mix impact was driven by the increased
sales of Clairol brands, which carry lower revenue per unit than the
Company’s base hair care brands.
Net earnings grew 23% to $1.98 billion. Approximately half of this
increase was driven by volume, with the remainder driven by reductions
in manufacturing costs through restructuring, base savings programs
and lower material costs. Lower overhead spending due in part to the
Clairol integration was offset by investments in marketing.
In 2002, Beauty Care results also benefited from the Clairol acquisition,
which was completed in the second quarter. Unit volume increased
13%, driving sales growth of 7% to $10.72 billion. Excluding the impact
of the Clairol acquisition, unit volume increased 3%, primarily behind
the base hair care business and fine fragrances and cosmetics. Sales