Is Procter & Gamble well on the road to recovery?

Sanford C. Bernstein analyst Ali Dibadj compiled a six point analysis of the company’s current financial position and the progress it has made with its restructuring program, suggesting the company is doing things correctly.

Since the beginning of the year, the company’s share price has been on an upward trajectory, rising from a low point of just under $75 a share, to the current price of just over $83, which also represented a small rise after the Bernstein analyst released his note.

Six points to underline improvements​

The analyst’s note included six points that highlighted the major portfolio restructuring, which has included the sale of $12bn worth of beauty brands to Coty, a deal that has been shaping up throughout the course of 2016 and should be completed by the second half of the year.

The Bernstein note also underlined an improved category-country mix, productivity and cost savings, reduced exposure to currency headwinds, improvement to the management structure and the prospect of better organic sales.

"Net-net, we see two ways to win with Procter & Gamble-either fundamentals sustainably improve and the stock goes up, or the break-up scenario becomes more real and the stock goes up,"​ the firm said, in a copy of the note published by Barrons​.

All about improving revenues​

Indeed, sales have been one of the company’s biggest challenges in recent years, having posted declining revenues for the past two years, so the number one challenge has been to reverse this decline.

P&G CEO David Taylor took over the leadership of the business at the end of last year, so all the attention was on him when he made a presentation at a press conference in New York in February – his first public appearance since taking up the position.

During the presentation he spelled out his vision and direction for the business, which focused on transitioning to a leaner, more efficient business, with a stress on regional management.

Devolving management to a regional level​

The consensus is that Taylor’s decision to devolve that power and focus it on a more regional level will allow managers in different geographies to make decisions that are more informed and closer to what is going on in the different markets.

“A few years ago we got too central and global and too slow to address market opportunities. We need more direct ownership for our regional managers all the way to the store shelf,”​  Taylor said at the analyst conference.

Also speaking at the investor conference was P&G CFO Jon Moeller, who revealed that the new management direction would allow it to be more competitive in markets beyond North America.

In particular he referred to China, where the company’s performance has been on the wane, as smaller and more proactive players have carved out more market share.