P&G chief faces debut before Wall St. skeptics

Procter & Gamble's CEO, David Taylor, is speaking today for the first time since he took over leadership of the company. You can listen to Taylor's presentationbefore the Consumer Analyst Group of New York,  here. CFO Jon Moeller is joining Taylor for the presentation. The Enquirer's Alexander Coolidge is at Taylor's talk and will file a full report later today on Cincinnati.com. Coolidge also is tweeting from the event; you can follow him on Twitter @alexcoolidge.

Barely more than 100 days at the helm of Procter & Gamble, David Taylor heads to Florida on Thursday for a command performance: His first public appearance as CEO for the world's largest consumer products giant.

Wall Street analysts will closely watch his demeanor as he delivers his pitch, because it's unlikely he will offer any major surprises in his hour-long presentation.

Analysts will size up how confident Taylor appears running the consumer products giant. "It's David's show right now," said Edward Jones analyst Jack Russo. "Nobody expects any big changes: David's a long-time company guy. He's steady, if he does that, he'll be fine."

Speaking to the Consumer Analyst Group of New York, Taylor will seek to reassure a room full of hundreds of professionals overseeing billions in investments that P&G is a strong stock with a bright future.

Taylor's presentation will take place at a posh Boca Raton resort that boasts "unparalleled luxury" with suites costing upwards of $3,000 a night and amenities including a spa, a marina and even a surfing school.

There will be limited R&R, however, because attendees spend up to 12 hours a day dressed in suits squinting in the dark at slide shows and listening to similar presentations by companies ranging from Coca-Cola to Newell Rubbermaid.

Chief Financial Officer Jon Moeller will assist Taylor with an overview of recent results that show both progress and more hard work ahead.

A 35-year P&G veteran, Taylor will be scrutinized for how he handles any tough analyst questions, how directly he answers and his level of enthusiasm.

"Taylor wants to convey confidence in himself, the business and its strategy," said Terry Kelly, a principal at Bartlett & Co. "It's a coming out party for Taylor – it's his first appearance as CEO and his chance to start his relationship with The Street. He wants to leave the impression that he knows there's a lot of work ahead, but he's looking forward to improved results."

While the conference presentations are heavily scripted and rehearsed, analysts say executives sometimes deliver surprises. Four years ago, P&G unveiled its $10 billion restructuring plan at the Boca Raton conference.
And sometimes the unscripted question-and-answer sessions can reveal unexpected insights. At P&G's Analyst Day in 2012, for example, Morningstar analyst Erin Lash noted "tension" between then-CEO Bob McDonald and Moeller during the presentation where The top accountant at one point interrupted McDonald.

She also noted the absence of two vice chairman from the 2012 presentations, which indicated those two executives might not be in the running if McDonald left the company. Within six months, McDonald retired abruptly and P&G brought Lafley out of retirement to run the company.

The biggest problem that P&G faces remains the same as under its two previous CEOs: It has failed to meaningfully grow the company's overall sales. Meanwhile, the world's economy has faltered while the U.S. dollar has soared.

While P&G has resorted to escalating restructuring measures that have propped up profits, the company's stock could ultimately be jeopardized by the company's failure to grow.

Analysts say Taylor has about a year for the company to show improving results before investors grow restless. Slightly-improving results during the first quarter under his watch won him some good will, but the company has a long way to go before returning to its heydays of the last decade.

"I don't expect any huge surprises. They're doing everything they can. He'll get a honeymoon," said Jeff Cornell, a portfolio manager and principal at Johnson Investment Counsel in Monfort Heights.

When Taylor takes the stage Thursday, here are the issues the CEO is likely to address:

Brand shredding wraps up, results must follow

Unable to grow overall fast enough, P&G announced 18 months ago it would sell off or exit 100 slower selling, mostly minor brands.

The brand shedding, which is slated to be complete this year, is supposed to leave P&G a company composed of 65 larger, faster-growing core brands. The new, slimmer lineup will mean P&G will have $70 billion in annual sales, about $10 billion less than before.

Had the deal already closed, company executives have said P&G's organic sales (excluding foreign exchange, mergers and acquisitions) would be 1 percent higher. Lafley, who gave up the CEO spot in November, also predicted the company will be easier to run with fewer business units.

The company previously had sold off Iams and other pet food brands. Meanwhile, a deal to sell Duracell batteries to Warren Buffett's Berkshire Hathaway is set to close by April. Finally, a deal to merge 43 P&G beauty brands with Coty is set to close later this year.

If P&G's moves fail to yield results, analysts won't rule out further brand sales. Braun shavers, Bounty paper towels and Puffs tissue have all been mentioned as potential divestiture candidates down the road.

Job cutting continues into next year

P&G will continue to slim its operations as well as its brand portfolio.

The company first announced its $10 billion cost-cutting plan at this conference in 2012. Since then, it has greatly expanded the scope of cuts, slashing more than 20,000 jobs so far. The pending Duracell sale and Coty merger will remove 2,700 and 10,000 more jobs respectively from P&G's payroll.

By mid-2017, P&G will employ 95,000 to 98,000 worldwide. Between cuts and brand sales, P&G is on track to be the smallest workforce since at least 2003 and possibly since 1991.

Beyond job cuts, P&G is overhauling its factory footprint in the U.S. and elsewhere, enlarging some plants to produce consumer goods for multiple business units, while shutting outdated facilities, such as Augusta, Georgia, and Puerto Rico.

The cost cutting is freeing up cash and beefing up profitability: last year's $20.1 billion in operating expenses was down almost 24 percent from $26.3 billion in 2013.

Foreign exchange keeps pressure on sales

While showcasing P&G's efforts, Taylor will admit the company is facing mounting challenges from exchange rates.

A global economic slowdown has prompted governments and central banks throughout the world to devalue their currencies – hitting P&G, which does two-thirds of its business outside the U.S., hard.

P&G has raised prices overseas to preserve profit margins. Executives say the move hits sales, but keeps their business sustainable in the long run.

All told, P&G predicts currency woes will shave almost $5 billion off annual sales ending June 30, up from $4.6 billion a year ago.

Fixing China offerings

Taylor will also likely say the company is working to retool its business in China, P&G's second largest market, with $5.7 billion in annual sales.

Despite currency rate woes elsewhere in the world, P&G is trying to go more upscale there as it has discovered Chinese customers want higher quality and are willing to pay for it.

Top executives admitted the company had "gotten behind" on premium offerings in China, which are the fastest growing segment. To address the gap, P&G has launched new premium baby care products, and is rolling out new and improved offerings in everything from laundry detergent to oral care.

Keep the stream of innovations flowing 

Known for breakthrough products such as Swiffer mops and Crest Whitestrips, P&G drives its product sales with a steady stream of incremental improvements.

P&G has credited new absorbent channels in Pampers diapers and the better-pivoting FlexBall razor with helping improve recent results. Looking ahead, the company has just launched a new conditioner for Pantene hair care, it's growing its new online Gillette Shave Club, and it's introducing a new line of Tide and Downy, called Odor Defense, which is aimed at cleaning athletic wear.

Boosting share value through buybacks

To mollify shareholders, P&G has continued increasing its dividend and has bought back stock to bolster share prices.

By buying back stock, P&G's earnings per share increase because there are fewer shares outstanding.

Berkshire Hathaway is set to tender almost 53 million P&G shares worth more than $4 billion to pay for its acquisition of Duracell batteries, retiring about 2 percent of outstanding stock. Including that transaction, P&G expects to retire $8 billion to $9 billion in stock this year.

P&G is also expected to deliver its 60th straight annual dividend increase this spring, though recent increases have gotten smaller. Last year's payout increased just 3 percent, compared with double-digit increases in previous years.

Analysts believe P&G is being careful not to increase the dividend too much because some investors might frown on the company not plowing more money into new innovations or additional advertising.