Procter & Gamble (P&G), a leading personal care and cosmetics conglomerate, revealed plans for a significant portfolio overhaul amidst ongoing macroeconomic challenges. The restructuring primarily targets specific Enterprise Markets like Argentina and Nigeria, where P&G expects charges ranging between one billion and 1.5 billion dollars after tax, anticipated to materialise in fiscal years 2024 and 2025.
In addition to the aforementioned charges, P&G indicated an additional 1.3 billion dollars in charges associated with the write-down of its Gillette business, bringing the total charges to a range of two to 2.5 billion dollars. The company intends to carry out a non-cash impairment tied to Gillette’s intangible assets acquired during P&G’s acquisition of The Gillette Company in 2005, expected to take place in the ongoing quarter ending December 31, 2023.
The decision behind the latest impairment on the Gillette business revolves around a reduction in the estimated fair value of the indefinite-lived intangible asset of Gillette, attributed to a higher discount rate and currency weakening concerning the US dollar, as outlined in P&G’s regulatory filing. P&G’s acquisition of Gillette amounted to 57 billion dollars in 2005, but due to currency fluctuations, the company previously incurred an eight billion dollar charge in 2019 concerning the business. Despite these challenges, P&G reported net earnings attributable to the company of 14.7 billion dollars for fiscal 2023.
P&G underscored that while the underlying performance of the Gillette business remains robust, any adverse future changes in business dynamics or the macroeconomic environment could potentially trigger further impairment charges. Chief Financial Officer Andre Schulten mentioned at a Morgan Stanley conference that P&G expects its Gillette business to grow within the 5% range, consistent with its growth trajectory over the last three years.
