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Item 7. Management’s Discussion and Analysis

2024-08-05 compared with 2023-08-04 · 305 added, 326 removed, 451 unchanged (58% of the section changed)

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Forward-looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties that may cause results to differ materially from those expressed or implied in the forward-looking statements.

We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise, except to the extent required by law.

We undertake no

14 The Procter & Gamble Company

obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise, except to the extent required by law.

Risks and uncertainties to which our forward-looking statements are subject include, without limitation:

(1) the ability to successfully manage global financial risks, including foreign currency fluctuations, currency exchange or pricing controls and localized volatility;

(1) the ability to successfully manage global financial risks, including foreign currency fluctuations, currency exchange or pricing controls;

(2) the ability to successfully manage local, regional or global economic volatility, including reduced market growth rates, and to generate sufficient income and cash flow to allow the Company to effect the expected share repurchases and dividend payments;

(3) the ability to successfully manage uncertainties related to changing political and geopolitical conditions and potential implications such as exchange rate fluctuations, market contraction, boycotts, sanctions or other trade controls;

(4) the ability to manage disruptions in credit markets or to our banking partners or changes to our credit rating;

(4) the ability to maintain key manufacturing and supply arrangements (including execution of supply chain optimizations and sole supplier and sole manufacturing plant arrangements) and to manage disruption of business due to various factors, including ones outside of our control, such as natural disasters, acts of war (including the Russia-Ukraine War) or terrorism or disease outbreaks;

(5) the ability to maintain key manufacturing and supply arrangements (including execution of supply chain optimizations and sole supplier and sole manufacturing plant arrangements) and to manage disruption of business due to various factors, including ones outside of our control, such as natural disasters, acts of war or terrorism or disease outbreaks;

(6) the ability to successfully manage cost fluctuations and pressures, including prices of commodities and raw materials and costs of labor, transportation, energy, pension and healthcare;

(6) the ability to stay on the leading edge of innovation, obtain necessary intellectual property protections and successfully respond to changing consumer habits, evolving digital marketing and selling platform requirements and technological advances attained by, and patents granted to, competitors;

(7) the ability to compete with our local and global competitors in new and existing sales channels, including by successfully responding to competitive factors such as prices, promotional incentives and trade terms for products;

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(11) the ability to rely on and maintain key company and third-party information and operational technology systems, networks and services and maintain the security and functionality of such systems, networks and services and the data contained therein;

(12) the ability to successfully manage uncertainties related to changing political and geopolitical conditions and potential implications such as exchange rate fluctuations and market contraction;

(13) the ability to successfully manage current and expanding regulatory and legal requirements and matters (including, without limitation, those laws and regulations involving product liability, product and packaging composition, intellectual property, labor and employment, antitrust, privacy and data protection, tax, the environment, due diligence, risk oversight, accounting and financial reporting) and to resolve new and pending matters within current estimates;

(14) the ability to manage changes in applicable tax laws and regulations;

(12) the ability to successfully manage the demand, supply and operational challenges, as well as governmental responses or mandates, associated with a disease outbreak, including epidemics, pandemics or similar widespread public health concerns;

(13) the ability to stay on the leading edge of innovation, obtain necessary intellectual property protections and successfully respond to changing consumer habits, evolving digital marketing and selling platform requirements and technological advances attained by, and patents granted to, competitors;

(14) the ability to successfully manage our ongoing acquisition, divestiture and joint venture activities, in each case to achieve the Company’s overall business strategy and financial objectives, without impacting the delivery of base business objectives;

(15) the ability to successfully achieve productivity improvements and cost savings and manage ongoing organizational changes while successfully identifying, developing and retaining key employees, including in key growth markets where the availability of skilled or experienced employees may be limited;

(17) the ability to successfully manage the demand, supply and operational challenges, as well as governmental responses or mandates, associated with a disease outbreak, including epidemics, pandemics or similar widespread public health concerns;

(18) the ability to manage the uncertainties, sanctions and economic effects from the war between Russia and Ukraine;

(16) the ability to successfully manage current and expanding regulatory and legal requirements and matters (including, without limitation, those laws and regulations involving product liability, product and packaging composition, manufacturing processes, intellectual property, labor and employment, antitrust, privacy, cybersecurity and data protection, artificial intelligence, tax, the environment, due diligence, risk oversight, accounting and financial reporting) and to resolve new and pending matters within current estimates;

(17) the ability to manage changes in applicable tax laws and regulations;

and (18) the ability to successfully achieve our ambition of reducing our greenhouse gas emissions and delivering progress towards our environmental sustainability priorities.

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Throughout the MD&A we refer to measures used by management to evaluate performance, including unit volume growth, net sales, net earnings, diluted net earnings per common share (diluted EPS) and operating cash flow.

We also refer to a number of financial measures that are not defined under accounting principles generally accepted in the United States of America (U.S.

GAAP), consisting of organic sales growth, core earnings per share (Core EPS), adjusted free cash flow and adjusted free cash flow productivity.

Organic sales growth is net sales growth excluding the impacts of acquisitions and divestitures and foreign exchange from year-over-year comparisons.

Core EPS is diluted EPS excluding certain items that are not judged by management to be part of the Company's sustainable results or trends.

Adjusted free cash flow is operating cash flow less

We also refer to a number of financial measures that are not defined under U.S.

GAAP, including organic sales growth, Core earnings per share (Core EPS), adjusted free cash flow and adjusted free cash flow productivity.

The explanation at the end of the MD&A provides the

The Procter & Gamble Company 15

capital spending and excluding payments for the transitional tax resulting from the U.S.

Adjusted free cash flow productivity is the ratio of adjusted free cash flow to net earnings excluding certain one-time items.

We believe these m easures provide our investors with additional information about our underlying results and trends as well as insight to some of the metrics used to evaluate management.

The explanation at the end of the MD&A provides more details on the use and the derivation of these measures as well as reconciliations to the most directly comparable U.S.

definition of these non-GAAP measures, details on the use and the derivation of these measures, as well as reconciliations to the most directly comparable U.S.

GAAP measure.

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Management also uses unit volume growth to evaluate drivers of changes in net sales.

Organic volume growth reflects year-over-year changes in unit volume excluding the impacts of acquisitions, divestitures and certain one-time items, if applicable, and is used to explain changes in organic sales.

Procter & Gamble is a global leader in the fast-moving consumer goods industry, focused on providing branded consumer packaged goods of superior quality and value to our consumers around the world.

Our products are sold in approximately 180 countries and territories primarily through mass merchandisers, e-commerce (including social commerce) channels, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and professional channels.

Organic volume growth reflects year-over-year changes in unit volume excluding the impacts of acquisitions and divestitures and certain one-time items, if applicable, and is used to explain changes in organic sales.

In our presentation of data in tables or other charts, certain columns and rows may not add due to rounding.

P&G is a global leader in the fast-moving consumer goods industry, focused on providing branded consumer packaged goods of superior quality and value to our consumers around the world.

Our products are sold in about 180 countries and territories primarily through mass merchandisers, e-commerce (including social commerce) channels, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and professional channels.

We also sell direct to individual consumers.

We have on-the-ground operations in approximately 70 countries.

We have on-the-ground operations in about 70 countries.

Our market environment is highly competitive with global, regional and local competitors.

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Sector Business Units

The Company's ten product categories are organized into five SBUs and five reportable segments (under U.S.

The Company's product categories are organized into five SBUs and five reportable segments (under U.S.

Fabric & Home Care;

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The following provides additional detail on our reportable segments and the ten product categories and brand composition within each segment.

The following provides additional detail on our reportable segments and the product categories and brand composition within each segment.

Reportable Segments % of

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Skin and Personal Care ( Antiperspirants and Deodorants, Personal Cleansing, Skin Care )

Olay, Old Spice, Safeguard, Secret, SK-II

8% 10% Grooming ( Appliances, Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Grooming )

Olay, Old Spice, Safeguard, Secret, SK-II, Native

Grooming 8% 9% Grooming ( Appliances, Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Grooming )

Braun, Gillette, Venus

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Luvs, Pampers

Feminine Care ( Adult Incontinence, Feminine Care )

Feminine Care ( Adult Incontinence, Menstrual Care )

Always, Always Discreet, Tampax

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(1) Percent of Net sales and Net earnings for the fiscal year ended June 30, 2024 (excluding results held in Corporate).

(2) Effective July 1, 2022, the Grooming Sector Business Unit completed the full integration of its Shave Care and Appliances categories to cohesively serve consumers' grooming needs.

This transition included the integration of the management team, strategic decision-making, innovation plans, financial targets, budgets and internal management reporting.

Organization Design:

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We are a global market leader amongst the beauty categories in which we compete, including hair care and skin and personal care.

We are a global market leader in the retail hair care market with nearly 20% global market share primarily behind our Pantene and Head & Shoulders brands.

In skin and personal care, we offer a wide variety of products, ranging from deodorants to personal cleansing to skin care, such as our Olay brand, which is one of the top facial skin care brands in the world with nearly 5% global market share.

We are the global market leader in the blades and razors market.

We are a global market leader in the retail hair care market with about 20% global market share primarily behind our Head & Shoulders and Pantene brands.

We are the global market leader in the grooming market, where we hold more than 45% share.

Our global blades and razors market share is more than 60%, primarily behind our Gillette and Venus brands.

Our appliances, such as electric shavers and epilators, are sold primarily under the Braun brand in a number of markets around the world where we compete against both global and regional competitors.

We hold nearly 25% of the male electric shavers market and over 50% of the female epilators market.

Our appliances, such as electric shavers and intense pulse light devices, are sold primarily under the Braun brand.

We hold over 25% of the male electric shavers market.

We compete in oral care and personal health care.

In oral care, there are several global competitors in the market, and we have the number two market share position with nearly 20% global market share behind our Crest and Oral-B brands.

In personal health care, we are a global market leader among the categories in which we compete, including respiratory treatments, digestive wellness, vitamins and analgesics behind our Vicks, Metamucil, Pepto-Bismol and Neurobion brands.

In oral care, there are several global competitors in the market, and we have the number two market share position with about 20% global market share behind our Crest and Oral-B brands.

In personal health care, we are a global market leader among the categories in which we compete, including respiratory treatments, digestive wellness, sleep aids, vitamins and analgesics behind our Vicks, Metamucil, Pepto-Bismol and Neurobion brands.

Fabric & Home Care:

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and home care products, including dishwashing liquids and detergents, surface cleaners and air fresheners.

In fabric care, we generally have the number one or number two market share position in the markets in which we compete and are the global market leader with over 35% global market share, primarily behind our Tide, Ariel and Downy brands.

In fabric care, we generally have the number one or number two market share position and are the global market leader with over 35% market share in the markets in which we compete, primarily behind our Tide, Ariel and Downy brands.

Our global home care market share is about 25% across the categories in which we compete, primarily behind our Cascade, Dawn, Febreze and Swiffer brands.

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In baby care, we are a global market leader and compete mainly in taped diapers, pants and baby wipes, with more than 20% global market share.

We have the number one or number two market share position in the markets in which we compete, primarily behind our Pampers brand.

We are a global market leader in the feminine care category with over 25% global market share, primarily behind our Always and Tampax brands.

We also compete in the adult incontinence category in certain markets behind Always Discreet, with over 10% market share in the key markets in which we compete.

We generally have the number one or number two market share position in the markets in which we compete, primarily behind our Pampers brand.

We are a global market leader in the feminine care category with over 20% global market share.

We compete in the menstrual care sub-category primarily behind our Always and Tampax brands with over 25% global market share.

We also compete in the adult incontinence sub-category behind Always Discreet, with about 15% market share in the markets in which we compete.

Our family care business is predominantly a North American business comprised primarily of the Bounty paper towel and Charmin toilet paper brands.

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Delivering and sustaining leadership levels of shareholder value creation requires balanced top- and bottom-line growth and strong cash generation.

The Company competes in daily-use product categories where performance plays a significant role in the consumer's choice of brands, and therefore, play to P&G's strengths.

Our focused portfolio of businesses consists of ten product categories where P&G has leading market positions, strong brands and consumer-meaningful product technologies.

Our strategy is to deliver and sustain value creation through five integrated choices:

a portfolio of daily-use products where performance drives brand choice;

superiority across product, package, brand communication, retail execution and value;

productivity;

constructive disruption of the entire value chain;

and a highly efficient and effective organization structure.

The Company competes in daily-use product categories where performance plays a significant role in the consumer's choice of brands, and therefore, plays to P&G's strengths.

Our focused portfolio of businesses consists of product categories where P&G has strong brands and consumer-meaningful product technologies with typically leadership market positions.

Within these categories, our strategic choices are focused on delighting and winning with consumers.

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Superior products delivered with superior execution drive market growth, value creation for retailers and build share growth for P&G.

Ongoing productivity improvement is crucial to delivering our balanced top- and bottom-line growth, cash generation and value creation objectives.

Ongoing productivity improvement is strategic and crucial to delivering our balanced top- and bottom-line growth, cash generation and value creation objectives.

Productivity improvement enables investments to strengthen the superiority of our brands via product and packaging innovation, more efficient and effective supply chains, equity and awareness-building brand advertising and other programs and expansion of sales coverage and R&D programs.

Productivity improvements also enable us to mitigate challenging cost environments (including periods of increasing commodity and negative foreign exchange impacts).

Productivity improvements also enable us to mitigate and manage through periods of challenging cost environments (including periods of increasing commodity, inflation and negative foreign exchange impacts).

Our objective is to drive productivity improvements across all elements of the statement of earnings and balance sheet, including cost of goods sold, marketing and promotional spending, overhead costs and capital spending.

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We are improving operational effectiveness and organizational culture through enhanced clarity of roles and responsibilities, accountability and incentive compensation programs.

Additionally, within this strategy of superiority, productivity, constructive disruption and organization, we have declared four focus areas to strengthen our performance going forward.

These are 1) leveraging environmental sustainability as an additional driver of superior performing products and packaging innovations, 2) increasing digital acumen to drive consumer and customer preference, reduce cost and enable rapid and efficient decision making, 3) developing next-level supply chain capabilities to enable flexibility, agility, resilience and a new level of productivity and 4) delivering employee value equation for all gender identities, races, ethnicities, sexual orientations, ages and abilities for all roles to ensure we continue to attract, retain and develop the best talent.

Additionally, to further strengthen our integrated strategy, we have declared four focus areas.

These are 1) leveraging environmental sustainability as an additional driver of superior performing products and packaging innovations, 2) increasing digital acumen to drive consumer and customer preference, reduce cost and enable rapid and efficient decision making, 3) developing next-level supply chain capabilities to enable flexibility, agility, resilience and a new level of productivity and 4) delivering a superior employee value equation for all employees inclusive of all genders, races, ethnicities, sexual orientations, ages and abilities - for all roles - to ensure we continue to attract, retain and develop the best talent to better serve our diverse consumer base.

We believe this strategy is right for the long-term health of the Company and our objective of delivering total shareholder return in the top one-third of our peer group.

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18 The Procter & Gamble Company

RECENT DEVELOPMENTS

Limited Market Portfolio Restructuring

In December 2023, the Company announced a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions.

In connection with this announcement, the Company announced that it expected to record incremental restructuring charges of $1.0 to $1.5 billion after tax, consisting primarily of foreign currency translation losses to be recognized as non-cash charges upon the substantial liquidation of operations in the affected markets.

As of June 30, 2024, the Company has substantially liquidated its operations in certain Enterprise Markets, including Nigeria, and recorded a non-cash charge of $216 million after tax for accumulated currency translation losses previously included in Accumulated other comprehensive income/(loss).

On July 1, 2024, the Company completed the divestiture of its business in Argentina.

The Company expects to record a non-cash charge of approximately $750 million for accumulated currency translation losses in the first quarter of the fiscal year ending June 30, 2025.

Consistent with our historical policies for ongoing restructuring-type activities, resulting charges were funded by and included within Corporate for segment reporting.

Restructuring charges above the normal ongoing level of restructuring costs were reported as non-core charges.

For more details on the restructuring program, refer to Note 3 to the Consolidated Financial Statements.

Intangible Asset Impairment

During the fiscal year ended June 30, 2024, the Company recorded a $1.3 billion before tax ($1.0 billion after tax) non-cash impairment charge on an indefinite-lived intangible asset acquired as part of the Company’s 2005 acquisition of The Gillette Company.

The impairment charge arose from a reduction in the estimated fair value of the Gillette indefinite-lived intangible asset due to a higher discount rate, weakening of several currencies relative to the U.S.

dollar and the impact of the non-core restructuring program described above.

This impairment charge adjusted the carrying value of the Gillette indefinite-lived intangible asset to fair value.

For a more detailed discussion of the Gillette impairment, refer to Note 4 to the Consolidated Financial Statements.

SUMMARY OF 2024 RESULTS

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• Net sales increased 2% to $84.0 billion versus the prior year.

The net sales growth was driven by a mid-single-digit increase in Health Care, low single-digit increases in Fabric & Home Care, Baby, Feminine & Family Care and Beauty, partially offset by a low single-digit decrease in Grooming.

Organic sales, which excludes the impact of acquisitions and divestitures and foreign exchange, increased 7%.

Organic sales increased high single digits in Health Care and Fabric & Home Care and mid-single digits in Baby, Feminine & Family Care, Beauty and Grooming.

• Operating income increased $321 million, or 2%, to $18.1 billion versus year ago due to the increase in net sales, partially offset by a modest decrease in operating margin.

• Net earnings decreased modestly by $55 million to $14.7 billion versus year ago as the increase in operating income was more than fully offset by a higher effective tax rate.

Foreign exchange impacts reduced net earnings by approximately $1.4 billion .

• Net earnings attributable to Procter & Gamble decreased $89 million, or 1%, to $14.7 billion versus the prior year due primarily to the decrease in net earnings.

• Diluted EPS increased 2% to $5.90 as the decrease in net earnings was more than offset by a reduction in shares outstanding.

The net sales growth was driven by mid-single-digit increases in Health Care, Fabric & Home Care and Grooming and a low single-digit increase in Beauty.

Net Sales were unchanged in Baby, Feminine & Family Care.

Organic sales, which exclude the impact of acquisitions and divestitures and foreign exchange, increased 4%.

Organic sales increased high single digits in Grooming, mid-single digits in Fabric & Home Care and Health Care and low single digits in Beauty and Baby, Feminine & Family Care.

• Operating income increased $411 million, or 2%, to $18.5 billion due to the increase in net sales, partially offset by the non-cash impairment charge of $1.3 billion related to the Gillette intangible asset.

• Net earnings increased $236 million, or 2%, to $15.0 billion due to the increase in operating income, partially offset by a higher effective tax rate.

Foreign exchange impacts reduced net earnings by approximately $589 million.

• Net earnings attributable to Procter & Gamble increased $226 million, or 2%, to $14.9 billion.

• Diluted EPS increased 2% to $6.02 due to the increase in net earnings.

Core EPS, which excludes the charge for the Gillette intangible asset impairment and incremental restructuring charges, increased 12% to $6.59.

• Cash flow from operating activities was $19.8 billion.

◦ Adjusted free cash flow, which is operating cash flow less capital expenditures and certain other impacts, was $16.9 billion.

◦ Adjusted free cash flow productivity, which is the ratio of adjusted free cash flow to net earnings, was 95%.

ECONOMIC CONDITIONS AND UNCERTAINTIES

We discuss expectations regarding future performance, events and outcomes, such as our business outlook and objectives, in annual and quarterly reports, press releases and other written and oral communications.

All such statements, except for historical and present factual information, are "forward-looking statements" and are based on financial data and our business plans available only as of the time the statements are made, which may become out-of-date or incomplete.

We assume no obligation to update any forward-looking statements as a result of new information, future events or other factors, except as required by law.

Forward-looking statements are inherently uncertain and investors must recognize that events could be significantly different from our expectations.

For more information on risk factors that could impact our results, please refer to “Risk Factors” in Part I, Item 1A of this Form 10-K.

◦ Adjusted free cash flow productivity, which is the ratio of adjusted free cash flow to net earnings excluding the Gillette intangible asset impairment charge and a non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria, was 105%.

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ECONOMIC CONDITIONS AND UNCERTAINTI ES

Global Economic Conditions.

Our products are sold in numerous countries across North America, Europe, Latin America, Asia, Australia and Africa, with more than half our sales generated outside the United States.

Our largest international markets are Greater China, the United Kingdom, Canada, Japan and Germany and collectively comprise more than 20% of our net sales in fiscal 2023.

As such, we are exposed to and impacted by global macroeconomic factors, geopolitical tensions, U.S.

and foreign government policies and foreign exchange fluctuations.

We are also exposed to market risks from operating in challenging environments including unstable economic, political and social conditions, civil unrest, natural disasters, debt and credit issues and currency controls or fluctuations.

These risks can reduce our net sales or erode our operating margins and consequently reduce our net earnings and cash flows.

Changes in Costs.

Our costs are subject to fluctuations, particularly due to changes in commodity and input material prices, transportation costs, other broader inflationary impacts and our own productivity efforts.

Our products are sold in numerous countries worldwide, with more than half our sales generated outside the United States.

Our largest international markets are Greater China, the United Kingdom, Canada, Japan and Germany and collectively comprised approximately 20% of our net sales in fiscal 2024.

As a result, we are exposed to global macroeconomic factors, geopolitical tensions and government policies.

We are exposed to market risks from operating in challenging environments due to economic, political and social instabilities, natural disasters, debt and credit issues, currency controls, foreign exchange and interest rate changes.

These risks can negatively impact our net sales, net earnings and cash flows.

For example, we are exposed to risks due to the ongoing war between Russia and Ukraine.

Our Russia business accounted for less than 2% of consolidated net sales, net earnings and net assets as of June 30, 2024.

Foreign Exchange.

We have significant exposure to exchange rate fluctuations, both due to translation and transaction exposures.

Translation exposures arise from measuring income statements of foreign subsidiaries with functional currencies other than the U.S.

Transaction exposures involve impacts from 1) input costs that are denominated in currencies other than the local reporting currency and 2) revaluation of working capital balances denominated in currencies other than the functional currency.

We have experienced significant foreign exchange impacts in the past due to the weakening of certain foreign currencies versus the US dollar, which have negatively impacted net sales, net earnings and cash flows.

In response to the devaluation of foreign currencies (including those deemed highly inflationary), any lags or inability (due to government restrictions) to implement price increases or the negative impacts of such actions on product consumption may lead to a decline in our net sales, net earnings and cash flows.

Commodities and Supply Chain.

Our costs are subject to fluctuations due to changes in commodity and input material prices, transportation costs, inflationary impacts and productivity efforts.

We have significant exposures to certain commodities and input materials, in particular certain oil-derived materials like resins and paper-based materials like pulp.

Volatility in the market price of these commodities and input materials has a direct impact on our costs.

Disruptions in our manufacturing, supply and distribution operations due to energy shortages, natural disasters, labor or freight constraints have impacted our costs and could do so in the future.

New or increased legal or regulatory requirements, along with initiatives to meet our sustainability goals, could also result in increased costs due to higher material costs and investments in facilities and equipment.

Volatility in the market price of commodities and input materials directly affects our costs.

Disruptions in manufacturing, supply and distribution operations can lead to increased costs.

Legal or regulatory requirements and sustainability initiatives may result in increased costs.

We strive to implement, achieve and sustain cost improvement plans, including supply chain optimization and general overhead and workforce optimization.

Increased pricing in response to certain inflationary or cost increases may also offset portions of the cost impacts;

however, such price increases may impact product consumption.

If we are unable to manage cost impacts through pricing actions and consistent productivity improvements, it may adversely impact our net sales, gross margin, operating margin, net earnings and cash flows.

18 The Procter & Gamble Company

Foreign Exchange.

We have significant translation and transaction exposure to the fluctuation of exchange rates.

Translation exposures relate to exchange rate impacts of measuring income statements of foreign subsidiaries that do not use the U.S.

dollar as their functional currency.

Transaction exposures relate to 1) the impact from input costs that are denominated in a currency other than the local reporting currency and 2) the revaluation of transaction-related working capital balances denominated in currencies other than the functional currency.

In the past three years, weakening of certain foreign currencies versus the U.S.

dollar has resulted in significant foreign exchange impacts leading to lower net sales, net earnings and cash flows.

Certain countries that recently had and are currently experiencing significant exchange rate fluctuations include Argentina, Brazil, the United Kingdom, Japan, Russia and Turkey.

These fluctuations have significantly impacted our historical net sales, net earnings and cash flows and could do so in the future.

Increased pricing in response to certain fluctuations in foreign currency exchange rates may offset portions of the currency impacts but could also have a negative impact on the consumption of our products, which would negatively affect our net sales, gross margin, operating margin, net earnings and cash flows.

however, such price increases may negatively impact product consumption.

If we are unable to manage cost impacts through pricing actions and consistent productivity improvements, it may negatively impact our net sales, net earnings and cash flows.

Government Policies.

Our net sales, gross margin, operating margin, net earnings and cash flows could be affected by changes in U.S.

or foreign government legislative, regulatory or enforcement policies.

For example, our net earnings and cash flows could be affected by any future legislative or regulatory changes in U.S.

tax policy, including changes resulting from the current work being led by the OECD/G20 Inclusive Framework focused on "Addressing the Challenges of the Digitalization of the Economy." The breadth of the OECD project extends beyond pure digital businesses and, as proposed, is likely to impact most large multinational businesses by both redefining jurisdictional taxation rights and establishing a 15% global minimum tax.

Our net sales, gross margin, operating margin, net earnings and cash flows may also be impacted by changes in U.S.

and foreign government policies related to environmental and climate change matters.

Additionally, we attempt to carefully manage our debt, currency and other exposures in certain countries with currency exchange, import authorization and pricing controls, such as Egypt, Argentina and Pakistan.

Further, our net sales, gross margin, operating margin, net earnings and cash flows could be affected by changes to international trade agreements in North America and elsewhere.

Changes in government policies in the above areas might cause an increase or decrease in our net sales, gross margin, operating margin, net earnings and cash flows.

Russia-Ukraine War .

The war between Russia and Ukraine has negatively impacted our operations.

Our Ukraine business includes two manufacturing sites and accounted for less than 1% of consolidated net sales and consolidated net earnings in the fiscal year ended June 30, 2023.

Net assets of our Ukraine business accounted for less than 1% of consolidated net assets as of June 30, 2023.

Our Russia business includes two manufacturing sites.

Beginning in March 2022, the Company reduced its product portfolio, discontinued new capital investments and suspended media, advertising and promotional activity in Russia.

The Russia business accounted for approximately 2% of consolidated net sales and consolidated net earnings in the fiscal year ended June 30, 2023.

Net assets of our Russia business accounted for less than 2% of consolidated net assets as of June 30, 2023.

Future impacts to the Company are difficult to predict due to the high level of uncertainty related to the war's duration, evolution and ultimate resolution.

Within Ukraine, there is a possibility of physical damage and destruction of our two manufacturing facilities.

We may not be able to operate our manufacturing sites and source raw materials from our suppliers or ship finished products to our customers.

Within Russia, we may not be able to continue our reduced operations at current levels due to sanctions and counter-sanctions, monetary, currency or payment controls, legislative restrictions or policies, restrictions on access to financial institutions and supply and transportation challenges.

Our suppliers, distributors and retail customers are also impacted by the war and their ability to successfully maintain their operations could also impact our operations or negatively impact the sales of our products.

More broadly, there could be additional negative impacts to our net sales, earnings and cash flows should the situation escalate beyond its current scope, including, among other potential impacts, economic recessions in certain neighboring countries or globally due to inflationary pressures and supply chain cost increases or the geographic proximity of the war relative to the rest of Europe.

For additional information on risk factors that could impact our business results, please refer to “Risk Factors” in Part I, Item 1A of this Form 10-K.

We are exposed to changes in U.S.

and foreign government legislative, regulatory or enforcement policies that can have a negative impact on net sales, net earnings and cash flows.

These include tax policy changes (both U.S.

and foreign), including those resulting from the current work being led by the OECD/G20 Inclusive Framework focused on "Addressing the Challenges of the Digitalization of the Economy”.

Government controls such as currency exchanges, pricing and import authorizations as well as government policies related to environmental and climate change matters and changes to international trade agreements can also impact our financial performance.

For additional information on risk factors that could impact our business results, please refer to Risk Factors in Part I, Item 1A of the Company's Form 10-K for the fiscal year ended June 30, 2024.

RESULTS OF OPERATIONS

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Accordingly, our discussion of these operating costs focuses primarily on relative margins rather than the absolute year-over-year changes in total costs.

The Procter & Gamble Company 19

exchange rate fluctuations (in situations where certain input costs may be tied to a different functional currency than the underlying sales), the impacts of manufacturing savings projects and reinvestments (for example, product or package improvements) and, to a lesser extent, scale impacts (for costs that are fixed or less variable in nature).

The primary drivers of changes in gross margin are input costs (energy and other commodities), pricing impacts, geographic mix (for example, gross margins in North America are generally higher than the Company average for similar products), product mix (for example, the Beauty segment has higher gross margins than the Company average), foreign exchange rate fluctuations (in situations where certain input costs may be tied to a different functional currency than the underlying sales), the impacts of manufacturing savings projects and reinvestments (for example, product or package improvements) and, to a lesser extent, scale impacts (for costs that are fixed or less variable in nature).

The primary components of SG&A are marketing-related costs and non-manufacturing overhead costs.

2 unchanged sentences

The main drivers of changes in SG&A as a percentage of net sales are overhead and marketing cost savings, reinvestments (for example, increased advertising), inflation, foreign exchange fluctuations and scale impacts.

20 The Procter & Gamble Company

For a detailed discussion of the fiscal 2023 year-over-year changes, please refer to the MD&A in Part II, Item 7 of the Company's Form 10-K for the fiscal year ended June 30, 2023 .

Net sales increased 2% to $84.0 billion in fiscal 2024.

The increase in net sales was driven by higher pricing of 9% and a favorable mix of 1%, partially offset by unfavorable foreign exchange of 5% and a 3% decrease in unit volume versus the prior year.

Favorable mix was driven by a higher proportion of sales in North America (with higher than Company-average selling prices) and decline in Europe (with lower than Company-average selling prices).

Excluding the impacts of foreign exchange and acquisitions and divestitures, organic sales grew 7%.

Net sales increased mid-single digits in Health Care, increased low single digits in Fabric & Home Care, Baby, Feminine & Family Care and Beauty and decreased low single digits in Grooming.

On a regional basis, volume decreased double digits in Europe, mid-single digits in Greater China and low single digits in Asia Pacific, IMEA and North America.

Volume increased low single digits in Latin America.

The increase in net sales was driven by higher pricing of 4%, partially offset by unfavorable foreign exchange of 2%.

Volume and mix were unchanged versus the prior year.

Net sales increased mid-single digits in Health Care, Fabric & Home Care and Grooming and increased low single digits in Beauty.

Net sales were unchanged in Baby, Feminine & Family Care.

Organic sales, which exclude the impacts of acquisitions and divestitures and foreign exchange, increased 4%.

Organic sales increased high single digits in Grooming, mid-single digits in Fabric & Home Care and Health Care and low single digits in Beauty and Baby, Feminine & Family Care.

Operating Costs

9 unchanged sentences

The increase in gross margin was due to:

• a 430 basis-point increase from higher pricing and

• a 220 basis-point increase from manufacturing productivity savings,

• 160 basis points of lower commodity costs and

• a 170 basis-point increase from higher pricing.

These increases were partially offset by:

• 320 basis points of increased commodity and input material costs,

• a 110 basis-point decline from unfavorable mix due to the launch and growth of premium products (which have lower than Company-average gross margins) and the disproportionate decline of the super-premium SK-II brand,

• an 80 basis-point decline from unfavorable product mix including the decline of the super-premium SK-II brand,

• a 60 basis-point decline from unfavorable foreign exchange impacts,

• 30 basis points due to capacity start-up costs and other manufacturing impacts and

• 20 basis points of product and packaging investments.

Total SG&A increased 4% to $21.1 billion due primarily to an increase in overhead costs and other net operating costs.

SG&A as a percentage of net sales increased 50 basis points to 25.7% due to an increase in overhead and other net operating costs as a percentage of net sales, partially offset by a decrease in marketing spending as a percentage of net sales.

• Marketing spending as a percentage of net sales decreased 40 basis points due to the positive scale impacts of the net sales increase and increased productivity savings, partially offset by increased media reinvestments.

• 30 basis points of product and packaging investments and

• 30 basis points of one-time manufacturing related costs including capacity startup costs.

Total SG&A increased 10% to $23.3 billion due to increased marketing spending and overhead costs.

SG&A as a percentage of net sales increased 200 basis points to 27.7% due primarily to the increase in marketing spending as a percentage of net sales.

• Marketing spending as a percentage of net sales increased 170 basis points as the increase in marketing spending was partially offset by the positive scale impacts of the net sales increase and productivity savings.

• Overhead costs as a percentage of net sales increased 20 basis points due to wage inflation and other cost increases, partially offset by the positive scale impacts of the net sales increase and productivity savings.

• Other net operating expenses as a percentage of net sales increased 60 basis points due primarily to higher foreign exchange transactional charges.

Productivity-driven cost savings delivered 60 basis points of benefit to SG&A as a percentage of net sales.

Operating margin decreased 10 basis points to 22.1% as the increase in gross margin was more than fully offset by the increase in SG&A as a percentage of net sales as discussed above.

20 The Procter & Gamble Company

In the fiscal year ended June 30, 2024, the Company recorded a non-cash impairment charge of $1.3 billion ($1.0 billion after tax) on the Gillette intangible asset.

dollar and the impact of the limited market portfolio restructuring program.

For further discussion of the Gillette impairment charge, refer to Note 4 to the Consolidated Financial Statements.

Operating margin was unchanged at 22.1% as the increase in gross margin was more than fully offset by the increase in SG&A as a percentage of net sales and the non-cash impairment charge, as discussed above.

Operating income increased $411 million, or 2%, to $18.5 billion due to the increase in net sales, as discussed above.

Non-Operating Items

• Interest expense was $756 million, an increase of $317 million versus the prior year due to higher interest rates and an increase in short-term debt in the current year.

• Interest income was $307 million, an increase of $256 million versus the prior year due to higher interest rates.

• Other non-operating income increased $98 million to $668 million due primarily to a prior year unrealized loss on equity investments and a current year gain on divestiture of minor brands.

The effective tax rate increased 190 basis points versus the prior year period to 19.7% d ue to:

• a 100 basis-point increase from lower excess tax benefits of share-based compensation,

• a 50 basis-point increase from discrete impacts related to uncertain tax positions and

• a 40 basis-point increase primarily from lower current year deductions for foreign-derived intangible income versus prior year.

Operating income increased $321 million, or 2%, to $18.1 billion due to the increase in net sales, partially offset by a modest decrease in operating margin, both of which are discussed above.

Earnings before income taxes increased $358 million, or 2%, to $18.4 billion due primarily to the increase in operating income .

Net earnings declined modestly by $55 million to $14.7 billion due to the increase in earnings before income taxes, more than fully offset by the increase in the effective income tax rate discussed above.

Foreign exchange impacts reduced net earnings by approximately $1.4 billion due to a weakening of certain currencies against the U.S.

• Interest expense was $925 million, an increase of $169 million versus the prior year due primarily to higher interest rates.

• Interest income was $473 million, an increase of $166 million versus the prior year due primarily to higher interest rates.

• Other non-operating income was unchanged at $668 million as gains from the sale of minor brands and an increase in net non-operating benefits on postretirement plans were fully offset by a non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria.

The Procter & Gamble Company 21

The effective income tax rate for fiscal year ended June 30, 2024, was 20.2%, compared to 19.7% for the fiscal year ended June 30, 2023.

The increase in the effective tax rate was primarily driven by unfavorable geographic mix impacts, partially offset by decreases due to higher excess tax benefits of share-based compensation.

Earnings before income taxes increased $408 million, or 2%, to $18.8 billion due to the increase in operating income discussed above.

Net earnings increased $236 million, or 2%, to $15.0 billion due to the increase in earnings before income taxes, partially offset by the increase in the effective income tax rate discussed above.

Foreign exchange impacts reduced net earnings by approximately $589 million due to a weakening of certain currencies against the U.S.

This impact includes both transactional charges and translational impacts from converting earnings from foreign subsidiaries to U.S.

Net earnings attributable to Procter & Gamble decreased $89 million, or 1%, to $14.7 billion.

Diluted EPS increased $0.09, or 2%, to $5.90 as the decrease in net earnings was more than fully offset by a reduction in shares outstanding.

Net earnings attributable to Procter & Gamble increased $226 million, or 2%, to $14.9 billion.

Diluted EPS increased $0.12, or 2%, to $6.02 due primarily to the increase in net earnings.

SEGMENT RESULTS

20 unchanged sentences

% of net sales 19.5% 21.2% (170) bps

Beauty net sales increased 2% to $15.0 billion as the positive impacts of higher pricing of 8% and benefit from acquisitions of 1% were partially offset by unfavorable foreign exchange of 5%, unfavorable mix of 1% (due primarily to the decline of the super-premium SK-II brand, which has higher than segment-average selling prices) and a 1% decrease in unit volume.

The Procter & Gamble Company 21

Beauty net sales increased 1% to $15.2 billion as the positive impact of higher pricing of 4% was partially offset by unfavorable foreign exchange of 2% and an unfavorable mix of 1% (due primarily to the decline of the super-premium SK-II brand, which has higher than segment-average selling prices).

Unit volume was unchanged.

Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales increased 3%.

Global market share of the Beauty segment increased 0.1 points.

• Hair Care net sales increased low single digits.

Positive impacts of higher pricing (driven by all regions) and benefit from acquisitions were partially offset by the negative impacts of unfavorable foreign exchange and a decrease in unit volume.

Mix had a neutral impact on net sales.

The volume decrease was driven primarily by declines in Europe (due to portfolio reduction in Russia and increased pricing), Greater China (due to market contraction and pandemic-related disruptions) and Asia Pacific (due to increased pricing).

Organic sales increased high single digits driven by 20% growth in Latin America and double-digit growth in Europe and North America, partially offset by a mid-single-digit decline in Greater China.

Global market share of the hair care category decreased more than half a point.

• Skin and Personal Care net sales increased low single digits.

Positive impacts of higher pricing (across all regions), a unit volume increase and a benefit from acquisitions were partially offset by the negative impacts from unfavorable mix (due primarily to the decline of the super-premium SK-II brand) and unfavorable foreign exchange.

The volume increase was driven primarily by growth in North America, Latin America and Greater China (all due to innovation), partially offset by a decline in Asia Pacific (due to the decline of the super-premium SK-II brand in the travel retail channel).

Organic sales increased mid-single digits as more than 20% increases in Latin America and Europe and a double-digit increase in North America were partially offset by a double-digit decrease in Asia Pacific.

Global market share of the skin and personal care category increased nearly a point.

Net earnings increased 1% to $3.2 billion due to the increase in net sales, partially offset by a 20 basis-point decrease in net earnings margin.

Net earnings margin decreased due to a reduction in gross margin, partially offset by a reduction in SG&A as a percentage of net sales.

The gross margin reduction was driven by negative product mix (due to the decline of the super-premium SK-II brand), increased commodity costs and unfavorable foreign exchange, partially offset by increased pricing.

SG&A as a percentage of net sales decreased primarily due to a decrease in marketing spending.

• Hair Care net sales increased mid-single digits.

Positive impacts of higher pricing (driven by Latin America, Europe and North America), a net benefit from acquisitions and divestitures and favorable brand mix (due to growth of the premium Native brand) were partially offset by negative impacts of unfavorable foreign exchange.

Unit volume was unchanged as growth in Latin America (due to market growth), North America and Asia Pacific (both due to innovation) was offset by a decline in Greater China (due to market contraction and distribution footprint changes).

Organic sales increased high single digits due to an approximately 30% growth in Latin America, double-digit increases in North America and Europe, partially offset by a mid-single-digit decline in Greater China.

Global market share of the hair care category decreased 0.2 points.

• Skin and Personal Care net sales decreased low single digits.

Negative impacts of unfavorable mix (due to the decline of the super-premium SK-II brand, which has higher than category-average selling prices) and unfavorable foreign exchange

22 The Procter & Gamble Company

were partially offset by the positive impacts of higher pricing (across all regions) and an increase in unit volume.

The unit volume increase was driven by growth in North America and Europe (both due to innovation in Personal Care), partially offset by a decline in Greater China (due to the decline of the super-premium SK-II brand and market contraction).

Organic sales decreased low single digits due to mid-teen declines in Asia Pacific and Greater China, partially offset by a double-digit increase in North America.

Global market share of the skin and personal care category increased 0.3 points.

Net earnings decreased 7% to $3.0 billion as the increase in net sales was more than offset by a 170 basis-point decline in net earnings margin.

Net earnings margin decreased as an increase in gross margin was more than fully offset by an increase in SG&A as a percentage of net sales and a higher effective tax rate.

The gross margin improvement was driven by productivity savings and increased pricing, partially offset by negative product mix (due primarily to the decline of the super-premium SK-II brand).

SG&A as a percentage of net sales increased due to an increase in marketing and overhead spending, partially offset by the positive scale effects of the net sales increase.

The higher effective tax rate was driven by unfavorable geographic mix.

($ millions) 2024 2023 Change vs.

3 unchanged sentences

% of net sales 22.2% 22.8% (60) bps

Grooming net sales decreased 3% to $6.4 billion driven by unfavorable foreign exchange of 7%, a 3% decrease in unit volume and unfavorable mix of 2% (due to decline of appliances, which have higher than segment-average selling prices), partially offset by higher pricing of 9% (driven by all regions).

The volume decrease was primarily driven by decreases in Europe (due to portfolio reduction in Russia and increased pricing) and North America (due to market contraction and increased pricing).

Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales increased 5% driven by growth in all regions led by a more than 20% growth in Latin America and a double-digit growth in Asia Pacific.

Global market share of the Grooming segment increased 1 point.

Net earnings decreased 2% to $1.5 billion due to the decrease in net sales, partially offset by a 20 basis-point increase in net earnings margin.

Net earnings margin increased as a decrease in gross margin was more than fully offset by a decrease in SG&A as a percentage of net sales.

The gross margin decrease was driven by unfavorable product mix (due to a disproportionate decline of higher gross margin appliances such as premium shavers), commodity cost increases and unfavorable foreign exchange, partially offset by higher pricing and productivity savings.

SG&A as a percentage of net sales decreased due primarily to a decrease in marketing spending.

Grooming net sales increased 4% to $6.7 billion driven by higher pricing of 8% (driven primarily by Latin America and Europe) and a 1% increase in unit volume, partially offset by unfavorable foreign exchange of 5%.

Mix had a neutral impact on net sales growth.

The increase in unit volume was due to growth in IMEA and Latin America (both due to innovation), partially offset by decline in Europe (due to increased pricing).

Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales increased 9% driven by an approximately 40% growth in Latin America and high single-digit growth in Europe, partially offset by a low single-digit decline in North America.

Global market share of the Grooming segment increased 0.5 points.

Net earnings increased 1% to $1.5 billion due to the increase in net sales, partially offset by a 60 basis-point decrease in net earnings margin.

Net earnings margin declined as an increase in gross margin was more than fully offset by an increase in SG&A as a percentage of net sales.

The gross margin increase was driven by higher pricing and productivity savings, partially offset by unfavorable foreign exchange and unfavorable mix due to the growth of premium innovation that has lower than segment-average gross margins.

SG&A as a percentage of net sales increased due to an increase in marketing spending, partially offset by the positive scale effects of the net sales increase.

($ millions) 2024 2023 Change vs.

3 unchanged sentences

% of net sales 19.1% 18.9% 20 bps

Health Care net sales increased 4% to $11.2 billion driven by higher pricing of 5% and favorable mix of 4% (due to growth in North America and the Personal Health Care category, both of which have higher than segment-average selling prices), partially offset by unfavorable foreign exchange of 4% and a 1% decrease in unit volume.

Excluding the impact of foreign exchange and acquisitions and divestitures, organic sales increased 8%.

Global market share of the Health Care segment decreased 0.2 points.

Health Care net sales increased 5% to $11.8 billion driven by higher pricing of 4% and favorable mix of 2% (due to growth in North America and Europe, both of which have higher than segment-average selling prices), partially offset by a 1% decrease in unit volume.

Excluding the impact of foreign exchange and acquisitions and divestitures, organic sales also increased 5%.

Global market share of the Health Care segment increased 0.6 points.

• Oral Care net sales increased mid-single digits due to the positive impacts of favorable product mix (due to growth of premium paste and power brushes, which have higher than category-average selling prices) and higher pricing (driven by Latin America, Europe and North America), partially offset by a decrease in unit volume.

The unit volume decrease was due to a decline in Latin America and Greater China (both due to share losses) partially offset by growth in North America and Europe (both due to market growth).

Organic sales also increased mid-single digits due to a double-digit increase in Europe and a mid-single-digit increase in North America partially offset by a low single-digit decline in Greater China.

Global market share of the oral care category increased 0.1 points.

• Personal Health Care net sales increased mid-single digits due to the positive impacts of higher pricing (driven by North America, Latin America and Europe) and favorable foreign exchange, partially offset by unfavorable mix (due to the decline of respiratory products that have higher than category-average selling prices) and a decrease in unit volume.

The unit volume decrease was due to declines in Latin America and IMEA (both due to market contraction including lower cough and cold incidence), partially offset by growth in North America (due to innovation).

Organic sales increased low single digits due to mid-single-digit growth in Europe and North America, partially offset by a low single-digit decline in Asia Pacific.

Global market share of the personal health care category increased 0.7 points.

The Procter & Gamble Company 23

• Oral Care net sales decreased low single digits.

Negative impacts of unfavorable foreign exchange and a unit volume decrease were partially offset by increased pricing (driven primarily by North America and Europe) and favorable premium product mix.

Volume decline was primarily driven by Europe (due to portfolio reduction in Russia and increased pricing), North America (due to increased pricing) and Greater China (due to market contraction, especially in the power brush market).

Organic sales increased low single digits driven by a more than 20% growth in Latin America and a low single-digit growth in North America.

Global market share of the oral care category was unchanged.

• Personal Health Care net sales increased double digits.

Positive impacts of favorable mix (due to the disproportionate growth of North America and respiratory products, both of which have higher than category-average selling prices), higher pricing (driven primarily by North America, Europe and Latin America) and a unit volume increase were partially offset by unfavorable foreign exchange.

Volume increase was primarily driven by growth in North America (due to innovation and a stronger respiratory season) and Latin America, partially offset by a decline in IMEA (versus a prior year impacted by pandemic-related consumption increases in certain markets).

Organic sales increased mid-teens driven by a high teens increase in North America, a mid-teens increase in Europe and a low teens increase in Latin America.

Global market share of the personal health care category was unchanged.

Net earnings increased 6% to $2.3 billion due to the increase in net sales and a 20 basis-point increase in net earnings margin.

Net earnings margin increased as a decrease in gross margin was more than fully offset by a decrease in SG&A as a percentage of net sales.

The decrease in gross margin was driven by unfavorable product mix (due to the growth of products such as manual brushes, which have lower gross margins) and increased commodity and input material costs, partially offset by increased pricing.

SG&A as a percentage of net sales decreased due to the positive scale impacts of the net sales increase and lower marketing spending, partially offset by increased overhead spending.

Net earnings margin increased due to an increase in gross margin, partially offset by an increase in SG&A as a percentage of net sales.

The gross margin increase was driven by higher pricing and productivity savings, partially offset by unfavorable product mix (due to a decline in respiratory products, which have higher than segment-average gross margins).

SG&A as a percentage of net sales increased due to increased marketing spending, partially offset by the positive scale impacts of the net sales increase.

FABRIC & HOME CARE

4 unchanged sentences

% of net sales 19.3% 17.0% 230 bps

Fabric & Home Care net sales increased 3% to $28.4 billion driven by higher pricing of 11% and favorable mix of 1% (due to a disproportionate volume decline in Europe, which has lower than segment-average selling prices), partially offset by unfavorable foreign exchange of 5% and a 4% decrease in unit volume.

Fabric & Home Care net sales increased 4% to $29.5 billion driven by higher pricing of 3%, favorable mix of 1% and a 1% increase in unit volume, partially offset by unfavorable foreign exchange of 1%.

Excluding the impact of foreign exchange and acquisitions and divestitures, organic sales increased 5%.

Global market share of the Fabric & Home Care segment was unchanged.

• Fabric Care net sales increased low single digits.

Positive impacts of higher pricing (driven by all regions) and favorable geographic mix (due to decline in Europe, which has lower than category-average selling prices) were partially offset by unfavorable foreign exchange and a decrease in unit volume.

The volume decrease was primarily driven by declines in Europe (due to increased pricing and portfolio reduction in Russia), North America (due to increased pricing and market contraction) and Greater China (due to portfolio reductions and market contraction).

Organic sales increased high single digits driven by more than 20% increases in Latin America and IMEA, high single-digit increases in Asia Pacific and Europe and a low single-digit increase in North America.

Global market share of the fabric care category decreased nearly a point.

• Home Care net sales increased mid-single digits.

Positive impacts of higher pricing (driven primarily by Europe and North America) and favorable product mix were partially offset by unfavorable foreign exchange and a decrease in unit volume.

The volume decrease was driven by declines in Europe (due to market contraction and increased pricing) and North America (due to market contraction).

Organic sales increased high single digits driven by a mid-teens growth in Europe and a high single-digit growth in North America.

Global market share of the home care category increased more than a point.

Net earnings increased 10% to $4.8 billion due to the increase in net sales and a 110 basis-point increase in net earnings margin.

• Fabric Care net sales increased low single digits driven by the positive impacts of higher pricing (driven by Europe, Asia Pacific and Latin America, partially offset by increased trade spending in North America) and favorable geographic mix (due to disproportionate growth in North America, which has higher than category-average selling prices).

Unit volume was unchanged as growth in North America (due to increased marketing support and market growth) and Europe (due to innovation and increased marketing support) was offset by declines primarily in Asia Pacific (due to increased pricing) and Greater China (due to market contraction and portfolio rationalization).

Organic sales also increased low single digits driven by a high single-digit increase in Europe and a low single-digit increase in North America, partially offset by a mid-teens decline in Greater China.

Global market share of the fabric care category decreased 0.5 points.

• Home Care net sales increased high single digits.

Positive impacts of higher pricing (driven primarily by Europe and North America), a unit volume increase and favorable premium product mix were partially offset by unfavorable foreign exchange.

The unit volume increase was due to growth in North America and Europe (both due to innovation), partially offset by decline in Latin America (due to increased pricing).

Organic sales increased high single digits driven by mid-teens growth in Europe and a high single-digit growth in North America.

Global market share of the home care category increased 0.8 points.

Net earnings increased 18% to $5.7 billion due to the increase in net sales and a 230 basis-point improvement in net earnings margin.

Net earnings margin increased due to an increase in gross margin, partially offset by an increase in SG&A as a percentage of net sales.

The gross margin increase was driven by increased pricing, partially offset by an increase in commodity and input material costs, unfavorable foreign exchange and unfavorable product mix.

SG&A as a percentage of net sales increased due to an increase in media spending, partially offset by the positive scale effects of the net sales increase.

The Procter & Gamble Company 23

The gross margin increase was driven by productivity savings, lower commodity costs and higher pricing.

SG&A as a percentage of net sales increased due primarily to an increase in marketing spending, partially offset by the positive scale effects of the net sales increase.

BABY, FEMININE & FAMILY CARE

4 unchanged sentences

% of net sales 19.8% 17.5% 230 bps

Baby, Feminine & Family Care net sales increased 2% to $20.2 billion as the positive impacts of higher pricing of 8% and favorable mix of 1% (due to a higher proportion of sales in North America, which has higher than segment-average selling prices) were partially offset by unfavorable foreign exchange of 4% and a 3% decrease in unit volume.

Baby, Feminine & Family Care net sales were unchanged at $20.3 billion as the positive impacts of higher pricing of 3% and favorable mix of 1% (due to a higher proportion of sales in North America, which has higher than segment-average selling prices) were offset by a 2% decrease in unit volume and unfavorable foreign exchange of 2%.

Excluding the impact of foreign exchange and acquisitions and divestitures, organic sales increased 2%.

Global market share of the Baby, Feminine & Family Care segment was unchanged.

Global market share of the Baby, Feminine & Family Care segment decreased 0.2 points.

• Baby Care net sales decreased low single digits.

Negative impacts of a decrease in unit volume and unfavorable foreign exchange were partially offset by higher pricing (across all regions) and favorable product and geographic mix (due to a higher proportion of sales in North America).

The volume decrease was driven primarily by declines in Europe (due to increased pricing and portfolio reduction in Russia), North America (due to increased pricing) and Greater China.

Organic sales increased mid-single digits driven by a more than 30% growth in Latin America, high single-digit growth in IMEA and mid-single-digit growth in North America and Europe, partially offset by a double-digit decline in Greater China.

Global market share of the baby care category was unchanged.

• Feminine Care net sales increased mid-single digits.

Positive impacts of higher pricing (driven by all regions) and favorable product and geographic mix (due to a decline in Europe, which has lower than category-average selling prices) were partially offset by unfavorable foreign exchange and a decrease in unit volume.

The volume decrease was driven primarily by declines in Europe (due to portfolio reduction in Russia and increased pricing) and IMEA (due to increased pricing).

Organic sales increased double digits driven by growth in all regions led by a mid-teens increase in Europe and a double-digit increase in North America.

Market share of the feminine care category increased nearly half a point.

• Net sales in Family Care, which is predominantly a North American business, increased low single digits driven by higher pricing.

Unit volume had a neutral impact on net sales.

Organic sales increased mid-single digits.

North America's share of the family care category decreased nearly half a point.

Net earnings increased 9% to $3.5 billion due to the increase in net sales and a 100 basis-point increase in net earnings margin.

Net earnings margin increased primarily due to an increase in gross margin and a modest decrease in SG&A as a percentage of net sales.

Gross margin increased due to increased pricing, partially offset by an increase in commodity and input material costs.

SG&A as a percentage of net sales decreased due to the positive scale effects of the net sales increase partially offset by an increase in other operating expense.

Negative impacts of a decrease in unit volume and unfavorable foreign exchange were partially offset by higher pricing (driven primarily by Latin America and Europe) and favorable product mix (due to a higher proportion of premium-priced diapers).

Volumes decreased in all regions led by Europe, IMEA and North America, due to increased pricing and competitive activity.

Organic sales decreased low single digits driven by a mid-single-digit decline in Europe partially offset by mid-teens growth in Latin America.

Global market share of the baby care category decreased 0.3 points.

• Feminine Care net sales increased low single digits.

Positive impacts of higher pricing (driven primarily by Europe, Latin America and IMEA) and favorable mix (due to a higher proportion of premium products) were partially offset by a decrease in unit volume and unfavorable foreign exchange.

The volume decrease was driven primarily by declines in

24 The Procter & Gamble Company

Europe (due to increased pricing), Latin America (due to increased competitive activity) and IMEA (due to increased pricing), partially offset by growth in North America (due to increased marketing support and distribution gains).

Organic sales increased mid-single digits driven by mid-single-digit increases in Europe and IMEA and a low single-digit increase in North America.

Market share of the feminine care category increased 0.2 points.

• Net sales in Family Care, which is predominantly a North American business, increased low single digits driven by a unit volume increase (due to market growth and increased marketing support) and higher pricing, partially offset by unfavorable product mix (due to growth of larger pack sizes with lower than category-average selling prices).

Organic sales also increased low single digits.

North America's share of the family care category decreased 0.4 points.

Net earnings increased 13% to $4.0 billion due to a 230 basis-point increase in net earnings margin.

Net earnings margin increased primarily due to an increase in gross margin, partially offset by an increase in SG&A as a percentage of net sales.

Gross margin increased primarily due to lower commodity costs, productivity savings and increased pricing, partially offset by unfavorable foreign exchange.

SG&A as a percentage of net sales increased due to an increase in marketing and overhead spending.

($ millions) 2024 2023 Change vs.

5 unchanged sentences

The most notable ongoing reconciling item is income taxes, which adjusts the blended statutory rates that are reflected in the reportable segments to the overall Company effective tax rate.

Corporate net sales increased 3% to $765 million due to an increase in net sales of the incidental businesses managed at the corporate level.

Corporate net earnings decreased $884 million to a loss of $399 million primarily due to higher interest expense, lower excess tax benefits of share-based compensation and higher foreign exchange transactional charges, partially offset by the increase in net sales of the incidental businesses and higher interest income.

Corporate net sales decreased $164 million to $601 million due to a decrease in net sales of incidental businesses managed at the corporate level.

Corporate net earnings decreased $1.0 billion due to a loss of $1.4 billion due primarily to the impairment charge of the Gillette intangible asset and incremental restructuring charges.

Restructuring Program to Deliver Productivity and Cost Savings

The Company has historically had an ongoing restructuring program with annual spending in the range of $250 to $500 million.

Savings generated from the Company's restructuring program are difficult to estimate, given the nature of the activities, the timing of the execution and the degree of reinvestment.

In fiscal 2023, the Company incurred before tax restructuring costs within the range of our historical annual ongoing level of $250 to $500 million.

24 The Procter & Gamble Company

The Company has historically had an ongoing restructuring program with annual spending in the range of $250 to $500 million before tax.

On December 5, 2023, the Company announced an incremental limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria.

In fiscal 2024, the Company incurred before tax restructuring costs of $659 million, which include foreign currency translation losses recognized as a non-cash charge of approximately $216 million due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria.

Restructuring accruals of $166 million as of June 30, 2024, are classified as current liabilities.

Approximately 87% of the restructuring charges incurred in fiscal 2023 either have been or will be settled with cash.

Consistent with our policies for ongoing restructuring-type activities, the resulting charges are funded by and included within Corporate for segment reporting.

Excluding the non-cash charges of foreign currency translation losses for certain Enterprise Markets, including Nigeria, approximately 64% of the restructuring charges incurred in fiscal 2024 either have been or will be settled with cash.

Consistent with our policies for restructuring-type activities, the resulting charges are funded by and included within Corporate for segment reporting.

Savings generated from the Company's restructuring program are difficult to estimate, given the nature of the activities, the timing of the execution and the degree of reinvestment.

In addition to our restructuring programs, we have additional ongoing savings efforts in our supply chain, marketing and overhead areas that yield additional benefits to our operating margins.

Refer to Note 3 to the Consolidated Financial Statements for more details on the restructuring program.

CASH FLOW, FINANCIAL CONDITION AND LIQUIDITY

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The overall cash position of the Company reflects our strong business results and a global cash management strategy that takes into account liquidity management, economic factors and tax considerations.

The Procter & Gamble Company 25

Cash Flow Analysis

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Operating Cash Flow

Operating cash flow was $16.8 billion in 2023, a 1% increase versus the prior year.

Net earnings, adjusted for non-cash items (depreciation and amortization, share-based compensation, deferred income taxes and gain on sale of assets) generated approximately $17.5 billion of operating cash flow.

Working capital and other impacts used $656 million of operating cash flow as summarized below.

• An increase in Accounts receivable used $307 million of cash primarily due to sales growth.

The number of days sales outstanding increased approximately 1 day versus prior year.

• Higher inventory used $119 million of cash due to increased safety stock levels to strengthen supply chain sufficiency.

Inventory days on hand was flat versus year ago.

• Accounts payable and Accrued and other liabilities provided $313 million of cash, primarily driven by increases in taxes payable and accrued compensation expense, partially offset by a reduction in trade payables.

The reduction in trade payables was due to lower supply chain payables from a decrease in commodity and transportation costs, partially offset by the impact of extended payment terms with suppliers (see Extended Payment Terms and Supply Chain Financing below).

Days payable outstanding decreased approximately 3 days versus prior year.

• Other net operating assets and liabilities used $543 million of cash primarily driven by pension-related contributions.

Operating cash flow was $19.8 billion in 2024, an 18% increase versus the prior year.

Net earnings, adjusted for certain non-cash items (depreciation and amortization, intangible asset impairment, share-based compensation expense, deferred income taxes and gain on sale of assets) generated approximately $19.3 billion of operating cash flow.

Working capital and other impacts generated $533 million of cash in the period primarily driven by an increase in trade payables and other non-cash add-backs, partially offset by an increase in accounts receivable and a decrease in post-retirement benefit accruals.

The increase in trade payables is primarily from increased marketing support activities and extended payment terms with suppliers, partially offset by lower supply chain payables due to a decrease in commodity costs.

Other non-cash add-backs include the non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria.

The increase in Accounts Receivable is primarily from sales growth.

The decrease in post-retirement benefit accruals is due to payments and the net periodic credit from other retiree benefits.

Days sales outstanding increased by two days.

Days inventory on hand increased by two days.

Adjusted Free Cash Flow.

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The increase was primarily driven by the increase in operating cash flows as discussed above.

Adjusted free cash flow productivity, defined as the ratio of adjusted free cash flow to net earnings, was 95% in 2023.

Extended Payment Terms and Supply Chain Financing.

Beginning in fiscal 2014, in response to evolving market practices, the Company began a program to negotiate extended payment terms with its suppliers.

At the same time, the Company initiated a Supply Chain Finance program (the "SCF") with a number of global financial institutions (the "SCF Banks").

Under the SCF, qualifying suppliers may elect to sell their receivables from the Company to an SCF Bank.

These participating suppliers negotiate their receivables sales arrangements directly with the respective SCF Bank.

While the Company is not party to those agreements, the SCF Banks allow the participating suppliers to utilize the Company’s creditworthiness in establishing credit spreads and associated costs.

This generally provides the suppliers with more favorable terms than they would be able to secure on their own.

The Company has no economic interest in a supplier’s decision to sell a receivable.

Once a qualifying supplier elects to participate in the SCF and reaches an agreement with an SCF Bank, they elect which individual Company invoices they sell to the SCF bank.

However, all the Company’s payments to participating suppliers are paid to the SCF Bank on the invoice due date, regardless of whether the individual invoice is sold by the supplier to the SCF Bank.

The SCF Bank pays the supplier on the invoice due date for any invoices that were not previously sold to the SCF Bank under the SCF.

The Procter & Gamble Company 25

The terms of the Company’s payment obligation are not impacted by a supplier’s participation in the SCF.

Our payment terms with our suppliers for similar services and materials within individual markets are consistent between suppliers that elect to participate in the SCF and those that do not participate.

Accordingly, our average days outstanding are not significantly impacted by the portion of suppliers or related input costs that are included in the SCF.

In addition, the SCF is available to both material suppliers, where the underlying costs are largely included in Cost of goods sold, and to service suppliers, where the underlying costs are largely included in SG&A.

As of June 30, 2023, approximately 3% of our global suppliers have elected to participate in the SCF.

Payments to those suppliers during fiscal year 2023 were approximately $18 billion, which equals approximately 29% of our total Cost of goods sold and SG&A for the year.

For participating suppliers, we believe substantially all of their receivables with the Company are sold to the SCF Banks.

Accordingly, we would expect that at each balance sheet date, a similar proportion of amounts originally due to suppliers would instead be payable to SCF Banks.

All outstanding amounts related to suppliers participating in the SCF are recorded within Accounts payable in our Consolidated Balance Sheets, and the associated payments are included in operating activities within our Consolidated Statements of Cash Flows.

As of June 30, 2023 and 2022, the amounts due to suppliers participating in the SCF and included in Accounts payable were approximately $6 billion.

Although difficult to project due to market and other dynamics, we anticipate incremental cash flow benefits from the extended payment terms with suppliers could increase at a slower rate in fiscal 2024.

Future changes in our suppliers’ financing policies or economic developments, such as changes in interest rates, general market liquidity or the Company’s credit-worthiness relative to participating suppliers, could impact suppliers’ participation in the SCF and/or our ability to negotiate extended payment terms with our suppliers.

However, any such impacts are difficult to predict.

Adjusted free cash flow productivity, defined as the ratio of adjusted free cash flow to net earnings excluding the Gillette intangible asset impairment charge and non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria, was 105% in 2024.

Investing Cash Flow

Net investing activities used $3.5 billion of cash in 2023, primarily due to capital spending and acquisitions.

Capital Spending.

Capital expenditures, primarily to support capacity expansion, innovation and cost efficiencies, were $3.1 billion in 2023.

Capital spending as a percentage of net sales decreased 20 basis points to 3.7% in 2023.

Acquisitions.

Acquisition activity used cash of $765 million in 2023, primarily related to a Beauty acquisition.

Net investing activities used $3.5 billion of cash in 2024, primarily due to capital expenditures and the settlement of net investment hedges.

Financing Cash Flow

Net financing activities consumed $12.1 billion of cash in 2023, mainly due to dividends to shareholders and treasury stock purchases, partially offset by a net debt increase and the impact of stock options and other.

Dividend Payments.

Our first discretionary use of cash is dividend payments.

Dividends per common share increased 4% to $3.6806 per share in 2023.

Total dividend payments to common and preferred shareholders were $9.0 billion in 2023.

In April 2023, the Board of Directors declared a 3% increase in our quarterly dividend from $0.9133 to $0.9407 per share on Common Stock and Series A and B Employee Stock Ownership Plan (ESOP) Convertible Class A Preferred Stock.

This is the 67th consecutive year that our dividend has increased.

We have paid a dividend for 133 consecutive years, every year since our incorporation in 1890.

Long-Term and Short-Term Debt.

We maintain debt levels we consider appropriate after evaluating a number of factors, including cash flow expectations, cash requirements for ongoing operations, investment and financing plans (including acquisitions and share repurchase activities) and the overall cost of capital.

Total debt was $34.6 billion as of June 30, 2023.

We generated $2.9 billion from net debt issuances in short-term debt and long-term debt markets.

Treasury Purchases.

Total share repurchases were $7.4 billion in 2023.

Impact of Stock Options and Other.

The exercise of stock options and other financing activities generated $1.3 billion of cash in 2023.

At June 30, 2023, our current liabilities exceeded current assets by $13.1 billion, largely due to short-term borrowings under our commercial paper program.

Net financing activities used $14.9 billion of cash in 2024, mainly due to dividends to shareholders, treasury stock purchases and a net debt decrease, partially offset by the impact of stock options and other.

At June 30, 2024, our current liabilities exceeded current assets by $8.9 billion, largely due to accounts payable, short-term borrowings and debt due within one year.

We anticipate being able to support our short-term liquidity and operating needs largely through cash generated from operations.

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We utilize short- and long-term debt to fund discretionary items, such as acquisitions and share repurchases.

We have strong short- and long-term debt ratings, which have enabled and should continue to enable us to refinance our debt as it becomes due at favorable rates in commercial paper and bond markets.

We have strong short- and long-term debt ratings, which have enabled and should continue to enable us to refinance our debt as it becomes due in commercial paper and bond markets.

In addition, we have agreements with a diverse group of financial institutions that, if needed, should provide sufficient funding to meet short-term financing requirements.

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We maintain bank credit facilities to support our ongoing commercial paper program.

The current facility is an $8.0 billion facility split between a $3.2 billion five-year facility and a $4.8 billion 364-day facility, which expire in November 2027 and

26 The Procter & Gamble Company

November 2023, respectively.

The current facility is an $8.0 billion facility split between a $3.2 billion five-year facility and a $4.8 billion 364-day facility, which expire in November 2028 and October 2024, respectively.

Both facilities can be extended for certain periods of time as specified in the terms of the credit agreement.

These facilities are currently undrawn and we anticipate that they will remain undrawn.

These credit facilities do not have cross-default or ratings triggers, nor do they have material adverse events clauses, except at the time of signing.

These credit facilities do not

26 The Procter & Gamble Company

have cross-default or ratings triggers, nor do they have material adverse events clauses, except at the time of signing.

In addition to these credit facilities, we have an automatically effective registration statement on Form S-3 filed with the SEC that is available for registered offerings of short- or long-term debt securities.

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Our annual tax rate is determined based on our income, statutory tax rates and the tax impacts of items treated differently for tax purposes than for financial reporting purposes.

Also inherent in determining our annual tax rate are judgements and

Also inherent in determining our annual tax rate are judgments and assumptions

The Procter & Gamble Company 27

assumptions regarding the recoverability of certain deferred tax balances, primarily net operating loss and other carryforwards, and our ability to uphold certain tax positions.

regarding the recoverability of certain deferred tax balances, primarily net operating loss and other carryforwards, and our ability to uphold certain tax positions.

Realization of net operating losses and other carryforwards is dependent upon generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carryforward periods, which involves business plans, planning opportunities and expectations about future outcomes.

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Determining the useful life of an intangible asset also requires judgment.

Certain brand intangible assets are expected to have indefinite lives based on their history and our plans to continue to support and build the acquired brands.

Other acquired intangible assets (e.g., certain brands, customer relationships, patents and technologies) are expected to have determinable

Certain brand intangible assets are expected to have

28 The Procter & Gamble Company

useful lives.

indefinite lives based on their history and our plans to continue to support and build the acquired brands.

Other acquired intangible assets (e.g., certain brands, customer relationships, patents and technologies) are expected to have determinable useful lives.

Our assessment as to brands that have an indefinite life and those that have a determinable life is based on a number of factors including competitive environment, market share, brand history, underlying product life cycles, operating plans and the macroeconomic environment of the countries in which the brands are sold.

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We use the income method to estimate the fair value of these assets, which is based on forecasts of the expected future cash flows attributable to the respective assets.

When appropriate, the market approach, which leverages comparable company revenue and earnings multiples, is weighted with the income approach to estimate fair value.

If the resulting fair value is less than the asset's carrying value, that difference represents an impairment.

Our annual impairment testing for goodwill and indefinite-lived intangible assets occurs during the three months ended December 31.

Most of our goodwill reporting units have fair value cushions that significantly exceed their underlying carrying values.

In connection with the Grooming operating segment integration as described further in Note 2, we concluded that the Shave Care and Appliances categories now operate as one reporting unit for goodwill impairment testing.

Based on our annual impairment testing during the three months ended December 31, 2022, our Grooming reporting unit goodwill has a fair value cushion of over 30%.

As of June 30, 2023, the carrying value of the Grooming reporting unit goodwill was $12.7 billion.

Most of our indefinite-lived intangible assets have fair value cushions that significantly exceed their underlying carrying value.

Based on our annual impairment testing during the three months ended December 31, 2022, the Gillette indefinite-lived intangible asset's fair value exceeded its carrying value by approximately 5%.

Other than our Gillette indefinite-lived intangible asset, our goodwill reporting units and our indefinite-lived intangible assets have fair values that significantly exceed their underlying carrying values.

During the fiscal year ended June 30, 2024, we determined the fair value of the Gillette indefinite-lived intangible asset was less than its carrying value.

As a result, we recorded a non-cash impairment charge of $1.3 billion ($1.0 billion after tax) to reduce the carrying amount to be equivalent to the estimated fair value.

As of June 30, 2024, the carrying value of the Gillette indefinite-lived intangible asset was $12.8 billion.

While we have concluded that no triggering event has occurred during the fiscal year ended June 30, 2023, the Gillette indefinite-lived intangible asset is most susceptible to future impairment risk.

Adverse changes in the business or in the macroeconomic environment, including foreign currency devaluation, increasing global inflation, market contraction from an economic recession and the Russia-Ukraine War, could reduce the underlying cash flows used to estimate the fair value of the Gillette indefinite-lived intangible asset and trigger a future impairment charge.

Further reduction of the Gillette business activities in Russia could reduce the estimated fair value by up to 5%.

The impairment charge arose due to a higher discount rate, weakening of several currencies relative to the U.S.

dollar and the impact of a new restructuring program focused primarily in certain Enterprise Markets, including Argentina and Nigeria.

While we have concluded that no triggering event has occurred during the quarter ended June 30, 2024, the Gillette indefinite-lived intangible asset is susceptible to future impairment risk.

Adverse changes in the business or in the macroeconomic environment including foreign currency devaluation, increasing global inflation, or market contraction from an economic recession, could reduce the underlying cash flows used to estimate the fair value of the Gillette indefinite-lived intangible asset and trigger a future impairment charge.

The most significant assumptions utilized in the determination of the estimated fair value of the Gillette indefinite-lived intangible asset are the net sales growth rates (including residual growth rates), discount rate and royalty rates.

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changes in the use and frequency of grooming products, shifts in demand away from one or more of our higher priced products to lower priced products or potential supply chain constraints.

In addition, relative global and country/regional macroeconomic factors, including the Russia-Ukraine War, could result in additional and prolonged devaluation of other countries’ currencies relative to the U.S.

In addition, relative global and country/regional macroeconomic factors could result in additional and prolonged devaluation of other countries’ currencies relative to the U.S.

The residual growth rates represent the expected rate at which the Gillette brand is expected to grow beyond the shorter-term business planning period.

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Spot rates as of the fair value measurement date are utilized in our fair value estimates for cash flows outside the U.S.

The royalty rates are driven by historical and estimated future profitability of the underlying Gillette business.

The royalty rate used to determine the estimated fair value for the Gillette indefinite-lived intangible asset is driven by historical and estimated future profitability of the underlying Gillette business.

The royalty rate may be impacted by significant adverse changes in long-term operating margins.

We performed a sensitivity analysis for the Gillette indefinite-lived intangible asset as part of our annual impairment testing during the three months ended December 31, 2023, utilizing reasonably possible changes in the assumptions for the discount rate, the short-term and residual growth rates and the royalty rates to demonstrate the potential impacts to the estimated fair values.

The table below provides, in isolation, the estimated fair value impacts related to a 25 basis-point increase in the discount rate, a 25 basis-point decrease in our shorter-term and residual growth rates, or a 50 basis-point decrease in our royalty rates, which may result in an impairment of the Gillette indefinite-lived intangible asset.

The table below provides, in isolation, the estimated fair value impacts related to a 25 basis-point increase in the discount rate, a 25 basis-point decrease in our shorter-term and residual growth rates, or a 50 basis-point decrease in our royalty rates, which may result in an additional impairment of the Gillette indefinite-lived intangible asset.

The Procter & Gamble Company 29

Approximate Percent Change in Estimated Fair Value

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See Note 4 to the Consolidated Financial Statements for additional discussion on goodwill and intangible assets.

The Procter & Gamble Company 29

New Accounting Pronouncements

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In addition, we are not aware of any facts or circumstances that would significantly impact such exposures in the near term.

Interest Rate Exposure on Financial Instruments.

Interest Rate Exposure.

We are exposed to interest rate movements due to our long and short-term borrowing program.

Interest rate swaps are used to manage exposures to interest rates on underlying debt obligations.

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Based on our interest rate exposure as of and during the fiscal year ended June 30, 2024, including derivative and other instruments sensitive to interest rates, we believe a near-term change in interest rates, at a 95% confidence level based on historical interest rate movements, would not materially affect our financial statements.

Currency Rate Exposure on Financial Instruments.

Because we manufacture and sell products and finance operations in a number of countries throughout the world, we are exposed to the impact on revenue and expenses of movements in currency exchange rates.

Currency Rate Exposure.

Because we manufacture and sell products and finance operations in a number of countries throughout the world, we are exposed to movements in currency exchange rates.

We leverage the Company’s diversified portfolio of exposures as a natural hedge.

Corporate policy prescribes the range of allowable hedging activity.

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Based on our currency rate exposure on derivative and other instruments as of and during the fiscal year ended June 30, 2024, we believe, at a 95% confidence level based on historical currency rate movements, the impact on such instruments of a near-term change in currency rates would not materially affect our financial statements.

Commodity Price Exposure on Financial Instruments.

Commodity Price Exposure.

We use raw materials that are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors.

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Measures Not Defined By U.S.

In accordance with the SEC's Regulation S-K Item 10(e), the following provides definitions of the non-GAAP measures and the reconciliation to the most closely related GAAP measure.

In accordance with the SEC's Regulation S-K Item 10(e), the following provides definitions of non-GAAP measures and a reconciliation to the most closely related GAAP measure.

We believe that these measures provide useful perspective on underlying business trends (i.e., trends excluding non-recurring or unusual items) and results and provide a supplemental measure of year-on-year results.

The non-GAAP measures described below are used by management in making operating decisions, allocating financial resources and for business strategy purposes.

These measures may be useful to investors, as they provide supplemental information about business performance and provide investors a view of our business results through the eyes of management.

These measures are also used to evaluate senior management and are a factor in determining their at-risk compensation.

These measures may be useful to investors, as they provide supplemental information about business performance and provide investors with a view of our business results through the eyes of management.

These measures are also used to evaluate senior management and are a factor in determining their at-

30 The Procter & Gamble Company

risk compensation.

These non-GAAP measures are not intended to be considered by the user in place of the related GAAP measures but rather as supplemental information to our business results.

These non-GAAP measures may not be the same as similar measures used by other companies due to possible differences in method and in the items or events being adjusted.

These measures include:

Organic Sales Growth.

Organic sales growth is a non-GAAP measure of sales growth excluding the impacts of acquisitions, divestitures and foreign exchange from year-over-year comparisons.

We believe this measure provides investors with a

30 The Procter & Gamble Company

supplemental understanding of underlying sales trends by providing sales growth on a consistent basis.

We believe this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis.

This measure is used in assessing the achievement of management goals for at-risk compensation.

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The following table provides a numerical reconciliation of adjusted free cash flow ($ millions):

Operating Cash Flow Capital Spending Adjustments to Operating Cash Flow (1)

Adjusted Free Cash Flow

Operating Cash Flow Capital Spending U.S.

Tax Act Payments Adjusted Free Cash Flow

2024 $ 19,846 $ (3,322) $ 422 $ 16,946

2023 $ 16,848 $ (3,062) $ 225 $ 14,011

(1) Adjustments to Operating Cash Flow include transitional tax payments resulting from the U.S.

Tax Act of $225 in 2023 and 2022.

Adjusted Free Cash Flow Productivity.

Adjusted free cash flow productivity is defined as the ratio of adjusted free cash flow to net earnings.

Adjusted free cash flow productivity is defined as the ratio of adjusted free cash flow to net earnings excluding the Gillette intangible asset impairment charge and non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria.

We view adjusted free cash flow productivity as a useful measure to help investors understand P&G’s ability to generate cash.

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Adjusted Free

Cash Flow Net Earnings Adjusted Free

Cash Flow Net Earnings Adjustments to Net Earnings (1)

Net Earnings as Adjusted Adjusted Free

Cash Flow Productivity

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2023 $ 14,011 $ 14,738 $ — $ 14,738 95 %

(1) Adjustments to Net Earnings relate to the after-tax Gillette intangible asset impairment charge ($1.0 billion) and non-cash charge for accumulated foreign currency translation losses ($216) due to the substantial liquidation of operations in certain Enterprise Markets, including Nigeria.

Core EPS is a measure of the Company's diluted EPS excluding items that are not judged by management to be part of the Company's sustainable results or trends.

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This measure is also used in assessing the achievement of management goals for at-risk compensation.

For the fiscal years ended June 30, 2023 and 2022, there were no adjustments to or reconciling items for diluted EPS.

The Core earnings measures included in the following reconciliation tables refer to the equivalent GAAP measures adjusted as applicable for the following items:

• Incremental restructuring:

The Company has historically had an ongoing level of restructuring activities of approximately $250 - $500 million before tax.

On December 5, 2023, the Company announced a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria.

The adjustment to Core earnings includes the restructuring charges that exceed the normal, recurring level of restructuring charges.

The Procter & Gamble Company 31

• Intangible asset impairment:

As discussed in Note 4 to the Consolidated Financial Statements, in the fiscal year ended June 30, 2024, the Company recognized a non-cash, after-tax impairment charge of $1.0 billion ($1.3 billion before tax) to adjust the carrying value of the Gillette intangible asset acquired as part of the Company's 2005 acquisition of The Gillette Company.

We do not view the above items to be part of our sustainable results, and their exclusion from core earnings measures provides

a more comparable measure of year-on-year results.

These items are also excluded when evaluating senior management in

determining their at-risk compensation.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

Reconciliation of Non-GAAP Measures

Fiscal Year Ended June 30, 2024 Fiscal Year Ended June 30, 2023

Amounts in millions except per share amounts As Reported (GAAP) Incremental Restructuring Intangible Impairment Core

(Non-GAAP) As Reported

Cost of products sold $ 40,848 $(70) $ — $ 40,778 $ 42,760

Selling, general and administrative expense 23,305 (33) — 23,273 21,112

Operating income 18,545 103 1,341 19,988 18,134

Non-operating income, net 668 248 — 916 668

Income taxes 3,787 (25) 315 4,077 3,615

Net earnings attributable to P&G 14,879 376 1,026 16,281 14,653

Diluted net earnings per common share (2)

$ 6.02 $ 0.15 $ 0.42 $ 6.59 $ 5.90

(1) For the fiscal year ended June 30, 2023, there were no adjustments to or reconciling items for Core EPS.

(2) Diluted net earnings per common share are calculated on Net earnings attributable to Procter & Gamble.

CHANGE VERSUS YEAR AGO

Net earnings attributable to P&G 2 %

Core net earnings attributable to P&G 11 %

Diluted net earnings per common share 2 %

Core EPS 12 %

Quantitative and Qualitative Disclosures About Market Risk.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis