Procter & Gamble Announces Restructuring Charges

Procter & Gamble (P&G) has disclosed that it will incur restructuring charges of up to $2.5 billion for its international operations, alongside an impairment hit for assets acquired in its 2005 purchase of Gillette.

Limited Portfolio Restructuring

In a regulatory filing, P&G stated that it anticipates recording charges ranging from $1 billion to $1.5 billion after tax for a limited portfolio restructuring. The focus of this restructuring will primarily be on specific operations within its enterprise markets division, notably in Argentina and Nigeria.

These charges include foreign currency translation losses expected from the liquidation of operations in the affected markets. P&G believes that the majority of these charges will not involve cash outflows.

The company expects these charges to be recognized in the fiscal years ending mid-2024 and mid-2025, with initial charges reported in the final quarter of this year. However, the exact timeline for the completion of the restructuring program has yet to be determined.

Impairment Charge for Gillette Assets

As part of its broader restructuring efforts, P&G will also incur approximately $1.3 billion in impairment charges during the three months ending December 31. These charges pertain to intangible assets acquired through the Gillette deal.

P&G attributes the impairment charge to a decrease in the estimated fair value of the indefinite-lived intangible asset connected to Gillette. Factors contributing to this decrease include a higher discount rate, the weakening of various currencies against the U.S. dollar, and the impact of the ongoing restructuring program. This impairment adjustment aligns the carrying value of the Gillette intangible asset with its fair value.

P&G clarified that despite this impairment charge, the underlying performance of its Gillette business remains robust. However, potential unfavorable changes in the business or macroeconomic environment could potentially result in further impairment charges.

Total Charges and Reporting

P&G expects the total charges, after tax, to amount to approximately $2 billion to $2.5 billion over the relevant periods. These charges will be classified as non-core charges in the company's financial reporting.