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Total Expenses were $63.72 billion in 2019
Breakdown of Procter and Gamble's Total Expenses in 2019:
Total = $63.72 Bil
Cost of Sales = $34.77 Bil
Operating Expenses = $27.43 Bil
Non-operating expenses = -$580 Mil
Provision for income taxes = $2.1 Bil
Procter and Gamble's total expenses have risen gradually from around $54.86 billion in 2017 to about $63.72 billion in 2019.However, expenses in 2019 included a one-time $8.35 billion write-down of Gillette.Cost of sales is the biggest expense head for the company, with it being 50.2% of revenue in 2017, before increasing slightly to around 51.4% of revenue in 2019. With revenue expected to rise steadily through 2020 and 2021, cost of sales as % of revenue is likely to drop to around 50%, leading to a projected growth in net income margin from 5.9% in 2019 to 16.9% in 2020.However, by 2021, net income margin is set to be around 17.2%, and this projected growth has helped drive a >30% rise in Procter and Gamble's share price since January 2018.Below, we take a look at the key drivers of P&G's expenses and net margins.
P&G's Total Expenses Have Increased From $54.86 Billion in 2017 to $63.72 Billion in 2019
% Change in total expenses
P&G's total expenses have increased from $54.86 billion in 2017 to about $63.72 billion in 2019.
For 2020, we expect total expenses to stand at $58.64 billion, which comprises of
1) Cost of Sales: $35.72 billion
2) Operating Expenses: $19.83 billion
2) Non-Operating Expenses: -$378 million
3) Income Taxes: $3.46 billion
Below, we take a look at how the company's key expense components have trended and the key reasons for the change.
(A) SG&A Expense has grown from $18.65 billion in 2017 to $19.08 billion in 2019. Expense has grown marginally over the past 2 years, but we expect this metric to rise further in 2020 and 2021, as P&G's revenue is expected to grow at a rate faster than the past 2 years. As a % Revenues, SG&A has declined from 28.7% in 2017 to 28.2% in 2019.
Selling, General & Administrative expenses
S,G & A Expenses as a % of revenue
(B) Goodwill and Impairment charges made up the remaining $8.35 billion of operating expenses in 2019. This was a one-time expense, due to the write-down of P&G's Gillette brand. As a % of Revenue, goodwill and impairment charges for 2019 came in at 12.3%.
Goodwill and impairment charges
Goodwill and impairment charges as a % of revenue
4) P&G's Income Tax Expense first increased from $3.06 billion in 2017 to $3.46 billion in 2018, before dropping to $2.1 billion in 2019, on the back of a drop in taxable income. Going forward, we expect an effective tax rate of 22.5%, with income tax expenses coming in around $3.5 billion for the next 2 years.
Income Tax Expense
Effective Tax Rate
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