Comment, question or quotation of the day

24-01-2023 : Very interesting quarterly results from Procter and Gamble

P&G has just published its results for the quarter ending 31 December, which show a 1% decline in quarterly sales. However, it would be wrong to stop at this figure as its breakdown is very illustrative of the current economic situation. The - 1% is the result of 3 main effects:


1/ A price effect of +10% because P&G has increased its prices by about the inflation given the strength of its brands.

2/ A volume effect of - 6% as consumers reduced their consumption of P&G products, probably to buy cheaper products such as private labels. Moreover, the decline in volume was strongest in the Fabric & Home Care (Ariel, Cash, Lenor) and Grooming (Braun and Gillette) divisions, -7 and -8%, where price increases were the strongest: 13 and 11% respectively.

3/ A currency effect of -6%, given the strength of the dollar over the past year.


The effective corporate tax rate of 18% (coming from 19 % the previous year) is a sobering figure given that the main countries where P&G operates all have higher corporate tax rates, and that its main competitor, L'Oréal, was at 22.5% in the first half of 2022. By this measure and over a year, that's about $1bn that is lost for the world's tax authorities, for P&G alone.


Have a good day. 

19-01-2023 : Renault Nissan: divorce at the back of the class.

Presented as a new beginning for the Renault-Nissan alliance, the terms of the new partnership are, in our opinion, similar to a divorce between two players who, from a financial point of view, have become marginalized over time, with respective market capitalizations of €11 and €13 billion, compared to 4 times more for Stellantis (Peugeot, Fiat, Chrysler), €46 billion, and 14 times more for Toyota (€180 billion). 

In the 2021 ranking of car sales, the Renault-Nissan-Mitsubishi Alliance is ranked third worldwide with 7.7 million vehicles sold, compared with 10.5 million for the leader (Toyota) and 8.9 million for Volkswagen. On this basis, Renault alone will be in 10th place, and Nissan in 8th, more in line with their market capitalization.

Sure, by gradually selling 28% of Nissan, Renault can recover at the current price a little less than €4bn, but that's only one-sixth of Stellantis' operating cash flow in 2022..., and of course, a non-recurring amount.

The sad moral of this story is twofold. Convoluted schemes and shaky governance rarely lead to industrial, let alone financial, success. They are too complicated, synergies are not found, national sensitivities are protected and maintained by the coexistence of two entities. Moreover, it is rarely good to be a shareholder alongside the State when the latter is directly involved, as the Agnelli family had the intelligence to understand when they broke off advanced merger negotiations with Renault to marry Peugeot and create Stellantis, in the face of the procrastination of the State, Renault's largest shareholder. 

As for those who are worried about how Renault will replace the fraction of Nissan's dividends that will disappear from its results, let them be reassured. That is not the issue. The issue is industrial first and foremost. The proceeds from the sale of the 28% will be reinvested in Renault's activities and will generate results higher than the share of dividends lost, if the investments undertaken return their cost of capital.

Have a good day. 



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The Letter

Number 147 of January 2023

News : Should companies buy back their bond debt?

Statistics : The Forex market

Research : Dividend taxation and its impact on investment policies

Q&A : What are the two types of interest rate curves?

COMMENTS : Comments posted on Facebook