Scale: Plants, Productivity and a Cheap Balance SheetWide moat

Procter & Gamble (PG) — moat facet

P&G's scale takes hundreds of basis points of cost out every year and turns $87 billion of sales into about $16 billion of free cash.

P&G's scale is the half of the moat shoppers never see. It makes its goods in 96 plants across the United States and 31 other countries1, sells them in about 180 countries and territories2, and spreads its research, advertising and distribution over $87,032 million of annual sales3. A rival entering any one of its categories competes against a cost base built for all of them.

Operating cash flow ($M)14,608FY201517,403FY202019,846FY202417,817FY202519,556FY2026P&G Forms 10-K; operating activities
About $19-20 billion a year.

Scale shows up first in productivity. In fiscal 2026 manufacturing productivity added 180 basis points to gross margin and productivity in overheads another 1604. It shows up second in cash: operating cash flow was $19,556 million and adjusted free cash flow $15,835 million, 100% free cash flow productivity56. And it shows up in the cost of money, with Aa3 and AA- ratings and a 3.3% average rate on long-term debt78.

What scale pays for is the dividend and the buyback. P&G has raised its dividend for 70 consecutive years9 and returned $155 billion over the past ten years10.

Scale has not protected the margin from everything. Operating income fell to $19,748 million in fiscal 2026 from $20,451 million11, and the operating margin fell to about 22.7% from 24.3%12. Productivity was spent on marketing and absorbed by mix and restructuring.

The scale also carries a rising depreciation bill. Depreciation and amortisation was $3,160 million in fiscal 2026 against $2,847 million in fiscal 202513, as the heavier capital spending of recent years reaches the income statement. Productivity has to cover that before it adds anything to the margin.

The facet is wide and stable: few companies can take cost out at this rate. The falsifier is return on invested capital, 19.9% in fiscal 2026 against a 7% hurdle14; a fall back toward 15% without a one-off write-down would mean the cost engine is no longer outrunning the business's own headwinds.

Moat trajectory: Holding steady

Productivity +180bp; adjusted FCF productivity 100%; ROIC 19.9%.

The number that tests this moat
Reported
Adjusted free cash flow, FY2026
$15,835M (100% productivity)

The cash the scale produces; a fall below 85% productivity would mean less of the earnings reach owners.

Source: P&G Form 10-K, FY2026 ↗
Aspects of the moat
DIG DEEPER 01
Ninety-Six Factories in Thirty-Two Countries
P&G makes its goods in 96 plants across 32 countries, a footprint built for heavy, cheap products that no rival can assemble quickly.
DIG DEEPER 02
Productivity Worth 180 Basis Points
P&G saved 180 basis points of gross margin through productivity in fiscal 2026, more than four times what price increases added.
DIG DEEPER 03
An Aa3 Balance Sheet
P&G is rated Aa3 and borrows at 3.3%, with net debt of about $24 billion against $19.6 billion of annual operating cash flow.
DIG DEEPER 04
Seventy Consecutive Dividend Increases
P&G has raised its dividend every year since 1956, and its free cash flow still covers it about one and a half times.
⚠ Threats to the moat
⚠ THREAT 01
Buybacks Halved From the Peak
P&G buys back less than half as much stock as it did in fiscal 2021, because the dividend now takes most of the cash.
⚠ THREAT 02
The Operating Margin Fell 160 Basis Points
P&G's operating margin fell 160 basis points in fiscal 2026, and 220 in the final quarter.
References
  1. ReportedIt makes its goods in 96 plants across the United States and 31 other countries, sells them in about 180 countries and territories, and spreads its research, advertising and distribution over $87,032 million of annual sales.
    Procter & Gamble Form 10-K for fiscal 2026 (year ended 30 June 2026) - Item 1 business and Item 2 properties: employees, manufacturing sites, customers, channels, competition and strategy. — FY2026 · publ. 4 August 2026 · source ↗
  2. ReportedIt makes its goods in 96 plants across the United States and 31 other countries, sells them in about 180 countries and territories, and spreads its research, advertising and distribution over $87,032 million of annual sales.
    Procter & Gamble Form 10-K for fiscal 2026 (year ended 30 June 2026) - Item 1 business and Item 2 properties: employees, manufacturing sites, customers, channels, competition and strategy. — FY2026 · publ. 4 August 2026 · source ↗
  3. ReportedIt makes its goods in 96 plants across the United States and 31 other countries, sells them in about 180 countries and territories, and spreads its research, advertising and distribution over $87,032 million of annual sales.
    Procter & Gamble Form 10-K for fiscal 2026 (year ended 30 June 2026) - consolidated statements of earnings, cash flows and financial position, debt and dividends. — FY2026 · publ. 4 August 2026 · source ↗
  4. ReportedIn fiscal 2026 manufacturing productivity added 180 basis points to gross margin and productivity in overheads another 160.
    Procter & Gamble Form 10-K for fiscal 2026 (year ended 30 June 2026) - Item 7 MD&A: net sales drivers, organic sales and gross margin bridge. — FY2026 · publ. 4 August 2026 · source ↗
  5. ReportedIt shows up second in cash: operating cash flow was $19,556 million and adjusted free cash flow $15,835 million, 100% free cash flow productivity.
    Procter & Gamble Form 10-K for fiscal 2026 (year ended 30 June 2026) - consolidated statements of earnings, cash flows and financial position, debt and dividends. — FY2026 · publ. 4 August 2026 · source ↗
  6. ReportedIt shows up second in cash: operating cash flow was $19,556 million and adjusted free cash flow $15,835 million, 100% free cash flow productivity.
    Procter & Gamble fourth-quarter and fiscal 2026 results release, Form 8-K exhibit 99.1, with fiscal 2027 guidance - quarterly and fiscal-year headline results and cash flow. — Q4 FY2026 · publ. 29 July 2026 · source ↗
  7. ReportedAnd it shows up in the cost of money, with Aa3 and AA- ratings and a 3.3% average rate on long-term debt.
    Procter & Gamble Form 10-K for fiscal 2026 (year ended 30 June 2026) - Item 1A risk factors, Item 5 market information and performance graph, and critical accounting estimates (Gillette brand). — FY2026 · publ. 4 August 2026 · source ↗
  8. ReportedAnd it shows up in the cost of money, with Aa3 and AA- ratings and a 3.3% average rate on long-term debt.
    Procter & Gamble Form 10-K for fiscal 2026 (year ended 30 June 2026) - consolidated statements of earnings, cash flows and financial position, debt and dividends. — FY2026 · publ. 4 August 2026 · source ↗
  9. ReportedP&G has raised its dividend for 70 consecutive years and returned $155 billion over the past ten years.
    Procter & Gamble Form 10-K for fiscal 2026 (year ended 30 June 2026) - consolidated statements of earnings, cash flows and financial position, debt and dividends. — FY2026 · publ. 4 August 2026 · source ↗
  10. ReportedP&G has raised its dividend for 70 consecutive years and returned $155 billion over the past ten years.
    Procter & Gamble fourth-quarter fiscal 2026 earnings slides, Form 8-K exhibit 99.1 - organic sales and core EPS history, share results and fiscal 2027 guidance assumptions. — Q4 FY2026 · publ. 29 July 2026 · source ↗
  11. ReportedOperating income fell to $19,748 million in fiscal 2026 from $20,451 million, and the operating margin fell to about 22.7% from 24.3%.
    Procter & Gamble Form 10-K for fiscal 2026 (year ended 30 June 2026) - consolidated statements of earnings, cash flows and financial position, debt and dividends. — FY2026 · publ. 4 August 2026 · source ↗
  12. Moat Explorer calcOperating income fell to $19,748 million in fiscal 2026 from $20,451 million, and the operating margin fell to about 22.7% from 24.3%.
    Moat Explorer calculation from Procter & Gamble's reported figures ($ millions unless stated; fiscal years end 30 June). Net debt: FY2026 11,296 + 22,842 - 9,942 = 24,196; 24,196 / 54,311 = 0.45 times equity; 24,196 / 19,556 = 1.24 years of operating cash flow; debt due within one year 11,296 / (11,296 + 22,842) = 33% of debt; FY2025 9,513 + 24,995 - 9,556 = 24,952; FY2024 7,191 + 25,269 - 9,482 = 22,978. Capital spending 4,409 / 87,032 = 5.1% of net sales. Adjusted free cash flow over dividends 15,835 / 10,232 = 1.55 times. Dividends paid over net earnings attributable: 10,232 / 16,046 = 63.8% (FY2026); 9,872 / 15,974 = 61.8% (FY2025); 9,312 / 14,879 = 62.6% (FY2024). Buybacks 5,028 / 11,009 = 45.7% of the FY2021 peak. Peer market values on 25 September 2026 ($bn): 132.99 + 68.60 + 34.19 + 34.18 + 32.74 + 22.86 + 10.13 = 335.69, against P&G 339.64; P&G / Clorox 339.64 / 10.13 = 33.5 times. P/E: 339.64 / 16.046 = 21.2 (now); 394.82 / 14.879 = 26.5 (December 2024 over FY2024). Free cash flow yield 15,835 / 339,640 = 4.7%. Goodwill plus Gillette brand 41,276 + 12,800 = 54,076; 54,076 / 126,521 = 42.7% of total assets. Segments (five reportable, excluding Corporate): FY2026 sales 16,023 + 6,918 + 12,456 + 30,314 + 20,401 = 86,112; net earnings 2,672 + 1,529 + 2,404 + 5,632 + 3,930 = 16,167; FY2025 net earnings 2,715 + 1,577 + 2,440 + 5,848 + 4,013 = 16,593; 16,167 / 16,593 - 1 = -2.6%. Segment net earnings changes FY2026: Beauty 2,672 / 2,715 - 1 = -1.6%; Grooming 1,529 / 1,577 - 1 = -3.0%; Health Care 2,404 / 2,440 - 1 = -1.5%; Fabric & Home Care 5,632 / 5,848 - 1 = -3.7%; Baby, Feminine & Family Care 3,930 / 4,013 - 1 = -2.1%. Fabric & Home Care share of segment net earnings 5,632 / 16,167 = 34.8%. Pre-tax margins FY2026: Beauty 3,473 / 16,023 = 21.7%; Grooming 1,966 / 6,918 = 28.4%; Health Care 3,163 / 12,456 = 25.4%; Fabric & Home Care 7,290 / 30,314 = 24.0%; Baby, Feminine & Family Care 5,145 / 20,401 = 25.2%. Net margins FY2023: Beauty 3,178 / 15,008 = 21.2%; Health Care 2,125 / 11,226 = 18.9%; Fabric & Home Care 4,828 / 28,371 = 17.0%; Baby, Feminine & Family Care 3,545 / 20,217 = 17.5%. Three-year growth FY2023-FY2026: Health Care sales 12,456 / 11,226 - 1 = 11.0%; Health Care net earnings 2,404 / 2,125 - 1 = 13.1%; Grooming sales 6,918 / 6,419 - 1 = 7.8%; Baby, Feminine & Family Care sales 20,401 / 20,217 - 1 = 0.9%. Segment capital spending over sales FY2026: Grooming 540 / 6,918 = 7.8%; Baby, Feminine & Family Care 1,520 / 20,401 = 7.5%; Health Care 592 / 12,456 = 4.8%; Fabric & Home Care 1,250 / 30,314 = 4.1%; Beauty 415 / 16,023 = 2.6%. Geography FY2026 ($bn): international 45.3 / 87.0 = 52.1%; United States 41.7 / 87.0 = 47.9%. Walmart about 16% x 87,032 = 13,925, about $13.9 billion. Top ten customers less Walmart (rounded percentages): FY2017 35 - 16 = 19; FY2020 38 - 15 = 23; FY2023 40 - 15 = 25; FY2026 43 - 16 = 27. Dividend per share 4.2589 / 4.0763 - 1 = 4.5% (FY2026); 4.0763 / 3.8286 - 1 = 6.5% (FY2025). Market exit charges after tax 1,200 + 131 = 1,331. P&G / Unilever market value 339.64 / 132.99 = 2.6 times. Restructuring charges FY2024-FY2026 659 + 1,114 + 1,230 = 3,003. Gillette write-downs 8.3 + 1.3 = 9.6 billion. Operating margin 19,748 / 87,032 = 22.7% (FY2026); 20,451 / 84,284 = 24.3% (FY2025) - growth rates, margins and charges. — FY2015-FY2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Procter & Gamble's Forms 10-K, results releases, earnings slides and market data; operands shown in the source line.
  13. ReportedDepreciation and amortisation was $3,160 million in fiscal 2026 against $2,847 million in fiscal 2025, as the heavier capital spending of recent years reaches the income statement.
    Procter & Gamble Form 10-K for fiscal 2026 (year ended 30 June 2026) - consolidated statements of earnings, cash flows and financial position, debt and dividends. — FY2026 · publ. 4 August 2026 · source ↗
  14. Moat Explorer calcThe falsifier is return on invested capital, 19.9% in fiscal 2026 against a 7% hurdle; a fall back toward 15% without a one-off write-down would mean the cost engine is no longer outrunning the business's own headwinds.
    Moat Explorer calculation from SEC EDGAR XBRL for CIK 80424: return on invested capital 7.4% (FY2015), 9.6% (FY2016), 10.4% (FY2017), 12.3% (FY2018), 5.1% (FY2019, Gillette impairment), 16.3% (FY2020), 19.3% (FY2021), 19.2% (FY2022), 18.9% (FY2023), 19.0% (FY2024), 20.5% (FY2025), 19.9% (FY2026). — FY2015-FY2026 · publ. September 2026 · source ↗
    Method: Operating income x (1 - effective tax rate; 35% default before fiscal 2018 and 21% where pre-tax income is untagged) divided by average (total assets - current liabilities - cash), from SEC EDGAR XBRL using the tools_roic_edgar.py method; after fiscal 2019 the cash tag is CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents. A 7% hurdle is assumed.
Sources
Generated September 26, 2026