Performance Plastics – learn about plastic

In this video we’re going to talk about plastic: What it is, that there are different types and a glimpse of what you can make with it. Okay, so I’m sure you already know about some things about plastic. I mean it’s everywhere around us: Jerry cans (watering cans), packaging, flower pots, toys, containers, cups. A lot of stuff we have is made from plastic. You can literally find this on any place in the world Even in places where we don’t want to have it… and last year we produced a lot of it. I mean I cannot even imagine how much that is. In fact I couldn’t even pronounce it that’s why I wrote it down and this number is still growing every year because we keep producing more new plastic.

Which is kind of weird because on the one hand is made from oil which is a precious fossil fuel we’re running out of and on the other end it ends up on places in the world where we don’t want it, damaging our planet and environment In fact research says that less than 10 percent of our plastic actually gets recycled, so of all the new plastic we make a lot of it ends up in the wrong place. Time to get recycling, right? So plastic often looks and feels the same, but it’s probably not. In fact there are dozens of different types of plastic out there, but you can narrow it down into two main categories. So, for instance, this bowling ball is a thermal set, and this lunch box is a thermal plastic. And the biggest difference, is that the lunch box you can always remelt it so when you’re done with this you can melt the plastic again, and turn it back to another shape or its original shape.

And this bowling ball is made from a very hard polyurethane. It’s molded into this shape and afterwards you cannot remelt it. This is basically a block of material which you cannot really do anything with. And this one you can just remelt it and reuse it again. And luckily about 80% of the plastic is made from this type, which is good thing because this one is easy to recycle. In fact it often has this little logo on the bottom, which says that you can recycle it And this is what the plastic looked like as a raw material: small pellets that are used over the entire plastic industry to create new things.

Huge High Density Polyethylene rod

But even within this group of plastic there are many different types. But we can narrow them down again into several main groups, which basically all the plastic around you is made from. And each of them has their own difficult technical name like “Polypropylene”, “Polystyrene”. I don’t know where they make it so difficult, so often the shorter version is being used. It’s hard to tell the difference between two types of plastic. I mean they can have the same color, feel the same, and look the same but still being a different type. And this is actually the main problem with plastic how to separate the different types of plastic because they all have different properties, behaviors and melting temperatures. But there are a few tricks on how to get this done. Trick number one (and this is by far the easiest one): is look for the logo. If it has a recycle logo, you can see which type of plastic it is so this one is made from polypropylene.

Unfortunately not every plastic product has a logo like this… And then you need another– Trick number two is to remember it and this is actually often done in recycling plants. So for instance, flower pots: made from polypropylene Lego is made from ABS. The bottle caps are made from HDPE. But as you can imagine, there’s a lot of different plastics out there; a lot of things to remember so this goes wrong, and isn’t 100% accurate.

Another one is to look at the visual properties. For instance, polystyrene has this breakable sound, whereas polyethylene is more flexible and tough kind of plastic. And then there’s another technique which is called “the flame technique”. We don’t recommend this, but it’s a technique, so we’re going to show you. For instance, if you burn plastic you get a little flame, so, this one has a nice yellow flame. If we’re going to fire up this one… So and this has, like, this dark smoke, which is polystyrene. Like I said, we don’t recommend this technique. Yeah, it’s not nice. The last one is the floating technique. This is quite an interesting one, so, let’s say you have a lot of different types of plastic, mixed.

You can put them in the water, and some will sink and some will float. And then we’re going to add some water. So you can see some plastic floats, some will sink. But if we add some salt… So as you can see: the polypropylene and polyethylene floats, and the PET (Polyester or Polyethylene Terephthalate) sinks. And you can do this with other types of plastic as well by changing the density of the water, And all the more detailed information: like the different densities, or the different flame colors, or the visual properties you can download in our download pack.

So as we just learned there are many different types of plastic out there, and the ones that you can recycle basically all work according to the same principle. You need some heating and some pressure to mold it into something new and that’s pretty much the basic start of the entire plastic industry. They all work according to these principles. But they have a lot of variation, and by making a different combination of these techniques they can make a whole range of different products. And our machines are based on these techniques as well, only, simplified and made with local tools and materials, so you can build them yourself.

San Bernardino County HDPE Plastic Recycling

Alan Robbins is betting everything he owns that the world will pay more for picnic tables, mailbox posts, and speed bumps if they’re made from recycled plastics

Yes, he’s heard the career advice line from The Graduate. (“I just want to say one word to you: plastics.”)

You see, if you’re Alan E. Robbins, 43, a sense of humor comes in handy.

You need one, given what he wants to do with the rest of his life. Robbins, a charming father of five, wants to make wood obsolete. Maybe concrete, too.

It’s not quite as silly as it sounds.

Robbins is president of a company, which takes recycled plastics — milk jugs are a primary source of raw material — and turns them into everything from mailbox posts, picnic tables, and speed bumps to retaining walls at Sea World. In many areas in the country, especially the San Bernardino County and areas near by, recycling has become much more popular.

And no doubt there’s a desperate need for someone to do something with what the industry calls post-consumer (used) plastics. Recycled plastic materials are in demand.

With Americans producing 160 million tons of solid waste a year — that’s better than three pounds per person per day — landfills are beginning to overflow. And while plastics account for only 7% of those garbage heaps by weight, they make up 13% of their volume. Anything, even a mailbox post, that can reduce that amount of trash is something to be wished for.

Abs Plastic Products

San Bernardino County Plastic Information and Training

You reach out to pick up an apple. You can do it, thanks to brain-based robotics. But since you have a prosthetic hand, you can't feel it. You can't feel it when you hug someone, either. (That's arguably even worse.)

That's the reality for many of the millions of amputees fortunate enough to have access to artificial limbs (many more millions worldwide don't). But Zhenan Bao is out to change all that. The Stanford chemical engineer is working with a team of researchers to develop a new "skin" that could stand in for the real thing and give amputees back sensation. Previously, researchers have been able to offer some sense of touch, but not with flexibility at the same time. Bao's skin, by comparison, would allow amputees to feel even with bendable prosthetics.

The science of how you feel

To get a sense of just how incredible Bao's feat is, consider how your regular sense of touch works: Inside your skin are millions of nerve receptors. These receptors gather information about force, pain, and temperature. The receptors then send electrical impulses to your neurons (nerve cells). The impulses pass rapidly from neuron to neuron, to the spinal cord, and finally to your brain. The brain then has the job of translating the incoming signals. To work properly, Bao's skin had to replicate that entire sequence, all with an adaptable, flexible material that still would be durable enough to avoid interruption of the process.

Bao's solution

Bao came up with a two-layer design of ultra-thin plastic, with the first layer standing in for your nerve receptors and the second layer containing circuits that get the electrical signals to your brain. To get there:

  • The researchers investigated and described how to use plastics and rubbers as pressure sensors, measuring how much natural rebound or spring the molecular structures in those materials provide.
  • Bao and her team indented a waffle pattern into the top layer of thin plastic to compress the "springs" in the material even more, thereby increasing pressure sensitivity.
  • The team inserted carbon nanotubes through the waffled plastic. When you increase pressure on the plastic, the nanotubes are brought closer together. Subsequently, they conduct electricity to sensors better. When you decrease pressure on the plastic, the nanotubes move further apart, and electricity doesn't travel to the sensors as easily.
  • Bao connected the first layer of the "skin" to the second circuit layer.
  • The researchers adapted an optogenetics technique developed by Karl Deisseroth. The technique allows scientists to bioengineer cells to turn "on" and "off" in response to specific light frequencies. Bao was able to translate the electronic signals from the "skin" into light, which then theoretically would activate neurons that would carry the messages to the brain.

One sensing mechanism down, five to go

Bao stresses that the skin is still only in the proof of concept phase, and that much more work is required to get the full touch capability most people naturally have. She still has to develop and incorporate systems that will mimic the remaining five types of biological sensing mechanisms regular skin holds. But already, the basic, two-layer foundation Bao has makes such additions theoretically feasible, and her team is partnering with PARC (of Xerox) to adapt inkjet printing technology that would make the skin practical over a large area. Not only that, but Bao's plastic fabric also should be able to "heal" and power itself. It might take time, but molecule by molecule, it's coming.

Plastic Technology

ISO Standards for Small BusinessISO Standards for Small Business

Determining the optimum barrel-temperature profile is one of the most important tasks in extrusion. A barrel-temperature profile (BTP) that works well on one extruder may not work on the same type of extruder right next to it, even if the extruders process the same plastic, use the same screw and die design, and run at the same rpm. So in an extrusion plant with many extruders, trying to run them all at the same BTP will likely result in below-optimum performance for some extruders.

There are many possible reasons for this. One is the depth of temperature sensors in the barrel. If one extruder uses shallow-well thermocouples and another uses deep-well thermocouples, this will result in different temperatures on the inside wall of the barrel, where it really counts. The BTP is also affected by die head pressure, screw and barrel wear, ambient conditions (air temperature and humidity), and resin inlet temperature and moisture level.

Finding the correct BTP requires observing how the process reacts when changes occur. Some changes are intentional and obvious, such as a change in screw speed or barrel setpoint. A BTP that works well at 50 rpm screw speed may not work well at 120 rpm. When a new screw is installed in an extruder, particularly a screw with different flight geometry, the BTP will need adjustment.

Some process changes are unintentional and not necessarily obvious--for instance, when the extruder performance changes as a result of screw wear or buildup of contamination on the screen pack.

Start with these general temperature guidelines for the three major sections of the extruder--feed, transition, and metering. In the feed section, set barrel temperature to maximize motor load and minimize pressure variation at the die. In the transition section, set barrel temperature to minimize melt-temperature variation at the die. In the metering section, set barrel temperature to the manufacturer's suggested melt temperature for the resin--but keep in mind that discharge melt temperature can be significantly higher than barrel temperatures in the metering section.

For a non-vented, single-stage extruder, the feed section consists of temperature zone 1 and sometimes part of zone 2. The metering section usually consists of the last two temperature zones. Temperature zones in between make up the transition section. Short extruders (24:1 to 26:1 L/D) usually have three or four zones in all. Longer extruders (30-32:1 L/D) typically have five to six zones, while long extruders (34:1 L/D and longer) may have six to 10 zones.

Typical processing temperatures for semi-crystalline plastics are generally about 50[degrees] to 75[degrees] C above the melting point of the resin. For instance, HDPE with a melting point of 130 C is typically processed at 180 to 205 C or higher. If the resin is susceptible to degradation, it may be processed closer to its melting point.

Amorphous plastics are usually processed about 100[degrees] C above their glasstransition temperature (Tg). For instance, PS with a Tg around 100 C is typically processed at around 200 C.

If standard or typical barrel-temperature profiles do not result in acceptable performance, the temperature settings will have to be optimized. The only technically correct way to find the best BTP is to perform a Design of Experiments (DOE) procedure incorporating all barrel-temperature zones. Ideally, this should be done with a full-factorial DOE because the various barrel-temperature zones can have interaction effects. A full-factorial DOE is reasonable when there are only three or four barrel zones. When a two-level factorial design is performed with four factors or barrel-temperature zones, this will require 16 ([2.sup.4]) experiments. If each experiment takes 30 min, this will take a total of 8 hr--a full shift.

When there are five or more zones, a full-factorial DOE is too time-consuming and expensive to be practical in most situations, especially with a large extruder. For instance, a two-level factorial design with six factors or zones requires 64 experiments (26), each taking 30 min, for a total of 32 hr.

Therefore, the One-at-a-Time Experiments (OTE) method is the most commonly used way to optimize BTP. It usually uses small (5[degrees] C) temperature changes. But this method is also slow and expensive. Each time a temperature change is made, you have to wait until the barrel zone reaches setpoint and the extruder stabilizes. Reaching setpoint can take 5 to 10 min on a small (20- to 40-mm) extruder or 30 to 60 min on a large extruder (over 100 mm diam.). It can take another 5 to 10 min for a small extruder to stabilize, or 30 to 60 min for a large extruder. So making five or six changes can take an entire day or longer for a large extruder. The OTE method also cannot uncover interaction effects.


A third method of optimizing BPT is Dynamic Optimization, which involves making large temperature changes (20 to 40[degrees] C or more) and tracking the dynamic response of the extruder. This method is a fast but robust method of barrel-temperature optimization that works even for very large extruders operating in a production environment. This method has been used for many years, and proven effective in a wide variety of extrusion operations, though it still isn't widely enough known.

When the setpoint of a barrel-temperature zone is changed by large amounts, the temperature-control system may not achieve the set temperature. For instance, if the setpoint for zone 3 is changed from 220 C down to 160 C, actual barrel temperature may only go down to 184 C. If the cooling system is on full blast at this condition, the barrel temperature cannot be reduced further even if the setpoint is put much lower. The only way to achieve further temperature reduction would be to increase cooling capacity or to change process conditions like reducing screw speed.

As an example of Dynamic Optimization on a 100-mm extruder, suppose zone 1 barrel temperature is changed from 200 C down to 150 C. It may take the extruder 15 to 20 min to bring the actual barrel temperature down to 150 C. With Dynamic Optimization the actual barrel temperature is recorded every 15 to 30 sec, or whatever time interval allows accurate determination of the extruder's behavior. (When a data-acquisition system is avail able, the data are recorded automatically with a sampling frequency high enough to record the transient behavior accurately.)


At each barrel-temperature recording, the corresponding melt-pressure variation is recorded. This allows construction of a graph of pressure variation versus barrel temperature. The lowest pressure variation is reached at between 160 C and 165 C. The pressure variation increases rapidly at temperatures below 155 C and less rapidly above 170 C. That means that zone 1 temperature should be set at 165 C to avoid the steep part of the curve between 150 C and 155 C.

It is possible that under steady-state conditions, the pressure variation is not the same as under transient conditions. If the steady-state pressure variation at 165 C is much higher than the transient pressure variation, it may be necessary to do a few OTE runs around 165 C. In most cases, however, this won't be necessary, and the extruder will run well at the setpoint determined by Dynamic Optimization.


Zone 1 barrel temperature in many cases has the strongest effect on extrusion process stability. So it is often not necessary to do further experiments with the BTP. In a 100-mm extruder, therefore, it may be possible to determine the optimum BTP in less than an hour.


For further information about these companies and their products, visit

Rauwendaal Extrusion Engineering Inc. (530) 269-1082 *

Xaloy Inc., Pulaski, VA 800-BARRELS *

By Chris Rauwendaal

Rauwendaal Extrusion

Engineering Inc.


Chris Rauwendaal has worked in extrusion for 35 years. He heads his own engineering firm in Auburn. Calif., which provides custom screws and dies, training, and process troubleshooting services. The author welcomes readers' questions or comments by e-mail at

San Bernardino County

The Slow, Sad, and Ultimately Predictable Decline of 3-D Printing

California Wear Resistant Plastic

California Wear Resistant Plastic

The fundamental science behind stretch blow molded polyethylene terephthalate (PET) has advanced considerably in its quarter-century history. Throughout California and the surrounding areas, the use of clear PET water bottles has grown significantly. We now have a far better understanding of the particulars involved in the successful production of PET containers, which display excellent performance at commercially feasible costs.

More than two decades have passed since the first stretch blow molded polyethylene terephthalate (PET) container was made. In filling the demand for inexpensive, high-performance, resealable containers to package food, personal care, and other products, biaxially oriented PET, in particular, has won great acceptance from consumers.

Bottle Grade PET

When all other considerations are equal, a container with a unique proprietary shape offers more in the way of shelf appeal than one with a plain appearance. However, uniquely shaped containers, as attractive as they may be and as popular as they are in California, can sometimes compromise other interests of the consumer or manufacturer. Such shapes often have variable contours that may evoke geometric yielding under lower carbonation levels and lower external forces, or cross sections that deviate from a circular geometry and create additional surface area. For instance, a bottle with a square cross section has 1.128 times the surface area of a bottle with a circular cross section, assuming equal volume and height.

The introduction of additional surface area, without an increase in bottle mass, results in lower wall thickness per unit volume, ultimately inducing carbonation loss. It is important to learn about plastic and materials used in our everyday products. Moreover, undesirable material distribution and nonuniform orientation are a consequence of complicating the stretch blow process. This only magnifies the detrimental effects on the container’s physical properties.

Plastics!, Marketing Methods Article

Plastic Sheet Price

The perfect circular saw blade exists for nearly every job. Don't mess up your project by using the wrong one.

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Orange County Where To Buy Plastic Sheet

Alan Robbins is betting everything he owns that the world will pay more for picnic tables, mailbox posts, and speed bumps if they’re made from recycled plastics

Yes, he’s heard the career advice line from The Graduate. (“I just want to say one word to you: plastics.”)

You see, if you’re Alan E. Robbins, 43, a sense of humor comes in handy.

You need one, given what he wants to do with the rest of his life. Robbins, a charming father of five, wants to make wood obsolete. Maybe concrete, too.

It’s not quite as silly as it sounds.

Robbins is president of a company, which takes recycled plastics — milk jugs are a primary source of raw material — and turns them into everything from mailbox posts, picnic tables, and speed bumps to retaining walls at Sea World. In many areas in the country, especially the Orange County and areas near by, recycling has become much more popular.

And no doubt there’s a desperate need for someone to do something with what the industry calls post-consumer (used) plastics. Recycled plastic materials are in demand.

With Americans producing 160 million tons of solid waste a year — that’s better than three pounds per person per day — landfills are beginning to overflow. And while plastics account for only 7% of those garbage heaps by weight, they make up 13% of their volume. Anything, even a mailbox post, that can reduce that amount of trash is something to be wished for.

Plastic Market

Orange County Plastic Information and Training

The perfect circular saw blade exists for nearly every job. Don't mess up your project by using the wrong one.

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  • How to Use a Circular Saw

    The circular saw is one of the handiest portable power tools, but it is potentially very dangerous. Be sure you understand how...

  • How to Tighten the Blade on a Circular Saw

    Circular saws can cut a variety of materials efficiently including wood and metal. They're also highly portable which means they can be...

  • Types of Circular Saw Blades

    The circular saw is an electrically powered saw with a rotating circular blade. Saw blades are available in sizes from 4 inches...

  • Jigsaw Techniques for Plywood

    Plywood sheets provide a cheap material capable of being used in a variety of woodworking projects. The various cuts that are required...

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Plastic Market

The Slow, Sad, and Ultimately Predictable Decline of 3-D Printing

Recycled Plastic Bottles Wholesale Plastic Jars For Sale

Concerns about global economic trends to hold the paper bag industry is of great significance to the future.Your best Plastic Bottle Cap Manufacturers, HDPE Bottle Manufacturers here.

For recommends: encourages enterprise for technology, especially energy-saving environmental technology of upgrade, improve plastic products of quality and process, to reached international market standard; Guide and support has technology, and funds, and talent advantage of research institutions and production enterprise, on engineering plastics, and medical with plastic and electronic components, high-end field by needed of plastic raw materials and the accessories, and production equipment and process for development, speed up on plastic products industry structure of adjustment.

In 2012, China’s total output of plastic products above designated size reached 57.81 million tons, and the total industrial output value was nearly 1.7 trillion yuan. China’s plastics industry, the larger consumer market and applications are still in development, with the optimization of the regional structure of the plastics industry, the plastics industry in China’s development of huge space. January-July 2014, plastic products manufacturing enterprises accumulated 1112.87 billion yuan of main business income, an increase of 11.9%; total profit of 58.51 billion yuan, an increase of 12.4%; the total tax of 28.98 billion yuan, an increase of 15.1%.

At present, plastic products processing industry has become China’s largest industry of light industry, China has become the world’s largest production and consumption of plastic products country. 2012 China’s annual output of more than 1 million tons of plastic products has reached 16 provinces. Guangdong Province, China’s plastics industry is the most important provinces, despite the industry in recent years into the industrial structure, product structure adjustment period, the Guangdong Plastics Industry is still 20 years in a leading position in the country. In 2012 the total output of plastic products 9.19 million tons, accounting for the proportion of 15.9%, total output value close to 400 billion yuan.

The future demand of domestic plastic products market is mainly concentrated in agricultural plastic products, plastic packaging products, building plastic products, industrial transportation and engineering plastics products in several areas. According to the Ministry of Agriculture statistics, China’s horticultural facilities used for cultivation of plastic film, with ammoniated film, silage film and stretch film forage film, plastic nursery containers, shade nets, fishing nets, foam sheet, Products 3 million tons.
The main performance characteristics of plastic products

Plastic products are made of plastic as the main raw material of daily necessities, industrial products collectively.

Plastic main performance characteristics
Plastics and other materials, are the following performance features:
1. Light weight plastic is lighter material, relative density between 0.90–2.2. It is clear that can float on the surface of plastics? Especially foam plastic, porous texture, light, relative density is only 0.01. This makes plastic products that can be used to reduce weight.

2. Excellent chemical stability of the vast majority of plastics on the acid, alkali and other chemicals has a good resistance to corrosion. In particular commonly referred to as King of plastics PTFE (F4), it is better than gold, even the chemical stability, put in “aqua regia” for more than 10 hours from going bad. F4 has excellent chemical stability and corrosion resistance is an ideal material. F4 can be used as to transport corrosive and viscous liquids pipeline material.

3. Excellent electrical insulating properties of ordinary plastic is a poor conductor of electricity, the surface resistance, the resistance is very large in size, with numbers up to 10,911,018 ohms. Breakdown voltage and dielectric loss angular tangent value is very small.

Our Company is a best Plastic Bottle Manufacturers, Plastic Water Bottle Manufacturers in China.

Orange County

The Basics of Stretch Blow Molding PET Containers.

California Wear Resistant Plastic

Los Angeles County Plastic Company

Alan Robbins is betting everything he owns that the world will pay more for picnic tables, mailbox posts, and speed bumps if they’re made from recycled plastics

Yes, he’s heard the career advice line from The Graduate. (“I just want to say one word to you: plastics.”)

You see, if you’re Alan E. Robbins, 43, a sense of humor comes in handy.

You need one, given what he wants to do with the rest of his life. Robbins, a charming father of five, wants to make wood obsolete. Maybe concrete, too.

It’s not quite as silly as it sounds.

Robbins is president of a company, which takes recycled plastics — milk jugs are a primary source of raw material — and turns them into everything from mailbox posts, picnic tables, and speed bumps to retaining walls at Sea World. In many areas in the country, especially the Los Angeles County and areas near by, recycling has become much more popular.

And no doubt there’s a desperate need for someone to do something with what the industry calls post-consumer (used) plastics. Recycled plastic materials are in demand.

With Americans producing 160 million tons of solid waste a year — that’s better than three pounds per person per day — landfills are beginning to overflow. And while plastics account for only 7% of those garbage heaps by weight, they make up 13% of their volume. Anything, even a mailbox post, that can reduce that amount of trash is something to be wished for.

Plastic ABS

Los Angeles County Plastic Information and Training

Alan Robbins is betting everything he owns that the world will pay more for picnic tables, mailbox posts, and speed bumps if they're made from recycled plastics

Yes, he's heard the career advice line from The Graduate. ("I just want to say one word to you: plastics.")

And yes, he's gotten used to the jokes about his business's name (The Plastic Lumber Co.?).

And no, he doesn't mind them at all.

You see, if you're Alan E. Robbins, 43, a sense of humor comes in handy.

You need one, given what he wants to do with the rest of his life. Robbins, a charming father of five, wants to make wood obsolete. Maybe concrete, too.

It's not quite as silly as it sounds.

Robbins is president of the Akron company, which takes recycled plastics -- milk jugs are a primary source of raw material -- and turns them into everything from mailbox posts, picnic tables, and speed bumps to retaining walls at Sea World.

And no doubt there's a desperate need for someone to do something with what the industry calls postconsumer (used) plastics.

With Americans producing 160 million tons of solid waste a year -- that's better than three pounds per person per day -- landfills are beginning to overflow. And while plastics account for only 7% of those garbage heaps by weight, they make up 13% of their volume. Anything, even a mailbox post, that can reduce that amount of trash is something to be wished for.

The problem is that a lot of people have been rubbing on the genie's lamp for a long time. The first reported use of recycled plastics dates back to the 1930s -- a Du Pont chemist with a sense of humor used some postindustrial plastics to make a length of fence -- so the idea is not exactly new.

And Robbins is not exactly without competition. The notepad holders, in-and-out-trays, and trash cans produced by Rubbermaid Inc. are made in large part of recycled plastics. Plus, companies such as Du Pont, Dow, Amoco, Mobil, and Occidental have all begun joint-venture projects aimed at making recycled plastics widely available.

But despite the growing interest, there are two major reasons why the idea of recycled plastics has not caught on -- and Robbins must deal with both.

First, there's no consistent source of raw materials. Recycling is still not mandatory nationally, and even those states or towns with recycling programs don't always require that plastics be left by the curb, believing -- mistakenly -- plastics can't be recycled. (They can. But since traditional recycling methods can't guarantee the purity of recycled resins, recycled plastics are not used in packaging that comes in direct contact with food.)

Cost is the second reason that everything from marina docks to highway dividers is not yet made from recycled plastic. If you use recycled plastics as a substitute for virgin ones, as the carpet industry is doing, you'll save money.

But if you use recycled plastics to replace materials such as wood and concrete, the economics change. Robbins's picnic tables and parking stops cost up to twice as much as those made from traditional materials.

While that's a problem, it's not a insurmountable one, says Robbins, who has worked as everything from a restaurant manager to a stockbroker (see "The Founder," page 4). His sales pitch stresses that since plastic lumber and plastic concrete last longer than their traditional counterparts, they're actually cheaper over the long haul.

Besides, as Robbins points out, the potential market is huge. In 1989, only 250 million pounds of plastics were recycled, yet the demand for materials that plastics could replace was thousands of times greater, according to Robert A. Bennett, associate dean of the college of engineering at the University of Toledo. For example, last year Americans used some 3 billion pounds of treated lumber, and roughly 7.4 billion board feet of wood just to build pallets.

Robbins is not looking to replace all that wood -- just a splinter of it.

And he's convinced his timing is right. Some 20 years after the first Earth Day, taking care of the environment is suddenly fashionable again. Everyone from McDonald's to Dayton Hudson department stores is using seedlings as a sales promotion tool. Time magazine made "Endangered Earth" its planet of the year, and George Bush will tell anyone willing to read his lips that he is "the environmental President."

Even the plastics industry has gotten into the act, creating impressive-sounding task forces (The Council for Solid Waste Solutions) and running commercials during the Sunday morning news shows explaining that it, too, wants a cleaner environment. When you have politicians and Fortune 500 CEOs tripping over themselves to be ecologically correct, it's relatively easy to get people to listen -- for a little while, anyway -- when you tell them you're selling products made out of recycled plastics.

Robbins is making the most of the opportunity. Early on he hired a public-relations firm that has made his company better known than his sales would justify, and the attention is beginning to pay off. "We're getting inquiries from businesses and governmental units we never knew existed."

When he returns those calls and letters, Robbins is quick to stress the advantages his goods offer. Products made from plastic weigh less than concrete (that means fewer injuries and workers' compensation claims), require less maintenance (unlike wood or concrete, they don't need to be repeatedly stained or painted), and are virtually impervious to the weather.

Plus, plastic lumber can be sawed, nailed, drilled, glued, and bolted, just like its wood counterpart.

In 1989, convinced he was onto something, Robbins hired Ken Boersma, who had worked at another plastics company on recycling, to create a proprietary extruding machine, and The Plastic Lumber Co. was born.

* * *

Marketing: Robbins started with a great idea: he'd let his market tell him what his sales, positioning, and pricing strategy should be. Unfortunately, the market is speaking with about as much clarity as was heard from the tower of Babel.

And the message that is getting through is certainly not the one Robbins expected.

Before opening his doors last September, Robbins knew his potential market was huge. For example, anyone with a parking lot might need The Plastic Lumber Co.'s car stops (the rectangular bar that keeps a car from taking up two spaces) and speed bumps. So Robbins tried to narrow the field to places where he'd have the easiest time making the sale.

"I figured we should go after universities and municipalities," says Robbins. "With landfills being close to capacity, government seemed a natural. The universities also seemed a good fit, given the environmental appeal of the product.

"I thought there might be a consumer market as well. I could see selling our picnic tables through hardware stores. And I knew there'd also be a commercial application -- things like pallets -- but I wasn't really going to chase that hard at first."

What happened? Commercial sales now account for virtually all of his revenues.

Why? Because the huge marketing advantage Robbins thought he had -- that he's using only recycled plastics -- produces nothing but yawns when he explains it to schools and government.

Yes, they quickly acknowledge, using recycled components is a good idea. Now, let's talk price.

The moment that happens, Robbins is on the defensive. His parking stops cost about $22.50, or about 50% more before installation, than those made out of concrete. His picnic tables are easily twice the price of their wood counterparts.

But, Robbins argues, those prices are misleading. You must look at the long-term costs of using plastic versus concrete or wood. "Somewhere around 5 to 10 years out, we actually become cheaper, and we get more so every year after that, because there are no maintenance costs."

That may be, but his product is still more expensive initially. Cost savings over a product's lifetime can be a very difficult idea for schools and especially municipalities -- which are used to awarding contracts to the lowest bidder -- to understand.

Robbins's marketing thrust isn't misguided. The biggest company in this tiny field is getting a very large part of its revenues from a municipality. But at $3.5 million in sales, Hammer's Plastic Recycling Corp., in Iowa Falls, Iowa, can afford to have a marketing staff. Hammer's people met continually with city of Chicago park department officials, for instance, to answer their questions, eventually working out a deal for landscape ties for playgrounds and plastic slats for park benches.

But Plastic Lumber Co. is woefully undercapitalized. There's no money for a marketing staff. In fact, there's not much of a staff at all. Robbins and Boersma had a falling out, so the entire company consists of Robbins, his administrative assistant, and the four plant workers who actually turn out his product.

If you're running the plant and front office, and also chasing every sales lead that comes in, you don't have a whole lot of time to spend educating some civil servant about the long-term advantages of plastic lumber. While there are growing signs that states and municipalities may be willing to exempt recycled products from the traditional bidding process, that hasn't happened yet.

Fortunately for Robbins, businesses get the concept right away. Some 80% of The Plastic Lumber Co.'s revenues come from a placement in a building-supply catalog.

But that's not the kind of sales mix Robbins was looking for. For one thing, he's now overly dependent on that one distributor, and for another, selling to businesses just about locks him into commodity status.

When Robbins was punching numbers into his Lotus spreadsheet, trying to forecast potential profit margins, he assumed he would average 20% pretax profits. In part, he'd do that by keeping his costs low -- while Robbins budgeted raw materials cost at 44% of sales, labor was expected to be just 9%. But he also expected he'd fetch a premium price for his products.

First off, he thought he'd get a bit more for shaping that recycled plastic into picnic tables and the like. "After all, every time you punch a hole or screw in a bolt, you're adding value, and people are willing to pay for that," he says. And given the unique nature of his goods, plus the lack of competition in the field -- financing for recycling companies has proven hard to come by -- Robbins figured people would be willing to pay a little extra for something that was environmentally on the side of the angels.

Well, some consumers might. And so might some universities. But businesses tend not to be that altruistic. "Purchasing agents are trained killers" is the way Robbins puts it. So far, pretax margins on the speed bumps and car stops he has sold to commercial accounts -- businesses tend not to buy Robbins's value-added products -- have been lower.

Bothersome as this is, at least Robbins knows there's a market for his paving products. With plastic lumber . . . well, let's quote the business plan: "The plastic lumber market can only be considered in its infancy."

To be honest, no one knows what kind of recycled plastic products -- if any -- the market wants, and that's an important point, because when it comes to recycling, there is plastic and then there is plastic.

Some companies, such as Wellman Inc., headquartered in Shrewsbury, N.J., have chosen to specialize. Wellman deals almost exclusively with polyethylene terephthalate, which is used to make soda bottles. Empty soda bottles are traditionally recycled into things like carpet fibers and the linings of parkas and sleeping bags.

The problem is that the equipment needed both to recycle polyethylene terephthalate and to convert it into usable products is expensive. The Plastic Lumber Co. avoids most of that cost by being less fussy about the plastics it uses. It either buys raw materials or cleaned and sorted scrap, which is then melted down and extruded.

However, since the resulting plastic is a blend -- a catsup bottle, for example, which might be part of the company's raw materials mix, is made up of five to seven different plastics -- it's impossible to predict the quality or strength of the resulting products.

That's why the company focuses on making simple products in which the specific properties of the plastic are not important.

Robbins started by selling mailbox posts and picnic tables because they are relatively easy to make. "We're not all that skilled as craftsmen," he says with a shrug. He'll be more than happy to add to the line -- within the limits of his plastic's quality, of course; making a plastic four-by-four to support a swing set would be out of the question, for example, because its strength would not be up to code. But first he needs the market to tell him what it wants.

Ironically, Robbins is finding himself with more time to listen than he expected. His products turned out to be very difficult to sell during cold weather. Nobody is going to go and put a speed bump on the ground when it is 20 below zero, and very few people go looking for picnic tables when they have to shovel their way out the front door. "I didn't realize the extent to which we would be affected by the weather," he says. "Next winter we will concentrate our marketing efforts on the southern part of the country, and on building inventory."

That assumes that (1) he'll have a better handle by then on who his customers are and what they need and (2) his money will hold out.

* * *

Capital: If Plastic Lumber doesn't make it, it won't be because Robbins overspent on decorating.

As you walk into Robbins's fifth-floor offices in downtown Akron, you have to hurdle the tires strewn about and duck under stunning pictures of elaborate food displays. Robbins sublets from his brother-in-law, a commercial photographer who does a lot of work for area food and tire companies. Says Robbins: "By sharing space with him, I didn't have to worry about going out and buying fax machines and copiers."

The same sense of frugality exists throughout the company. Robbins drives a 1982 Oldsmobile diesel that had been in mothballs. He pays $2 per square foot -- about half the going rate -- for his production facility in an old tire plant that Ohio is trying to turn over to small businesses. And by marrying interest from a CD to a term loan in a linked-deposit program, Robbins has borrowed $154,000 at about prime.

But the money is going quickly, thanks to a combination of lower-than-budgeted sales and cost increases primarily caused by problems with the extruder. "We've had to rebuild the chilling system and the molds a few times," says Robbins. "What has happened, given the cost overruns, is that we've gotten one machine for the price of two."

The upshot: the company lost $55,000 during its first three months. And when sales failed to come close to forecasts this past January and February, Robbins reduced salaries and eliminated his public-relations program and most of his advertising. The Plastic Lumber Co. is still losing money.

With Robbins having contributed about his entire savings, and the banks reluctant to loan any more, what is needed -- and soon -- are additional equity investors. (When the company was formed, Robbins sold stock and options totaling 24% of it to a friend for $50,000.) "We've been putting off looking for outside funding," says Robbins. "The better shape we can get the company in before offering stock, the higher the valuation will be. But we are now starting to hold serious meetings with venture capitalists."

The question is, of course, whether the money will come in time -- and in sufficient amounts. Even if it does, there are other problems. Is it reasonable to expect university administrators and civil servants to be farsighted? Will they pay higher prices today for savings tomorrow?

And what about Robbins's embryonic marketing program? There's little doubt that someday there will be a huge market for products made from recycled plastics, but which products?

And even if Robbins does figure out which products the market wants, can he muster the technical expertise to make them? Good questions all, says Robbins, who remains sanguine nonetheless. "We'll be OK."

We'll see.

-- Research assistance was provided by Leslie Brokaw.


The Company:

The Plastic Lumber Co., Akron

Concept: Recycle plastics into products such as picnic tables, mailbox posts, and speed bumps

Projections: Profits of about $6,000 in 1990, almost $500,000 in 1991; pretax profits of 40% and 44%

Hurdles: Defining market; convincing customers that paying more now for products made with recycled materials will save them money in the long run; overcoming lack of technical expertise


"I've been preparing for this my whole life," says Alan E. Robbins, referring to the company he started last year. Given that he's constantly discussing and/or handling such materials as polypropylene and high-density polyethylene, you'd think he was talking about years of toil in the chemistry lab. He's not.

Robbins, a former industrial-technology major who "finished in the upper 98% of my class; thank heaven for that other 2%" at Miami University in Oxford, Ohio, is talking about how the past 20 years have equipped him to run his own business.

He began work in Oxford running restaurants (good for learning how to manage people) and went on to run a mom-and-pop supermarket (people skills again, inventory control, marketing). From there Robbins worked as a headhunter (telemarketing, selling) and eventually a stockbroker ("great financial training"). Before starting The Plastic Lumber Co., Robbins was director of merchant sales for Rondy & Co., an Ohio-based reprocessor of scrap rubber and plastic.

"Everything I've ever done has led me to running The Plastic Lumber Co.," says Robbins, who is putting his money where his mouth is. In budgeting his salary for the start-up, he took about a 50% pay cut -- to $55,000 a year. Since November, given the company's slower-than-expected start, he's been working for free.


Plastic Lumber Co. Operating Statement

1990 1991

Sales $495,000 $2,075,000

Cost of Sales

Raw materials 222,000 913,000

Direct labor 44,500 186,750

Rent 21,132 23,000

Electricity 11,535 48,349

Total Cost of Sales 299,167 1,171,099

Gross Profit 195,833 903,901

Gross profit % 40% 44%

Expenses 1990 1991

Production 53,120 150,568

Marketing 42,000 72,000

General & administrative 55,000 114,684

Finance costs 15,000 14,737

Depreciation 10,529 41,736

Other 13,400 24,000

Total Expenses 189,049 417,725

Net Income 6,784 486,176





General partner, Hambrecht & Quist, a San Francisco venture capital firm; co-manager of its $17-million Environmental Technology Fund, which has a position in a recycling company

I think Robbins was correct in perceiving there's a tremendous market opportunity here. The concept of the business, broadly defined, is sound; there will be exponential growth in the waste minimization segment of the market.

But I think Robbins has made things difficult for himself by focusing on the lower end of the business. By taking mixed plastics and making something that can't be used for much because of the tensile strength, he's artificially narrowed his business opportunities to the commmodity level. Recycled products with the characteristics of virgin materials -- that's where money will be made. If I were Robbins I would upgrade the technology and therefore the end product.

How do you do that? He needs to get some help where he doesn't have the background or the inclination. He's got marketing contacts and distribution experience; he should weave that into some kind of relationship with a plastics recycler with a little more know-how. He does have a little business there that could feed into the activities of another firm. There are all kinds of options: a co-marketing arrangement, or a subcontractor or OEM relationship. He's certainly got a lot of energy and enthusiasm, which could be put to better use.

One of the common mistakes is to think people are going to buy products just because they're environmentally correct. You can't rely on that kind of altruism. It certainly can help. But people are very dollars-and-cents oriented. Recycled plastics products do not have to be more expensive than what they're replacing, and in the long run they can't be. In the long run they have to be cheaper.

If Robbins is lucky, maybe he can bring in the top line, but I think his costs are going to increase. The company is very thin, and he can't run a business effectively and wear all the hats at the same time. But he does have the option of finding someone who will work with him. He's developed a market and has some customers, which is an asset that should be valuable to someone.



Director, Plastic Consulting for Strategic Analysis Inc., a Reading, Pa., firm

I'm very bullish on Robbins's idea and his chances for success. I think his sales forecast is actually quite modest. And there may even come a time when his raw materials cost -- which is relatively high now -- could be negative. As communities collect all this plastic, they're going to need somebody to take it off their hands.

However, there is a major problem. He has seriously underestimated his marketing costs. If he uses the $72,000 he has budgeted (on $2 million of projected sales) to hire a marketing person -- and he'll pay at least that to get someone qualified -- there won't be any budget for mailings and travel. You have to go to the trade shows and network.

Eventually there'll be many viable consumer and industrial applications for recycled plastic products. However, Robbins's company must first survive the next several months. Instead of letting his customers dictate his marketing approach, I would begin by working directly with major producers of plastic resins -- the Dows and Du Ponts -- and work out a deal where they would give him the plastics they can't use in their recycling programs, the co-mingled plastics, and see if they would be willing to buy the picnic tables and the like from him. These companies all have active recycling programs and are eager to promote recycling. Once the applications are demonstrated to be practical and cost effective, however, Robbins has got to reach a broader market.



Technical director, Hammer's Plastic Recycling Corp., Iowa Falls, Iowa, The Plastic Lumber Co.'s largest competitor

They're going to be struggling to stay alive unless they do something clever, and there doesn't seem to be anything clever on the horizon.

First, the company is grossly undercapitalized. And it's not spending the little money it does have on the right things. It's marketing that drives companies that make plastic lumber, yet Robbins has scaled back his marketing efforts to save money. He needs large orders to survive, and without a marketing budget, he's going to be hard pressed to get them.

Even with a marketing budget, he would seem to be in trouble because he doesn't have a marketing strategy. He's going with the flow, and that's a big mistake. There is no inherent market for plastic lumber; you have to create one. I think Robbins believes -- as a lot of companies that are no longer in business once believed -- that his product is so good that people will fight to buy it. That's wrong. It's always been wrong.

But in addition to overestimating sales and underestimating marketing expenses, he has another problem. There is no depth of technology. Ken Boersma has left. Who's going to replace him?

If I were running their company, I'd go out and recruit a good marketing man and a good technology person, but I don't see how Robbins will be able to attract the money he'd need to do it. When potential investors visit the company's offices and see the lack of staff, they're going to conclude the company is close to broke. The venture capitalists won't trust the company with their money, and customers won't trust it with their orders.

Plastic Lumber is where we were four years ago, but we had marketing and we had technology people who allowed us to create new products. They have neither.



President, National Association of County Park & Recreation Officials; Park & Recreation Director for Clark County (Las Vegas), Nev.

New products have to do something above and beyond what old ones do. There are a hundred manufacturers of picnic tables and speed bumps out there already. If Plastic Lumber came out with, say, a vandal-proof bench you could wipe spray paint off of, now we're dealing with something. But customers already have long-term relationships with manufacturers, and they're not going to set them aside just because somebody says, "Hey, I've got a newer product." I'm approached at least once a month by picnic-table manufacturers; it's an incredibly competitive field.

Robbins will have to prove his claim of extended life expectancy -- he can't just come out and say it costs more but is going to last twice as long. The documentation seems absent at this point.

If the company isn't competing on price it's going to have to convince customers to raise the standards of what they spec -- for instance, to require that benches last six years -- and then the company will have to prove that its product meets those standards. Convincing buyers and architects to stop specifying one product and specify something more stringent, on the basis that it's better for them, is an uphill battle. But that's how the game works.

Properties Of Plastic Materials

Learn about the World Industrial Fasteners.

FSCT has announced that its groundbreaking e-learning programs--the Virtual Learning Conferences--will begin in 2005 with a two-part program on UV-Curable Coatings. On March 17, Aaron Lockhart, of Bayer MaterialScience, LLC will present "UV-Curable Coatings I: Coatings for Plastics." The second session, "UV-Curable Coatings II: Coatings for Wood," will be offered on March 31 by Ron Schowengerdt, of PPG Industries.

These courses may be taken individually or as a series. Register by March 10 to receive discounts on the registration rates.

UV-Curable Coatings I: Coatings for Plastics

Thursday, March 17

2:00-3:30 pm (ET)

This session addresses UV-curable coatings chemistry and its potential suitability in end uses where a coating for plastic is needed or desired. Traditionally, elasticity, adhesion, and expense have limited the utilization of UV-curing technology in plastic coatings. However, with the employment of urethane chemistry in UV-curable coatings, these and other concerns are dissolved. Examples of both functional and aesthetic coatings are presented relative to mono- and dual-curing, waterborne and solventborne UV-curable coatings.

Learning Objectives

* Provide a general market status of UV-curable coatings

* Establish an understanding of the UV-curing mechanism

* Address difficulties in coating plastic substrates

* Demonstrate the suitability of UV-curable coatings for both decorative and protective functions over plastics.

Course Instructor

Aaron Lockhart is an associate scientist with Bayer MaterialScience, LLC, in Pittsburgh, PA. Mr. Lockhart received his B.S. Degree in Chemistry from The University of Virginia. As a member of the Business Development-Coatings, Adhesives, and Sealants group, he is responsible for testing and development of one- and two-component waterborne, solventborne, and UV-curable polyurethane raw materials for coatings for plastics. Mr. Lockhart began his professional career with Bayer in 2000.

Who Should Attend

This session is designed for applications development personnel, those responsible for new product design, technology managers, coatings manufacturers, and end-users that develop finished goods that require coatings for plastics.

UV-Curable Coatings II: Coatings for Wood

Thursday, March 31

2:00-3:30 pm (ET)

This course addresses UV-cure wood finishes, beginning with a discussion of the Total System Approach and how it is important in identifying coating needs and outcomes. The basic building blocks of UV-curable coatings are also addressed. In addition, the three types of sprayable UV finishes (solvent-based, water-based and high-solids) and the three types of sprayable stains (solvent-based, 100% solids UV and water-based) are covered. A presentation of application and curing equipment along with the typical line layout to prefinish architectural moldings completes this session.

Learning Objectives

* Learn about sprayable UV finishes for wood

* Learn about equipment used in applying coatings to a wood substrate

* Gain an understanding of the selection process for combining the appropriate equipment and coatings for production

Course Instructor

Ron Schowengerdt is a senior chemist at PPG Industries, Oak Creek, WI. He has done extensive work on spray, vacuum, and wood coating applications. Very knowledgeable about UV-curable coatings for wood, Mr. Schowengerdt is heavily involved in the furniture and kitchen cabinet industries.

Who Should Attend

The course is designed for applications development personnel, those responsible for new product design, technology managers, coatings manufacturers, and end-users that develop finished goods that require coatings for wood.


Early Bird Fees: Register by March 10 for either course to receive the discounted rate, per course, of: FSCT member--$349; Nonmember--$399.

Regular Fees: After March 10, the registration fees are: FSCT member--$399; Nonmember--$449.

Only one fee is charged per location, regardless of how many participate.

To register, visit; or call: 800.651.7916 from 6:00 am to 6:00 pm Mountain Standard Time.

For information, contact FSCT, 492 Norristown Rd., Blue Bell, PA 19422-2350; 610.940.0777; fax: 610.940.0292;

Los Angeles County

How to Choose the Right Circular Saw Blade

California Wear Resistant Plastic

Riverside County Plastic Information

Alan Robbins is betting everything he owns that the world will pay more for picnic tables, mailbox posts, and speed bumps if they’re made from recycled plastics

Yes, he’s heard the career advice line from The Graduate. (“I just want to say one word to you: plastics.”)

You see, if you’re Alan E. Robbins, 43, a sense of humor comes in handy.

You need one, given what he wants to do with the rest of his life. Robbins, a charming father of five, wants to make wood obsolete. Maybe concrete, too.

It’s not quite as silly as it sounds.

Robbins is president of a company, which takes recycled plastics — milk jugs are a primary source of raw material — and turns them into everything from mailbox posts, picnic tables, and speed bumps to retaining walls at Sea World. In many areas in the country, especially the Riverside County and areas near by, recycling has become much more popular.

And no doubt there’s a desperate need for someone to do something with what the industry calls post-consumer (used) plastics. Recycled plastic materials are in demand.

With Americans producing 160 million tons of solid waste a year — that’s better than three pounds per person per day — landfills are beginning to overflow. And while plastics account for only 7% of those garbage heaps by weight, they make up 13% of their volume. Anything, even a mailbox post, that can reduce that amount of trash is something to be wished for.

Polymer Sheet Suppliers

Riverside County Plastic Information and Training

NEW YORK -- announces that a new market research report related to the Industrial equipment industry is available in its catalogue.

World Industrial Fasteners html

(Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.)

Global demand to grow 4.8% yearly through 2012

Global demand for industrial fasteners is projected to increase 4.8 percent annually to $66 billion in 2012. Fastener demand, which reached $52 billion in 2007, grew nearly 9 percent annually since 2002. Although part of this growth is inflationary in nature, especially since 2005, real gains in demand have been fueled by increases in world economic growth, increased fixed investment activity and greater manufacturing production. Although future market gains will be somewhat constrained by the use of new materials and manufacturing methods that reduce the numbers of fasteners required, global gains in motor vehicle production and greater demand for aerospace grade fasteners required for aircraft will contribute to growth.

Asia/Pacific, Western Europe are net exporters

Although many countries engage in the production of fasteners, few are net exporters. For example, the US is a major global supplier of high end fastener products, but is a net importer of fasteners overall. Countries in the Asia/Pacific region are the largest net exporters of fasteners to the rest of the world, followed by Western Europe. Taiwan, Japan and China lead the Asia/Pacific region and the world in net fastener exports. Germany (whose net export position matched China's in 2007), Italy and Switzerland contribute the most to Western Europe's position as a net exporter. China will soon overtake Japan as the world's second-largest net exporting country, after Taiwan.

Emerging economies to outpace developed world

Growing manufacturing economies and increases in fixed investment among the world's emerging economies will bring more rapid growth in fastener demand in these regions relative to the world's more mature, industrialized nations. Consequently, fastener demand growth in the Asia/Pacific, Africa/Mideast, Eastern Europe and Latin America will outpace demand growth in the US, Japan and Western Europe. China is expected to show the greatest gains in fastener demand of any other country, and is expected to become the world's secondlargest market for fasteners, after the US, before 2012. Market growth will also be strong in India, Thailand, Taiwan and Russia. Sales growth will be stimulated by favorable economic conditions and higher income levels leading to a rise in manufacturing activity and consumer expenditures for durable goods. Although countries with emerging economies will be the fastest growing markets for fasteners, the more developed economies -- such as the US, Canada, Japan and most of Western Europe -- will remain the most intensive users of fastening products, reflecting the advanced industrial and technological nature of their economies.

Motor vehicles still most important end-use sector

Consumption of industrial fasteners by the world's original equipment manufacturers (OEMs) represented 84 percent of total global fastener demand, with maintenance, repair and overhaul (MRO) applications accounting for the balance. Among OEMs, motor vehicle manufacturers consume the most fasteners, accounting for 35 percent of global demand in 2007. Electrical & electronic equipment and industrial machinery are also important OEM markets. Additionally, demand for aerospace-grade fasteners is expected to grow at a healthy pace, approaching $5 billion in 2012.

Study coverage

This new study, World Industrial Fasteners, presents historical demand data (1997, 2002 and 2007) and forecasts for 2012 and 2017 by market sector, fastener type, world region and for 29 countries. The study also assesses key market drivers and technologies, evaluates market shares and profiles 41 global competitors.





World Economic Overview

Recent Historical Trends

Macroeconomic Outlook

World Gross Fixed Investment Outlook

World Manufacturing Outlook

World Motor Vehicle Production Trends

Aerospace Equipment Manufacturing Trends

Pricing Patterns


Industrial Fastener Technology

New Fastening Technologies

Plastic Fasteners

Competitive Joining Technologies

Legal & Regulatory Environment



World Industrial Fastener Markets

Regional Demand

Demand by Product

Standard Fasteners

Externally Threaded

Internally Threaded




Demand by Market

Original Equipment Manufacturing

Motor Vehicles

Electrical & Electronic Equipment

Industrial Machinery

Fabricated Metal Products

Other OEM

MRO & Other

World Industrial Fastener Production

International Trade Flows



Supply & Demand

United States





Supply & Demand



United Kingdom





Other Western Europe




All Other



Supply & Demand



South Korea





Other Asia/Pacific



All Other


Latin America


Supply & Demand


Other Latin America

Eastern Europe


Supply & Demand


Other Eastern Europe


Czech Republic

All Other



Supply & Demand


South Africa

Other Africa/Mideast



Industry Composition

Market Share

Illinois Tool Works

Acument Global Technologies

Precision Castparts


Link Solutions for Industry

Nippon Industrial Fastener

Emhart Teknologies (Black & Decker)

Koninklijke Nedschroef

Other Leaders

Product Development & Manufacturing

Marketing & Distribution

Cooperative Agreements

Financial Requirements

Mergers & Acquisitions

Company Profiles

A-1 Technologies, see Link Solutions for Industry

Acument Global Technologies

Agrati (A.) SpA

Air Industries Corporation, see Precision Castparts

Alcoa Incorporated

Altenloh, Brinck & Company KG

Atlas Bolt & Screw Company, see Marmon Group

Avibank Manufacturing, see Precision Castparts

AVK Industrial Products, see Precision Castparts

Black & Decker Corporation

Boellhoff GmbH

Bufab AB

Cherry Aerospace, see Precision Castparts

Chun Yu Group

Deerwood Fasteners International, see Marmon Group

Doncasters Group Limited

Emhart Teknologies, see Black & Decker

FACIL & Cie GCV, see KAMAX-Werke Rudolf Kellermann GmbH & Company KG and Raymond (A.) Group

FastenTech Incorporated, see Doncasters Group Limited

Ferry Cap & Set Screw, see Doncasters Group

Finnveden AB

Fontana Luigi SpA

Gem-Year Industrial Company Limited

Hilti AG

Hi-Shear Corporation, see Link Solutions for Industry Ifastgroupe

Illinois Tool Works Incorporated

Infasco, see Ifastgroupe

Infasco Nut, see Ifastgroupe

Ingersoll Fasteners, see Ifastgroupe

KAMAX-Werke Rudolf Kellermann GmbH & Company

Knipping, see Link Solutions for Industry

Koninklijke Nedschroef Holding NV

Link Solutions for Industry

MacLean-Fogg Company

Marmon Group Incorporated

McKechnie Aerospace

Melrose plc

MNP Corporation

Monadnock Company, see Link Solutions for Industry

Monogram Aerospace Fasteners, see TriMas

Nelson Stud Welding Incorporated, see Doncasters Group Limited

Nippon Industrial Fastener Company

Nitto Seiko Company Limited

NYLOK Corporation, see Marmon Group

Park-Ohio Holdings Corporation

PennEngineering & Manufacturing Corporation

Piolax Incorporated

Precision Castparts Corporation

PSM International

Raymond (A.) Group

Robertson Incorporated, see Marmon Group

San Shing Fastech Corporation

SFS Holding AG

Shanghai Prime Machinery Company Limited

Shur-Lok Group, see Precision Castparts

Specialty Bar Products Company, see Doncasters Group

Specialty Bolt & Stud Incorporated, see Marmon Group

SPS Greer Stop Nut Incorporated, see Precision Castparts

SPS Technologies Incorporated, see Precision Castparts

Sundram Fasteners Limited

Sure-Drive USA Incorporated, see Marmon Group

Textron Incorporated

Tong Hwei Enterprise Company Limited

Topura Company Limited

Trifast plc

TriMas Corporation

TRW Automotive Holdings Corporation

TT electronics plc

Unbrako Engineered Fasteners, see Precision Castparts



Summary Table


1 World Gross Domestic Product by Region

2 World Gross Fixed Investment by Region

3 World Manufacturing Value-Added by Region

4 World Motor Vehicle Production by Region

5 World Aerospace Equipment Shipments by Region

6 World Industrial Fastener Price Deflators

7 World Plastic Fastener Demand

8 World Adhesives Demand by Region


1 World Industrial Fastener Demand by Region

2 World Industrial Fastener Demand by Product

3 World Externally Threaded Fastener Demand by Region

4 World Internally Threaded Fastener Demand by Region

5 World Nonthreaded Fastener Demand by Region

6 World Application-Specific Fastener Demand by Region

7 World Aerospace-Grade Fastener Demand by Region

8 World Industrial Fastener Demand by Market

9 World Motor Vehicle Fastener Demand by Region

10 World Electrical & Electronic Equipment Fastener Demand by Region

11 World Industrial Machinery Fastener Demand by Region

12 World Fabricated Metal Product Fastener Demand by Region

13 World Other OEM Fastener Demand by Application & Region

14 World MRO & Other Industrial Fastener Demand by Region

15 World Industrial Fastener Shipments by Region

16 Industrial Fastener Net Exports by Region


1 North America Industrial Fastener Supply & Demand

2 North America Industrial Fastener Demand by Product & Market

3 United States Industrial Fastener Supply & Demand

4 United States Industrial Fastener Demand by Product & Market

5 Canada Industrial Fastener Supply & Demand

6 Canada Industrial Fastener Demand by Product & Market

7 Mexico Industrial Fastener Supply & Demand

8 Mexico Industrial Fastener Demand by Product & Market


1 Western Europe Industrial Fastener Supply & Demand

2 Western Europe Industrial Fastener Demand by Product & Market

3 Germany Industrial Fastener Supply & Demand

4 Germany Industrial Fastener Demand by Product & Market

5 France Industrial Fastener Supply & Demand

6 France Industrial Fastener Demand by Product & Market

7 United Kingdom Industrial Fastener Supply & Demand

8 United Kingdom Industrial Fastener Demand by Product & Market

9 Italy Industrial Fastener Supply & Demand

10 Italy Industrial Fastener Demand by Product & Market

11 Spain Industrial Fastener Supply & Demand

12 Spain Industrial Fastener Demand by Product & Market

13 Belgium Industrial Fastener Supply & Demand

14 Belgium Industrial Fastener Demand by Product & Market

15 Netherlands Industrial Fastener Supply & Demand

16 Netherlands Industrial Fastener Demand by Product & Market

17 Other Western Europe Industrial Fastener Supply & Demand

18 Other Western Europe Industrial Fastener Demand by Product & Market

19 Other Western Europe Industrial Fastener Supply & Demand by Country


1 Asia/Pacific Industrial Fastener Supply & Demand

2 Asia/Pacific Industrial Fastener Demand by Product & Market

3 Japan Industrial Fastener Supply & Demand

4 Japan Industrial Fastener Demand by Product & Market

5 China Industrial Fastener Supply & Demand

6 China Industrial Fastener Demand by Product & Market

7 South Korea Industrial Fastener Supply & Demand

8 South Korea Industrial Fastener Demand by Product & Market

9 India Industrial Fastener Supply & Demand

10 India Industrial Fastener Demand by Product & Market

11 Taiwan Industrial Fastener Supply & Demand

12 Taiwan Industrial Fastener Demand by Product & Market

13 Thailand Industrial Fastener Supply & Demand

14 Thailand Industrial Fastener Demand by Product & Market

15 Australia Industrial Fastener Supply & Demand

16 Australia Industrial Fastener Demand by Product & Market

17 Other Asia/Pacific Industrial Fastener Supply & Demand

18 Other Asia/Pacific Industrial Fastener Demand by Product & Market

19 Other Asia/Pacific Industrial Fastener Supply & Demand by Country


1 Latin America Industrial Fastener Supply & Demand

2 Latin America Industrial Fastener Demand by Product & Market

3 Brazil Industrial Fastener Supply & Demand

4 Brazil Industrial Fastener Demand by Product & Market

5 Other Latin America Industrial Fastener Supply & Demand

6 Other Latin America Industrial Fastener Demand by Product & Market

7 Eastern Europe Industrial Fastener Supply & Demand

8 Eastern Europe Industrial Fastener Demand by Product & Market

9 Russia Industrial Fastener Supply & Demand

10 Russia Industrial Fastener Demand by Product & Market

11 Other Eastern Europe Industrial Fastener Supply & Demand

12 Other Eastern Europe Industrial Fastener Demand by Product & Market

13 Other Eastern Europe Industrial Fastener Supply & Demand by Country

14 Africa/Mideast Industrial Fastener Supply & Demand

15 Africa/Mideast Industrial Fastener Demand by Product & Market

16 Turkey Industrial Fastener Supply & Demand

17 Turkey Industrial Fastener Demand by Product & Market

18 South Africa Industrial Fastener Supply & Demand

19 South Africa Industrial Fastener Demand by Product & Market

20 Other Africa/Mideast Industrial Fastener Supply & Demand

21 Other Africa/Mideast Industrial Fastener Demand by Product & Market


1 Industrial Fastener Sales for Selected Manufacturers, 2007

2 Selected Cooperative Agreements

3 Selected Acquisitions & Divestitures



1 World Manufacturing Value-Added by Region, 2007

2 Relationship Between Per Capita Industrial Fastener Demand

& Per Capita Manufacturing Value-Added, 2007

3 World Industrial Fastener Price Deflators, 1997-2017

4 World Plastic Fastener Demand, 1997-2017


1 World Industrial Fastener Demand by Region, 2007

2 Share of Industrial Fastener Demand Growth by Region, 2007-2012

3 World Industrial Fastener Demand by Product, 2007

4 World Industrial Fastener Demand by Market, 2007

5 World Industrial Fastener Shipments by Region, 2007


1 North America Fastener Demand by Country, 2007


1 Western Europe Industrial Fastener Demand by Country, 2007


1 Asia/Pacific Industrial Fastener Demand by Country, 2007


1 Eastern Europe Industrial Fastener Demand by Country, 2007

2 Africa/Mideast Industrial Fastener Demand by Country, 2007


1 World Industrial Fastener Market Share by Company, 2007

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Plastic Market

The Basics of Stretch Blow Molding PET Containers.

The Procter & Gamble Company (NYSE:PG)

Q2 2017 Earnings Conference Call

January 20, 2017 8:30 AM ET


Jon Moeller – Chief Financial Officer


Wendy Nicholson – Citi

Dara Mohsenian – Morgan Stanley

Ali Dibadj – Bernstein

Lauren Lieberman – Barclays

Steve Powers – UBS

Nik Modi – RBC Capital Markets

Olivia Tong – Bank of America Merrill Lynch

Joe Altobello – Raymond James

Kevin Grundy – Jefferies

Bill Schmitz – Deutsche Bank

Bill Chappell – SunTrust

Caroline Levy – CLSA

Jonathan Feeney – Consumer Edge Research

Bonnie Herzog – Wells Fargo

Jon Andersen – William Blair

Mark Astrachan – Stifel, Nicolaus

Jason English – Goldman Sachs


Good morning and welcome to Procter & Gamble’s Quarter End Conference Call. P&G would like to remind you that today’s discussion will include a number of forward-looking statements. If you will refer to P&G’s most recent 10-K, 10-Q and 8-K reports, you will see a discussion of factors that could cause the Company’s actual results to differ materially from these projections.

Also, as required by Regulation G, Procter & Gamble needs to make you aware that during the discussion, the Company will make a number of references to non-GAAP and other financial measures. Procter & Gamble believes these measures provide investors with useful perspective on the underlying growth trends of the business and has posted on its Investor Relations website,, a full reconciliation of non-GAAP and other financial measures.

Now, I will turn the call over to P&G’s Chief Financial Officer, Jon Moeller.

Jon Moeller

Good morning. Our second quarter results keep us on track with our objectives for fiscal year 2017. Organic sales for the quarter grew 2%. This includes about a 1-point drag from the rationalization of the ongoing portfolio and reduced finished product sales to our Venezuelan subsidiaries. It also includes negative impacts from Indian demonetization and difficult operating environments in markets such as Nigeria, Egypt, Turkey and Argentina.

Top line growth was broad-based. Organic sales improved in five of six regions, eleven of the 15 largest markets, all five reporting segments and in nine of ten product categories. In the U.S. our largest market organic sales grew 2%. Over the last three semesters, U.S. organic sales have progressed from up about half a point versus a year ago to up about 1.5 points to up more than 2 points. In China, our second largest market, organic sales growth has also progressed over the last three semesters and down 8% to down 2% to up 2.5% including 3% growth in the most recent quarter.

We’re making similar progress in each of our largest categories. Over the last three semesters, Fabric Care organic sales growth has progressed from up just less than 1% to 1.5% to 3% growth. Hair Care from down 1% to flat to up more than 2%. Baby Care from down more than two points to flat to up about half a point. And Grooming from up point and a half to up over 2 points in the two most recent semesters.

Sales growth in the quarter was volume driven, organic volume was up 2%. Pricing and mix were each essentially neutral to our organic sales growth. All-in sales for the company were flat versus the prior year, including the 2-point headwind from foreign exchange.

Moving to the bottom line, core earnings per share were $1.08, up 4% versus the prior year. Foreign exchange was a 5-point headwind on second quarter earnings growth about $0.05 per share worse than we expected heading into the quarter. On a constant currency basis, core earnings per share were up 9%. On a year-to-date basis constant currency core earnings per share growth is up double digits, extending the four year streak of high single or double digit constant currency core earnings per share growth. Core gross margin increased 70 basis points. On a constant currency basis, core gross margin was up 120 basis points, including 210 basis points of productivity improvement and a modest benefit from volume growth.

Commodities mix and pricing were each a 30 point hurt to gross margin in the quarter. Core operating margin was inline with the prior year quarter. On a constant currency basis, core operating margin was up 60 basis points. Productivity improvements contributed 230 basis points of operating margin benefit. Core effective tax rate was 23.5%, essentially equal to the base period rate.

All-in GAAP earnings per share were $2.88 for the quarter, up 157% versus the prior year. This includes gain of $1.95 per share from the Beauty transaction with Coty that closed at the beginning of the quarter. We generated $2.4 billion of adjusted free cash flow. We have returned $12.7 billion to shares, $1.8 billion in dividends, $1.5 billion in share repurchase and $9.4 billion in share exchanges with the Beauty transaction. Despite some significant and unforeseen challenges, we stand at the halfway mark of our fiscal year essentially on track with where we hoped we would be.

We are raising our guidance for fiscal year organic sales growth from around 2% to a range of plus 2% to 3% with the fourth quarter expected to be stronger than the third. We now expect fiscal 2017 all-in sales growth to be in line with the prior year. This includes a 2 to 3 point headwind from the combined impacts of foreign exchange and divestitures. We’re maintaining for now our guidance for bottom line core earnings per share growth of mid single-digits.

We continue to deal with an unprecedented amount of geopolitical disruption and uncertainty, which is affecting market growth, currency and commodities. We are not immune from these macro dynamics. We are aggressively driving cost savings to mitigate these impacts, but we’re protecting investments in the business to accelerate organic sales growth in a sustainable long-term market constructive and value accretive way. Even if it means results end up below the current core earnings per share guidance range.

We continue within our core of earnings per share estimates to reflect a reduction in fourth quarter non-operating income due to lower gains from minor brand divestitures. We now expect the core effective tax rate for the fiscal year to be slightly below last year’s level. All-in GAAP earnings per share are forecast to increase by 48% to 50%, including the one-time gain from the Beauty transaction. At current rates and prices, FX is more than $0.5 billion headwind on fiscal 2017 earnings. Commodities are a $200 million headwind. Combined, they are about a $0.26 per share drag on fiscal 2017 core EPS. We’re working to offset this, but are not yet completely there.

Further significant currency weakness, commodity price increases, or additional geopolitical disruption are not anticipated within this guidance range. We expect adjusted free cash flow productivity of 90% or better. As you know, fiscal 2017 is a year of significant value return to share owners. We expect to pay dividends of over $7 billion. We reduced outstanding shares by $9.4 billion in the transaction with Coty and we expect to purchase over $5 billion of our stock. In total, about $22 billion in dividend payments, share exchanges, and share repurchase this year.

As David said, again at our Analyst Day, our objective is sustainably balanced growth and value creation. We discussed our focus areas in depth in our Analyst Day presentation, which is available on our Investor Relations website, so I won’t elaborate on these again today. Instead I thought the balance of our time this morning could be most productively spent providing perspective on the most frequent conversation topics and questions we have been engaging with you on at and since the Analyst Day meeting.

Top-line progress and prospects, retail trade transformation, naturals products and sustainability, cost structure progress and prospects, portfolio, foreign exchange impacts, and our management approach to them, capital structure and debt and the bundle of trade and tariffs and tax reform. I will take each of these one by one and then I will turn it over to you for additional questions.

First how do we view our topline progress and longer term prospects. We stand modestly ahead of plan. We grew organic sales about a half point faster in each of the first two quarters than we were forecasting going in. We’re making sequential progress and most of our top categories in markets and we’re doing this despite some significant unexpected challenges. India demonetization, the elimination of 500, 1000 Rupee bank notes that accounted for over 80% of that country’s currency in a cash dominated economy was an unexpected headwind.

It was flowing high single-digits growth last quarter to a decline of high singles this quarter. Economic crises in Egypt and Nigeria are dramatically impacting category size; market contractions in Russia, Argentina, and Turkey pose real challenges and we’ve had to manage the market impacts of politically-related currency devaluation in places like the UK and Mexico. Our organic topline for the first half of the year has been affected by the portfolio work we’re doing in the ten ongoing categories and by loss sales to our Venezuelan subsidiaries.

With all these challenges, we grew organic sales between 2% and 3% for the first half, putting us, as I said, modestly ahead of plan. This is very encouraging as our many elements looking forward. We’re now a more focused ten category company, where purchase and intent in choice are driven by a specific job to be done and our products’ effectiveness in doing it. These are predominantly daily use categories that matter to our retail partners.

We said the new portfolio would grow up to a point faster and over the first two quarters of this fiscal year we’re seeing that play out. We are increasing our investments in market-stimulating product innovation. We’re continuing to improve and expand unit dose detergents. This premium price form has already past $2 billion in retail sales. We're currently building on this line-up, launching Tide PODS Plus Downy in North America.

Our scent bead offerings including Downy Unstopables, Lenor, Gain Fireworks and Bounce are growing fast and are growing the fabric enhancer category. In the US, Downy Beads are growing in the mid-20%s and the category is up 7 points.

In Germany, where we launched Lenor Beads last summer, the fabric enhancer category is up 6% and our share is now over 50%. Our scent beads are available in 33 countries so far, including the recent launch in the Arabian Peninsula.

Always Discreet has increased market growth rates for female adult incontinence products by roughly 50% in the eight countries that we've launched so far. Last fall, we launched our new Pampers Easy Ups Training pants in US. Since the launch, segment growth is 16% and Pampers' share has increased by over 4 points.

We are strengthening investments and brand awareness and trial at the point of market entry and point of market change. 70% of new moms in the U.S. will receive samples of our best Pampers product through our prenatal and hospital programs.

Gillette will sample over 2 million FlexBall ProShield razors with young men on their 18th birthdays. We will distribute over 30 million laundry detergent samples in new washing machines this fiscal year. We were connecting always with girls when they most need reassurance and self-confidence as they enter puberty and become new Feminine Care consumers.

We're making organization changes to improve our execution, speed and responsiveness to local market dynamics. We are increasing our investment in sales resources to improve coverage of fast-growing channels, including eCommerce and specialty stores. We're adding salespeople with deep category experiences in categories like personal health care. And we're changing our talent development and career planning approach to build and reward applied category mastery.

In our larger markets, we are establishing direct end-to-end lines from each product categories straight through to our retail customer teams. In smaller countries that we manage as market clusters, we're implementing changes to give on the ground business leaders more flexibility to react quickly to competitive threats or customer opportunities.

We see a significant cost and cash productivity runway ahead of us, enabling us to keep funding smart market accretive growth opportunities. While we're not without our topline challenges, we're currently tracking ahead of plan and are raising our outlook for the year.

So our next topic, you've been asking about is retail trade transformation and the impacts and opportunities for P&G. Our largest opportunity across channels of trade lies in creating and building indispensable brands and products of superior value, and in providing go-to-market experiences that are relevant and valuable to shoppers wherever they choose to shop.

If we do this well, we should have opportunity across channels and classes of trade. We don't currently envision and/or retail world, online or offline, mobile or desktop, subscription or a-la-carte. The mix along each of these continuums will vary by category, by country, by consumer and by occasion. We need to be relevant across this mix. One measure of relevance is market share. Our results vary by category and country, but on an aggregate basis, our online shares are currently equal to offline.

P& G eCommerce sales are now $3 billion. I was with David and the team last week in China. While we have more work to do, our eCommerce business there will reach 20% of sales and will exceed $1 billion this year. With an aggregate eCommerce share larger than the next three largest competitors in our categories combined.

In Korea, eCommerce is now 40% of our business. We're building a full toolkit of capabilities we can put to work where relevant. For diapers, subscription can provide convenience and increase loyalty. For SK-II super premium skin care, direct-to-consumer counseling either in-store or online can help inform the benefits of regimen usage.

We're prototyping supply-chain capabilities to produce and deliver features at equal cost per unit to current batch production. We're positioning ourselves for relevance across channels and shopping preferences. We remain fully committed to our omni-channel retail partners and shoppers where most of the business remains and where we also see significant growth opportunities.

Stores continue to hold strong relevance for many shoppers. For many shoppers, stores are more convenient, stopping at one location for multiple items. No packages left at the door; no passwords to manage. They can be more efficient for many shoppers groceries, gas, banking, and pharmacy, all in one stop.

Stores can be cheaper, with no membership fees, or delivery charges and for some consumers, stores offer a social experience away from home or a break from out behind their desks. The important points are that we continue to create and build indispensable brands and products whose relevance extends across channels and are building the skills, capabilities and partnerships to win where average consumers choose to shop.

The next question. Is there an opportunity for P&G to better serve the naturals consumer and the increasingly environmentally concerned shopper? There absolutely is. We introduced the first bio-based detergent with the cleaning power of Tide with Tide Pure Clean this past year.

Pure Clean provides the cleaning power of Tide with 65% bio-based ingredients and is produced with a 100% renewable wind power electricity, in a facility operating with zero manufacturing waste to landfill. While it's still early days, Pure Clean holds a 7% share of the pure and naturals segment and is driving over a 150% of the naturals segment growth.

We're just launching Herbal Essences with bio:renew, a revolutionary blend of antioxidants, aloe, and sea kelp that delivers an amazing product experience. The launch includes nine new collections, including styling products free of parabens, dyes, and gluten and an alcohol-free hair spray.

We are launching new Febreze Air Effects that introduces a proprietary odor-fighting technology, delivered in a plastic can versus the previous aluminum packaging. The plastic can reduces the carbon footprint by 11% and results in a more efficient manufacturing process, using 15% less energy and reducing waste by 10%.

On Charmin, we've added Forest Stewardship Council labels to let consumers know that 100% of our pulp is sourced from environmentally responsible forests.

P&G is a sustainability leader in laundry and home care industry. We're the first multinational company to globally remove phosphates from all laundry and auto-dishwashing detergents without a compromise in cleaning.

We're the first multinational company with 98% of this liquid laundry detergent compacted globally, with a dosage recommendation of 75 milligrams or lower. We're on track to reach 100% compaction in the near future. We believe one of the largest impacts we can make is enabling and educating consumers to use energy efficient laundry wash cycles.

We’ve set a target to have 70% of all machine wash loads completed in energy efficient wash cycles by 2020. We hope to get there with innovations like Tide HE Turbo Clean specifically designed for great performance in high-efficiency machines.

Moving behind the scenes, our supply network transformation enables improvements in environmental sustainability as we move manufacturing and distribution closer to consumption. Since 2010, we’ve reduced truck transportation commerce by more than 25%.

Over the same time period, our plant size have reduced water use by 24% and increased our renewable energy use to 10% with a goal of 30% in the next four years. As we’ve reported on our first-ever Citizenship Report published in December, we've recently achieved our 2020 goal of reducing energy use at P&G facilities by 20%, four years ahead of schedule.

Recently, we set a goal for zero manufacturing waste to landfill from all production sites by 2020. These natural ingredient-based products and our industry-leading efforts to improve the environmental sustainability of our operations enable us to increase the relevance of our brands and products with the naturals consumer and the increasingly environmentally conscious shopper.

Next, how are you feeling about your cost structure as it stands today and going forward? We feel very good about our current cost structure, having made significant progress over the past several years. And we have significant savings opportunities in front of us, which should enable us to invest in smart market-constructive financially accretive growth. We've talked about the historical progress before. We set a goal to save $10 billion over five years and then accelerated and exceeded each of our productivity objectives over that period.

We reduced manufacturing enrollment on a same-site basis by 27 and on an all-in basis, including divestitures by 35%. We reduced overhead enrollment by nearly 25%, excluding divestitures and by about 35%, including divestitures. Net of re-investments and to innovation, sales coverage, media and sampling, productivity savings have enabled us to deliver constant currency gross and operating profit margin improvement at high single-digit to double-digit constant currency core earnings per share growth in each of the last four fiscal years.

Over that same time period, constant currency earnings in our developing market grew 6 times faster than organic sales, significantly expanding local currency profit margins. On the balance sheet, we've improved inventory by around 10 days and payables by more than 30 days over the last five years. Our aggregate 22% core operating profit margin is the third highest in our industry. Only two companies in our primary competitive peer group have higher margins, Reckitt and Colgate, largely due to categories they compete in. Over the last three fiscal years, we've grown our top quintile operating margin by more than two points. What matters more than aggregate margin is the competitive comparison within each category. P&G's category gross margins are higher than competition by an average of about five points up to as many as 14 points.

The comparison favors P&G in over three-quarters of the cases. Over the last four years, we've grown our aggregate gross margin by two points. We see similar advantages in core SG&A overhead. When we compare P&G's SG&A overhead costs to a competitive average, weighted by P&G's business mix by sector, our costs are more than 100 basis points lower than the competitive weighted average. Over last four years we’ve reduced P&G's overhead costs, as a percentage of sales, by 50 basis points; over the next five years, we expect further improvement.

Putting this together, at the operating margin level, P&G's operating margins are higher than competition or more than 70% of the category level comparisons. We have double-digit advantages in several and a notable gap in just one. We have further advantages in below-the-line costs. We borrow at some of the most favorable rates in our industry and have a tax rate that is among the industry's lowest.

We are in an advantaged position but there is significant opportunity remaining to increase structural cost advantages and further improve cash efficiencies. We discussed many of these opportunities at our Analyst Day meeting, including the transformation of our supply chain and the digitization and automation of more of our work processes, both on and off the manufacturing floor. We will continue to improve productivity up and down the income statement and across the balance sheet, creating fuel to reinvest in smart value-accretive growth.

The next question you've been asking is whether we are confident we will maximize value with the recently restructured Company. We believe we can create superior value with the new company that we've just created. We've been through significant portfolio valuation and reconstruction over the last two years. We've carefully and thoroughly evaluated each of our businesses for strategic merit, fit with our core capabilities, financial attractiveness, and historical track record of return.

As we completed this thorough analysis, we felt several of the categories and more than half the brands have the potential to create more value in the hands of other companies, with stronger, more relevant capabilities in the categories in question, pet food with Mars, fragrances with Coty. We moved these categories out, removed all the stranded overhead and monetized the portion of the incremental value for our share owners.

In the last few years, we've transitioned from a Company that competes in 16 product categories to one that competes in 10, or about 170 brands to 65. The businesses we exited represented about 14% of fiscal 2013 sales and only about 6% of our profit. Our new 10 category portfolio has historically grown 1 point faster and then 2 margin points more profitable than the old portfolio.

So our affirmative response to value creation with the current company is not a function of our unwillingness to change or consider alternatives. The conviction comes from having done exactly that. It has only been one quarter, three months since we completed the majority of the portfolio moves but we're encouraged by path ahead of us.

Another reason value creation is maximized with the new company are the synergies that exists in the new company portfolio, which are greater than the synergies that existed in the old portfolio. A number of the innovation platforms we are advancing have relevant and multiple of the 10 categories. The supply chain we are transforming is designed to synergize this portfolio with multi-category production and mixing centers. Most of the businesses we've divested, batteries, for example, or pet food, were self-contained from a manufacturing standpoint and had different patterns and endpoints of distribution.

The mix of businesses we're moving forward with continues to facilitate highly synergized and cost-effective support functions and maintain scale purchasing advantages. For some businesses we chose to divest, we had a significant number of resources to provide the same level of support, a significant cost to synergy associated with the separation. The cost to synergy that completes separation will be massive. The operational dissynergy is extraordinarily complex. The tax implications will likely be very significant as would capital structure dissynergies, resulting in interest expense.

To overcome these negatives and create more value as separate pieces, we would have to be comfortable believing in dramatically higher topline growth rates, more than just one point or two points over many years. At current rates of market growth, this would imply sustained growth above market rates.

Having said all of that, our view to value creation will continue to be an extremely dynamic one. We're not led to the past simply because it is the past. We spent the last two years creating a new company, a new cost structure, a new portfolio. We're now creating the supply chain and the organization structure and culture that will allow us to drive, sustain, balance top and bottom line growth and are encouraged by the prospects.

The next question. How do you think about FX and how do you respond to it? It might be helpful to briefly, very briefly recount how FX impacts reported earnings, or as you know, three impacts. First, exchange rates affect the local cost of imported finished products and raw materials. We attempt to recover these cost increases through pricing when local legal requirements and market realities allow it. What was a lag between when a currency devalues, the costs are incurred and the pricing is taken and executed through our channels of distribution.

Second, we need to re-value transactional related foreign currency working capital balances at the end of every quarter at current spot rates. This includes a revaluation of working capital balances related to transactions between P&G legal entities that operate on different currencies. Balance sheet revaluation impacts are most pronounced when currencies make significant inter-quarter moves, such as the sharp devaluation of the Mexican Peso in November.

Last, is income statement translation as a result of foreign subsidiaries that do not use the U.S. dollars or functional currency are translated back to U.S. dollars at the new exchange rates. Given the complexity of our global supply chain and the volatility of currency markets, the degree to which each of these impacts effects us in a given attributable can vary quite a bit.

We've managed through more than $4 billion of accumulative FX impacts over the last four years, nearly half of fiscal year 2012 net earnings. Of this impact, about 30% was from transaction, 20% was from balance sheet revaluation, and the remaining 20% was from translation. At current rates, FX is more than $0.5 billion headwind to the current fiscal year, an increase of more than $300 million since our earnings last October.

Our primary approach to mitigating the impact of FX movements is operational hedging. Where financially feasible, we try to denominate expenses in the same currencies in which we're selling products. One way to do this is with local manufacturing. As we localized manufacturing, more of our labor costs are denominated in local currency, more raw impacted materials are sourced in local currencies. There are limits, though, to localization benefits. It would not make financial or operational sense to build blades and razors plants in 120 companies – countries, for example. Many material inputs, such as pulp, lauric oils and the crude oil derivatives are globally denominated in dollars. About two-thirds of our global commodity spend is dollar-denominated.

We're sometimes asked why we don't simply hedge away the remaining FX exposures. It's a good question and something we look at internally and with a different set of outside eyes every year as we prepare our financial plan. The three reasons we typically don't end up choosing to hedge the majority of the exposure. Up to two-thirds of our foreign exchange losses and a significant amount of our forward exposure is in currencies that are either non-deliverable or are very difficult to hedge. The Argentinian Peso, the Egyptian Pound, the Russian Ruble, Nigerian Naira are some examples.

Second, hedging is neither free nor necessarily cheap. Currency volatility increases this cost. The last shortfall as having as the answer is it solves nothing longer term. It does nothing to help us restore the fundamental margin structure of a business. It simply defers volatility. While it takes time and there's a lag between the hurt and the help, we typically look to pricing, sizing, mix enhancement, sourcing choices and cost reduction to manage FX impacts. Russia provides a recent example.

Two years ago, when the Ruble devalued we relax, we were left with negative gross margins across our portfolio of products, requiring us to take action. We initiated pricing and monitored consumer and competitive reaction, making adjustments where needed. Over an 18-month period, we took five pricing actions, resulting in a net 25% price increase across the portfolio. We made product sizing changes to ensure affordability with the pricing. Simultaneously, we aggressively reduced non-value-added costs, and worked to improve our product mix. Our operating approach is measured and practical. It is not defined by a fiscal year or a quarter. It often takes longer than that. We can't stand still but we also can't get out of balance.

Next question. Are we considering any changes to our capital structure? Should we be more leveraged? We remain committed to strong cash returns for share owners as an important part of overall shareholder value creation. Over the last 10 fiscal years, P&G has returned over $123 billion to shareholders through dividends, share repurchase, and share exchanges. We've returned 100% of net earnings over those 10 years. We have paid a dividend for 126 consecutive years, and we've increase the dividend from 60 consecutive years. Our dividend payout is over 70% of net earnings compared to a U.S. peer group average of about 54%. Our dividend yield is currently over 3%, a four point higher than the S&P 500 average.

At the start of the fiscal year, last fiscal year, we forecasted that we would return up to $70 billion in dividends, share exchange and share repurchase over four years through fiscal 2019. With $15 billion returned last fiscal and about $22 billion projected for this year, we are making good progress towards that goal. We believe we are in a good spot, with our AA minus credit rating and should retain it, particularly as interest costs are poised to increase and as potential tax reform creates uncertainty about future deductibility of interest expense. We're financing around $30 billion in debt at an average interest rate below 1.6%.

Commercial paper makes up about one-third of our debt portfolio. We've been able to access the CP market in several European companies at negative interest rates. Overall, we are borrowing at 70 to 80 basis points below 10-year treasury rates and below 5-year rates. We are among the – these are among the lowest rates in our industry. A downgrade would provide additional leverage that could be used to purchase more shares or to issue a special dividend. This will obviously be a one-time benefit. It’s not a recurring source of cash. Additional debt service, an increase in the cost of debt service and a less efficient mix of debt, with lower CP capacity, essentially overset – offset over time the modest cash return benefit.

Finally, we received a number of questions about potential impacts from U.S. policy changes related to trade barriers, tariffs, and tax reform. While we certainly appreciate the appropriateness of these questions, we are guessing and right along with you on what the impacts may or may not be on our business. That said, there are few facts that might be helpful. P&G produces 85% of the products themselves in the U.S. domestically, and we export about 10%. So a net import balance of only about 5% of U.S. sales. The majority of the small amount of imported product is produced in Canada. We estimate that over 90% of the materials we use to manufacture products in the U.S. are sourced domestically. Material imports occur primarily in the case of insufficient U.S. supply.

From our experience in many other markets, local supply constraints are usually taken into account as governments consider tariffs or other border adjustments. As always in tax and trade, the details matter very much, not just the headline rates and rules. As more details are known, we will update you on how they will affect our business.

Now wrapping up, as I said before, we leave the second quarter essentially on track to deliver our fiscal year objectives, despite unforeseen significant setbacks. We're increasing topline guidance. We're continuing our work to crawl out from under additional FX hurts and we remain on plan to return about $22 billion to shareowners through a combination of dividends, share repurchase, and share exchange. Hopefully, you found this question-guided discussion a helpful one.

I'll now be happy to take any additional questions.

Question-and-Answer Session


[Operator Instructions] Your first question comes from the line of Wendy Nicholson with Citi.

Wendy Nicholson

Hi, good morning. My question has to do actually with the hair care business specifically because I know last year CAGNY that was an area where you cited particularly robust innovation pipeline and all that. But the U.S. market share data has not been good in recent months. So when you called out that as a category that has been particularly strong. It has accelerated, can you explain where that’s coming from is it that the U.S. isn’t accurately reflecting what you are seeing, because there have been any pipeline sale, is it international market, is it non-track channels. And what’s the sustainability do you think of the strength in hair care given how competitive that category is? Thanks.

Jon Moeller

Thank you, Wendy. The strength in the U.S. is primarily behind Heads & Shoulders and Pantene both of which are doing very well. We are not doing so well on the balance of the portfolio, the smaller brands particularly Herbal Essence. We are just as we speak relaunching Herbal Essence. And I talked earlier in our prepared remarks about the naturals based focus of that launch and we're very excited about that. So part of the dynamic here has been different growth rates across the brands. But we are again relaunching Herbal Essence as we speak.

Across markets we continued to do well in markets like China. Hair care has done very well in Latin America. So there's also a geographic dynamic that's driving the overall aggregate result. You mentioned non-track channels. That's a significant impact and is going to be increasingly frustrating for this community I think. If you look at the U.S. on an aggregate P&G basis, I don't have the data with me for just hair care. But if you look at all of our categories, there is about 1.4 difference or 1.4% that explains the difference between reported growth rates and something like Nielsen and our growth rates that we're reporting through our earnings release. That increase is dramatically when you go to a market like China where that delta is up to six points. So that’s also one of the drivers. And we are doing relatively well from a hair care standpoint online.

I think the program. I know the program strengthens going forward. We're bringing new initiatives to market not just on Herbal Essence but on Pantene and Heads & Shoulders across geographies. So we feel reasonably good about the sustainability of the growth that we've been delivering more recently.


Your next question comes from the line of Dara Mohsenian with Morgan Stanley.

Dara Mohsenian

Hey, good morning. So I want to focus on organic sales. First the full year organic sales growth guidance raise is that more due to upside from the first half of the year that you already reported or you also more optimistic about the second half that it should be better than what you originally expected. And does the first half outperformance give you greater confidential and the year growing in line with the categories you previously articulated. And then to the last question, you mentioned the gap between on track and track channels. In the U.S. it looks like it was a couple of hundred basis points in the quarter. So I just want to get more specifics particularly in the U.S. across your business. Is that just that on track channels have really accelerated or the things like shipment timing in there? And do you think it’s true for the industry or is it more of a P&G phenomenon?

Jon Moeller

The answer for your first three or four questions is yes. So we did do better in the first half than we expected we would. So we're at about 2.5% through the first six months and we expect to improve that. Modestly as we go through the back of the year. So, yes it reflects progress to-date, yes, it reflects our confidence in the back half, and yes, we would expect we hope to get close to market growth rates as we exit the year. As I’ve said in our prepared remarks, we expect the fourth quarter to be stronger than the third quarter. There was always the swampy straight line but the answer broadly is yes. In terms of other things besides the non-track channel dynamic, driving differences between what you’re seeing in our reported sales numbers and the market base numbers.

There are always puts and calls in different markets. For example, in China, Chinese New Year fell very early this year. And so there were some part of the normal inventory load that occurs ahead of the Chinese New Year holiday but this year occurred in December. Last year it would have occurred in January or February, I can’t remember exactly when the holiday was last year. So there are those dynamics but broadly I think you can look at the 2% on the quarter is a pretty good number representative of the general strength of the business. It might be just a tad high because of dynamics like the Chinese New Year timing and different year-to-year promotional items but there’s nothing very significant or concerning within that.


Next question comes from the line of Ali Dibadj with Bernstein.

Ali Dibadj

Hi, guys. I have a question on SG&A and a question on just pricing. Suppress me with the second one, it was clearly flat to down everywhere and below FX, although you keep saying you want to offset FX and I want to understand whether that kind of the strategy or really just a determination of a weak consumer. And I ask that I guess in the context of is the plan to grow really from market share versus category growth, we’ve all seen the Nielson numbers, for example, slow down, but on a global basis. That’s question one.

The other one on margins, really, as I totally guess the gross margin of 210 basis points of productivity, I think that's great. I want to understand does that continue. So should we expect 200 basis points of improvement in our gross margin from productivity and for how long? So is that sustainable? And then on SG&A specifically, only 20 basis of productivity; I frankly have a tough time with the benchmarking numbers. You're putting up there saying you're actually better than peers without including scale and everything else. But you're 20 basis point seems a little low and I want to get a sense of whether you should expect that to ramp up. And then the 80 basis points reinvestment, how much of that is sampling versus actual kind of advertising expense increase? Thanks.

Jon Moeller

All right. I can't really – can't possibly answer all of those questions, but I'll take a shot at the big ones within that. In terms of pricing, when we look at pricing, inclusive of promotion, as a component of our top line growth that was neutral on the quarter. It's been neutral to positive for the past 24 quarters consecutively. It has been positive for the last 12 years. So as relates to the promotion part of the question or potential part of the question, as I've said many times, we will be competitive on promotion, but it is not something that we typically lead with. We would rather spend a dollar on innovation or equity when we have that opportunity.

In terms of the flat pricing in the quarter and its vis-à-vis FX increases; I mentioned when I was talking about FX that there's often a significant lag between when the FX hits us and when we're able to take smart pricing. And if you think about what's happened in the FX markets over the last, call it, six quarters; most of the increase that we're talking about – we talked about $500 million of FX impact versus year ago. I mentioned that $300 million of that has occurred since we reported earnings on October. So the pricing environment that exists in the market now is reflective of a more neutral FX environment and we'll have to see what happens going forward.

We are very cognizant that with a broad dollar move against most currencies that our pricing flexibility will be somewhat limited or will be less than it might otherwise have been. Nonetheless, it will continue to be part of the strategy, but they'll be a bigger component of cost reduction, mix management, sizing et cetera.

As relates to margin, I think the gross – and I honestly don't have in my head the exact gross margin numbers quarter-by-quarter, I just don't think about things that way. But the general order of magnitude you've seen is representative of the strength of the productivity program. That's going to differ quarter-by-quarter depending on commodity impacts, depending on how much volume we ship. But generally I expect to see a healthy gross margin contribution as we go forward.

Recall, we mentioned that our next $10 billion productivity program, the majority of that would be in cost of goods, which is part of the reason why you see a divergence between the gross margin benefit from productivity and the SG&A benefit. 20 points a quarter on SG&A, I’ll take that, make time. We obviously have more opportunity ahead of us as I said and we'll see how that progresses. At the same time we've talked about reinvesting in things like sales coverage which we are doing. And that is also reflected in the overall numbers.

I think I’ll leave it there and feel free to get back to me later in the day Ali, if I missed an important part.


Our next question comes from the line of Lauren Lieberman with Barclays.

Lauren Lieberman

Great, thanks. I'm going to actually try to ask one question, not seven. I wonder if you could talk a little bit more about innovation. I thought one of the things I picked up at the Analyst Day around that Tide Pure Clean that was really interesting was the notion of lean innovation, and try to move a lot faster, and bringing things to market in particularly things that are going to be increasingly consumer relevant.

So can you talk if there are other examples of where you are already putting that lean innovation mindset to work or if that's still very much on the calm? And then any other kind of notable news flow that we should be looking for in the next couple of months. Thanks.

Jon Moeller

Thank you, Lauren. Lean innovation is in its early days in terms of both learning and implementation. It offers significant opportunity for the reasons you describe, quick learning, quick response, lower cost learning, more shots on goal. I was just in a meeting for a couple of hours yesterday afternoon with some of the leadership team on lean innovation. And some of the pilot programs we were applying in that to try to improve, again, both the cost profile, the speed to market, and the number of ideas that we’re screening. So we're very excited about the potential it holds, but it's early days.


Our next question comes from the line of Steve Powers with UBS.

Steve Powers

Great, thanks. Hi, Jon. Just going back to sort of the demand building efforts that you've been making, I was just hoping if you could frame and quantify the magnitude of the year-over-year increases in demand building this quarter, and I'm thinking across trade, spend, A&P sampling, both a little gamut relative to the run rate looking backwards over the course of fiscal 2016 in Q1 versus where you think that trends going forward. I'm trying to figure out if we're at a relatively steady year-over-year increase or if we're poised to accelerate further or decelerate that kind of thing. Thank you.

Jon Moeller

Sure, Steve. With pride and we've talked about this a couple of times too both ensure that our demand creation efforts are sufficient and that they are sustained. One of the problems that we created in the past was a fair degree of volatility and support levels for the business. And that's why I made the remarks that I made when I was talking about the bottom line guidance in the context of FX that we're simply not going to make those choices. We're going to continue to support the business in a sustained fashion through the balance of this year, through the balance of next year.

Our support levels are pretty ratable quarter-by-quarter throughout this fiscal year. I don't have all the base period numbers exactly in my head, so I'm not sure what all the index comparisons would be. But I think what you've seen is symptomatic of what you will see going forward.

It's not just though the marketing and trade spending that we're viewing as investments in demand creation, it's also the investments in capability which comes in several forms. We've talked coverage which we're investing in. We've talked about category mastery, both building and hiring and from the outside, we've been doing that. We've talked about category dedication. We've talked about increasing the flexibility of our operations to respond to changes, whether there are changes in opportunities, whether they’re competitive, trade initiated or otherwise.

And so all of this were hopeful has an impact on demand creation. All of us this were hopeful as market accretive in its approach. And we still have a lot to prove, we still have a lot of work to do. But so far it's progressing in the direction that we had hoped.


And your next question comes from the line of Nik Modi with RBC Capital Markets.

Nik Modi

Thanks. Good morning everyone. Jon, can you just give us an update on in-store execution. I know about something that we talked about at the Analyst Day and kind of some of initiatives we're putting in place to really make sure you get the right assortment merchandising, limit out of stocks et cetera. And has ever been a discussion internally at P&G regarding moving perhaps the P&L responsibility to the customer teams versus the category or the geographic level? Thanks.

Jon Moeller

Thank you, Nik. I mean clearly in-store execution is another important element going back to Steve's question on sufficient demand creation, significant number of consumer choices on brand and product are made at that shelf. So having the products available, having them be presented in an understandable and compelling way, that’s all incredibly important.

A couple of things here; one, we are whole supply chain transformation. You're familiar with I think the fact that we now are operating these Mexican centers in the U.S., which is designed to get us closer to consumption and are designed to reduce auto stocks. We have significantly improved auto stock levels across our customer base through that, so we’re very happy about that. And this is an initiative that is going to be rolling globally in markets is appropriate. So we expect to continue to improve that. It’s very important.

We’ve also tried to get clear and clear alignment between our brand teams and our sales teams on what are the drivers of both market growth and brand growth in an in-store context. And then frame the tree programs and our execution in store against those drivers, key business drivers and be very focused and really, really, one or the two or three drivers that matter most.

That we’re measuring performance against a combination of those drivers, which are different by category was that delivered in-store and gross margin or gross contribution. So there is an element of profit responsibility and profit consideration that is occurring all the way down through to sales professional in the store. And this is an area I frankly think we have a lot of upside in. There is some great work going on around the world and it’s a clear driver of our business.


The next question comes from the line of Olivia Tong with Bank of America Merrill Lynch.

Olivia Tong

Hey, thanks. Just wondering if you could talk a little bit about some of things that you are seeing from the key things you are thing that give you the components to raise the organic sales outlook because that to back pretty far to see the last time you guys did that. And is it more function of the category is getting better or that your execution is improving to because it was look like all care to category seems to be getting better. But then some of the source parts in your product grouping there is still some challenges at we’re seeing there like in diapers. Thanks.

Jon Moeller

Thank you. In general on an aggregate basis category growth continues to decline at a very modest level, but it is declining. Some of that is developing market dynamics associated with some of the big currency moves. The U.S. is essentially, it is very – it’s pretty stable, may be a slight uptick here or there. So the majority of the progress that has been made is really execution and very little that, in fact I would have to look at specific good numbers, but I would expect that the category growth driver of our growth as a negative in the whole equation, modest negative but a negative.


Our next question comes from the line of Joe Altobello with Raymond James.

Joe Altobello

Hey guys, good morning. I just want to stay on the concept of demand creation for a second and the increase investment you guys are doing and things like sampling and salves coverages. I was just curious in terms of a more broader question the trend that you’re seeing in the overall cost to acquire a customer and to keep that customer versus where it was a five years ago. Thanks.

Jon Moeller

There are actually more options available to us to attract customers to our brand and more tools than there probably were five years ago, so done right. There’s no reason that the cost of acquisition of a customer should be hire today than it was five years ago. Having said that, there’s a lot more complexity in the shopping environment, in the media environment and done wrong, you can’t increase pretty significantly and efficiencies in the cost of customer acquisition. I really can’t give you a more specific answer than that Joe, but I don’t see customer acquisition cost has been significantly increased or inflated as we go forward. We can reach consumers and shoppers today and much richer, more direct ways than we ever could.


Our next question comes from the line of Kevin Grundy with Jefferies.

Kevin Grundy

Good morning. First one Jon housekeeping question, I don’t believe you gave it. I apologies if you did. Can you provide global category growth and maybe separate that by EM and DM. And then the second piece I wanted to come back to a comment you made and we’ve touched on a lot of these topics, but just to sort of underscore the importance here. You talked about long-term investment, even if it means P&G’s results and the below the current guidance of mid-single digit core constant currency.

And that sounded new to me and you tend to be very joyful about the language that you use. So is it just a matter of the stronger dollar and less ability to take pricing, is just a matter of promotion ramping maybe a bit more than anticipated. I just want to kind of come back to that and maybe underscore some of the key drivers behind that comment, thanks.

Jon Moeller

Thank you, Kevin. We talked about this both last year and this and we’ve done it. We talk about in the context of FX, which is what’s relevant again this year. We need to support our businesses in a sustainable sufficient way and we’re going to do that. The challenge of doing that and delivering and EPS number and the current environment is almost entirely FX. It is not – of course there are examples by category what promotion levels of increased or by country work promotion levels of increase, but on a broad scale basis as we look over the total business.

That’s not the driver of the challenge from a profitability standpoint it is FX and commodities and I talked about $500 million of FX, $300 million of which has just come on since October and about $200 million worth of commodity costs. We’re committed to work as hard as we can to offset that making smart choices on cost and ideally continuing to push the top line as well. What we’re not going to do is reduce investment that’s working to drive growth just to deliver a near-term quarterly number. So that’s all we’re saying.

And I think that that is maybe inconsistent in totality with our past. I think it’s very consistent with the last couple of years how we’ve been approaching the business. In terms of market growth, developed market growth is about 1% overall, developing is about 5%, not a significant change in either versus the prior quarter that yields about 3% global growth, there obviously significant differences by country, but that’s the aggregate look at that.


Our next question comes from Bill Schmitz with Deutsche Bank.

Bill Schmitz

Hey Jon, good morning. Can you just like add more detail to the delta on the commodity in FX inflation because I think it was $0.12 before and it’s $0.26 now? So you kept guidance obviously, I guess sales are modestly up. So can you just talk specifically how you even try to make up for that gap? And then can you just talk about to the category that stood out good and bad. So like the overall care business obviously came in way better. Was that market share gains or was that acceleration in category growth and then just very briefly in diapers, you talked about higher promotional spending. What is the strategic rationale for that, because I know you’ve talked pretty extensively about promotions being sort of like short-term fix and not a long-term your brand equity driver, thanks.

Jon Moeller

Thank you, Bill. The strategic rationale for the increase in production at diaper category is competitive response. I’ll just leave that there. In terms of Oral Care, we’re making very good progress on both our paste business, but also on our more high end brush business, the automatic power brushing. And that’s growing extremely well in markets like the U.S., but also in markets like China.

In terms of the breakdown of FX, I mean you talked about 12 points going to 26 points about three quarters of that occurred since October and it’s across currencies. If I were to show you a graph today of currencies that are down and up. I’m sure you have one sitting on your desk, as it is they’re all there’s been a significant move that’s occurred. And as I said earlier it’s different by category by country. But we’re going to try to recover that yet through a combination of price increases whether relevant, size and changes, mixed cost. And there really isn't one answer. I apologize, but that gives you an aggregate feel for how that happens. It's markedly different by market by currency. And one of the big differences is a yuan or euro functional currency competitor impacted by the valuation in a specific market or not.

Another variable is, what’s happening to local inflation and how our local competitors cost structure is being impacted by what’s happened. And they have a reason to price or not. Another factor is where are we, in terms of category leadership or followership are we the number one brand or we the number three brand. That has an impact.

So it is a very granular gain and a very executional gain but one that we frankly despite issues within a given quarter, I’ve done generally fairly well at over the last four years offsetting the $4 billion of affects, nobody likes the $3.80 or whatever the EPS number is the people feel were stuck on. But it could've been a whole lot worse. And we’ve done I think a very good job of managing that, and Kevin, I towards managing these in more effectively from a growth standpoint on the topline as we go forward.


Our next question comes from the line of Bill Chappell with SunTrust.

Bill Chappell

Good morning, thanks. Jon, taking to step back, maybe you could give us little bit more in the genesis of this call I mean it's a different format and kind of walking through the Q&A, it’s earlier I think this is the earliest you’ve ever reported at least that I can remember in terms of since the quarter close and ahead of some of your competitors and you obviously had a message you want to get out there.

So, are you frustrated with the stock price? Do you not feel like people understand what’s going on with P&G after the Analyst Day or there just key issues that you wanted to get out, I mean, just little more color would be great, that was kind of a surprise, obviously to see reporting this early and kind of going through this format.

Jon Moeller

Sure, sure, sure. This was a fairly clean quarter for us and it's obviously not a year end quarter. So we were able to get our accounts together and fairly short order. And having an earlier call, frankly, allowed me to take advantage of scheduling an opportunities next week and it’s simplest that. In terms of the format, I just didn’t thank you while that go through the Analyst Day, March again, since that was about available for you online. And that's essentially the format we’ve used before us to walk-through productivity walk-through portfolio, walk-through topline. I thought I would just diversify a bit and make sure all of the ground was hopefully, helpfully covered for you and that's all there was for that.


Our next question comes from the line of Caroline Levy with CLSA.

Caroline Levy

Good morning, Jon. Thank you so much. As always, I’m very interested in what's going on in China with particular interest in whether the heavy discounting in the diaper category has continued. And if you expect that to mitigate at any point, who has the consumer become used to 20% lower pricing. The other area in China would be detergents, where you’ve had some strong local competition and Oral Care, where you’ve had strong local competition, because just bring us up to date on that that would be helpful.

Jon Moeller

I want to step back in China first and then I’ll get to your specific questions. I think it's very important that we understand that China continues to be a very attractive opportunity. This is a market that is among the highest growth rates across the world on a sustained basis and that really hasn’t changed. It’s a market that as we've talked before, premiumizing significantly customers are trading up to better performing products across categories.

As we move out of the one trial policy, there’s certainly only upside that exist there, as the economy transitions from more of a manufacturing based company to – economy to a degree of a more consumption-based economy. That’s significant upside and we have a market position there and capabilities that, that allows us to take advantage and participate in all of those upsides. So China continues to be – as you know it's our second largest market both in terms of sales and profits. So it’s also a big focus area for us.

I mentioned on the call that David and I were there last week. No better way to start the New Year than to go to China. And the business is responding fairly well overall. We went from minus 8% quarter’s not very long goal to the quarter we just completed plus 3%, first half was plus 2.5%. Obviously we still have some work to do, because our markets are growing depending on the category mid-singles.

In terms of specific categories Oral Care, we're doing fairly well and that’s being driven primarily by power brush and by our Oral-B pastes launch a very premium dual phase product that’s doing very well. It is a limited distribution, but that distribution is going to be expanding as that has proven out. We do see continued promotion in the diaper category, but it's important to note that at the same time that that’s happening, that’s really a competitive driven dynamic.

At the same time that's happening, consumers are continuing to trade up to premium tiers. And that is by far the fastest growing segment of the market. So the notion that consumers in China have become if you will price-sensitive, that’s certainly not what we're seeing. This is a competitive dynamic that reflects in some ways the size of the opportunity that reflects in some ways changes in frankly, currency rates and regulation. But it is not something I would expect categorize the category for extended periods of time.

And we certainly – it’s certainly not a reflection of a desire for lower price on the part of the Chinese consumers, who is very focused on product quality and product performance. Detergents, our Ariel liquids lunch is about on a target with where we expected it to be. We do have as you mentioned very good, strong, local competition, but we also have two very good and strong brands on Tide and Ariel and continue to work to build that business.


Our next question comes from the line of Jonathan Feeney with Consumer Edge Research.

Jonathan Feeney

Thanks very much, Jon. Just one question on Fabric Care. There’s been a significant competitive entrant to reentrant into North American Fabric Care. And I think a lot of people have been wondering what implication that might have, when you think about maybe Fabric Care globally pricing little down and then significantly down relative to our currency. Just kind of trying to understand, what's going on? First of all, how North America – what North America pricing looks like the comment on that. If competitive entry there, or any place else is – you just mentioned China but it’s having an impact. Thank you.

Jon Moeller

The pricing environment in the U.S. market for detergents has become more competitive over the last quarter or two. As a result, you’ve seen market growth rates go from positive to slightly negative. And that's being driven as much by anticipation on the part of competitors as to what the new entrant is going to do. Then it is anything else. And we'll see how that plays out. We’re – in terms of how that strategy – how Henkel strategy is going to play out, it's way too early for us to know that. Our best play continues to be to strengthen our brands both from a product efficacy standpoint and a consumer delayed standpoint, which we continue to do.


Next we go to Bonnie Herzog with Wells Fargo.

Bonnie Herzog

Hi, Jon, good morning.

Jon Moeller

Good morning.

Bonnie Herzog

In light of the tough competitive environment in many of your key categories, how much further pricing promotion do you think is needed to drive share. And then you’ve talked in the past about getting your price ladders right in your different categories. So I’d be curious to what percentage if your business now has the right price ladders in place versus what percentage still needs to be treat. And then maybe highlight, which categories might need the most work. Thank you.

Jon Moeller

Sure Bonnie. I'm limited in what I can say about future pricing directions legally. But I can talk about current status in general strategy, which I'm happy to do. The majority of our portfolio whether that’s defined by category or by a market is where we feel we need to be from a price ladder standpoint. There are clearly some categories, a couple of categories where we have opportunities.

And again, I really don’t want to name categories, but I bet even I – if I wrote them on two separate piece of paper we’d find some of the same names. Those are factored into our plans that we have articulated today, we will be competitive on price. But again, we’re not going to lead with promotion as a way to grow market share. I don’t believe it’s a sustainable way to grow our market share because there’s absolutely nothing proprietary about it. It can be repeated in a nanosecond, which is matched – which is very different than either cutting edge innovation or idea inspired equity building. So there will be a mix but we will be competitive. We’re generally where we need to be but not in every category country combination.


Our next question comes from the line of Jon Andersen with William Blair.

Jon Andersen

Thanks. Hi, Jon. I had a question on kind of multi-channel discussion you outlined earlier. You mentioned that the company’s aggregate online share is comparable or equal to its offline share. I’m wondering if there are any specific markets or categories, one or two where that that is in the case and you think there is more work to be done. But you could talk a little bit about those and what your intentions are there. Thanks.

Jon Moeller

Probably, the primary example of where we have more work to do that matters from a size standpoint is China. In aggregate, our online shares in China are below our offline shares. We’re making a lot of progress though. I mentioned $1 billion in sales in online this year not 20% of our business, that business – the online business is growing at 30%, 40%, 50% clip depending on the month of the quarter. And we are building share. Our online share is growing. It is not yet though to the same level as our offline shares. And that’s probably the biggest example of where that’s the case. And in some other markets, we’re over developed from an online standpoint. And again it differs dramatically by category.

You can appreciate that categories like power brush, like our electric shaving business, some of the – certainly the diaper business are very well-developed online and some of the others a little bit less so. But if we were to get and I expect we will get China to market share equivalents online versus offline. The aggregate statement I would be making them is that our online shares are higher than our offline shares.


Our next question comes from the line of Mark Astrachan with Stifel, Nicolaus.

Mark Astrachan

Yes, thanks. Good morning everyone. I wanted to follow-up on the commentary on the omni-channel and wanted to be where consumers shop. So just curious, has there been a change in discussions around pricing and maybe broader product support for your brands giving increasing challenges faced by those traditional retailers and assuming need for greater reinvestment to drive the traffic. I mean, any sort of commentary on last couple of years, last six months, whatever it is that you’ve seen – that you could talk about, it would be helpful.

Jon Moeller

Everyone, whether they’re an online retailer or an offline retailer is participating in the race to drive traffic to their specific channel or chain. The biggest help we can give any retailer whether online or offline are indispensable brands that consumers need and want. That is by far the biggest driver of traffic for them. And creating offerings instead a relevant for their shopper, which may be different across channels. If we have products that are not irresistibly superior and don’t delay consumers, the notion that we’re going to drive store traffic on those items with a lower prices is a hard one to get comfortable with.

So we’re really focused in our discussions with our retail partners on driving their market basket and market growth through better performing brands that ideally are indispensable to consumers. We’re also very focused with them on making our joint operations as cost efficient as possible, which gives them inherently more pricing flexibility or marketing flexibility than they would have otherwise have. And that’s a big part, certainly not all of the part, but a big part of our approach on supply chain transformation has been designed inherently with this customer enabling focus in mind and reducing their costs as well as our costs, increasing shelf presence in terms of availability, which helps both us and them. So that is by far the majority of the conversation.


And sir, your final question comes from the line of Jason English with Goldman Sachs.

Jason English

Hey, good morning folks. Thank you for squeezing me into here. Congratulations on another relatively solid quarter especially the progress in the U.S. Its boost to aggregate topline is apparent; I presume this is also an important driver of why mix from a gross margin headwind is abating. So my question is really around sustainability of the U.S. We talked a few times throughout the quarter about the deviation in terms of reported results from what we can see in our data. But from what we see in the data it is kind of concerning.

Overall sales eroding but reported sales sort of accelerating and despite a lot of your comments Jon on promotions and not wanting to lean too heavily it looks like you are leaning really heavily on it. In the data and sort of underlying non-promoter base sales eroding even further. So the data sort of raises questions of whether we have a bit of a transitory disconnect between the data and results, which we see from time-to-time, which usually rever or whether this is now just really different if we had step changes sort of on measured contribution that its going to keep this delta widening on the forward. Can you give us some more color on that and give us a little more reason to sort of not believe the data we’re seeing the consumption.

Jon Moeller

I’d say a couple of things, Jason. If I step way back and look at for example strength of program, front half, back half, I talked about that previously, I don’t see a big change there. Innovation improves and increases in the back half in the U.S. We’re increasingly getting the coverage patterns that we want to have in place with the talent and deep category mastery in place across the U.S. So I don’t see anything at an aggregate level that says that U.S. sales should decelerate. It wouldn’t surprise me in a given quarter that instead of being plus two, it’s plus one – that’s kind of the range that which I am looking.

There are categories in the U.S. where promotion intensity has increased significantly. And what I am not saying is that, we’re not participated into them. We need to be competitive, I’ve said that several times on this call and we will be competitive. What we won’t typically do is lead promotions spending. There are also times when certain competitors for a very good reasons, we will take a list price decline. And our most efficient response may be at time as for a period of time to increase promotion to get to the right price spread versus our competitor. So well that tactically looks like a differential increase in promotion. It’s all about getting to a net price. Again, us being responsive to what our competitors offer.

So happy to talk that more with you later day Jason, that’s helpful. John and I will be around the balance of the day. Thank you for your time. And hope to see most of you here in a couple weeks at CAGNY.


Ladies and gentlemen and that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.

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