Kimberly-Clark: Better-than-expected 3Q18 profit

Kimberly-Clark Corporation, which manufactures Huggies diapers and Kleenex tissues among other items, reported 3Q18 results on Monday (22 October), which showed that its revenue declined by 1.7% YoY to $4.58bn vs $4.67bn posted in 3Q17. This was on the back of a strong dollar which reduced sales by 3%. However, higher pricing pushed up organic revenue by 1% YoY. Diluted EPS also rose 7.0% YoY to $1.71, while Refinitiv data show the consensus analyst estimate was for $1.63/share.

By segment, Personal Care recorded sales of $2.3bn (-1% YoY) with changes in currency rates reducing sales by 4% according to the company, while the acquisition of its joint venture in India benefited sales by 1%. Sales in North America rose 2% YoY, while volumes rose 3% YoY. Sales in emerging markets (EMs) decreased 4% YoY. Net selling prices and product mix each improved more than 2% YoY, driven by increases in Latin America, partially offset by decreases in China. Sales in developed markets (DMs) outside North America (Australia, South Korea and Western/Central Europe) declined by 3% YoY.

The Consumer Tissue segment recorded 3Q sales of $1.5bn – down 3% YoY, while 3Q operating profit of $212mn decreased 20% YoY. In this division, sales in North America declined 5% vs 3% YoY growth in the year-ago period. Sales in EMs decreased 6%, while DM sales (ex-North America) rose 3% YoY.

The K-C Professional (KCP) segment recorded a slight decrease in 3Q18 sales to $0.8bn. Operating profit of $160mn was down 9% YoY. Sales in North America increased slightly, but sales in EMs were down 2% YoY, including a 6-point negative impact from changes in currency rates. DM sales (ex-North America) were 1% YoY lower.

The Group also announced that its long-time CEO, Thomas Falk (who has been in the position since September 2002) would step down in 2019 (he will be succeeded by COO Michael Hsu). During Falk’s tenure, CNBC writes that the company’s annual sales have risen 38%, while the share price has nearly doubled. However, changing consumer habits and pricing pressure due to the rise of online sales has negatively impacted the industry and the share price is down c. 9% YTD (to Monday’s close). The firm also said commodity expenses would now be at the upper end of its previously forecast range of $675mn-$775mn, due to the rising costs of pulp, polymer resin and eucalyptus trees.

Looking ahead, management maintained its organic sales growth and earnings forecast for the year – for FY18, it expects EPS to be between $6.60 and $6.80. However, the company cautioned that full-year adjusted operating profit may decline more than the previously forecast range of 2%-5%.



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