USA
KC SALES UP BUT PRICE RISES ON THE WAY
Kimberly-Clark net sales were up 11% to $5 billion in the second quarter of 2008, with particular strength in developing and emerging markets. However, earnings were more than offset by a significant increase in cost inflation and a planned higher investment in strategic marketing of nearly $25 million, the company said.
There has been a rapid escalation in costs. Inflation in the second quarter was about $50 million higher than estimated heading into the quarter, with the greatest increases in energy costs, particularly natural gas, oil-based materials and distribution costs. Margins were adversely impacted across all businesses. Chairman and CEO Thomas J Falk said, "While I'm encouraged by our continued strong topline growth in the quarter, I'm disappointed that the dramatic acceleration in inflation over the last quarter has interrupted our progress in delivering on our bottom-line commitments. Given second quarter results and our planning assumption that raw material and energy costs will remain at elevated levels, we anticipate our margins will remain under pressure in the near-term.
Price rises
"In this environment, we are intent on improving revenue realization in order to offset recent commodity cost increases and restore profitability to acceptable levels. That's why we just raised prices again in K-C Professional in the US and will shortly be implementing our second price increase of the year across most of our US consumer tissue and personal care categories. We have also implemented or announced price increases in a number of other markets around the world. Moreover, further pricing actions may be warranted by the cost environment.
The company updated key planning and guidance assumptions for 2008, as follows:
| • | Organic sales growth of 5-7%. This assumes implementation of recently announced price increases in the US. |
| • | Net sales growth of 8-10%. Given current rates of exchange, currency should benefit sales for the full year by approximately 3%. |
| • | Inflation of as much as $900 million, more than double the company's original estimate. This reflects pricing for benchmark northern softwood pulp of $890-910/ton in the second half of the year. It also assumes that oil prices and natural gas prices will be similar to current levels over the balance of the year, in ranges of $135-145 per barrel and $12 to $13 per mmbtu, respectively. |
| • | Capital investments of $850-950 million that will help support future sales and earnings growth. This is consistent with the company's original plan for the year. |
| • | Share repurchases totaling $700-800 million in 2008. This will allow for the repurchase of approximately 3% of the company's outstanding shares at the beginning of the year. |
Commenting on the outlook, Falk said, "We have plans in place to generate continued solid growth in organic sales over the balance of the year, supported by higher levels of spending for strategic marketing and customer development and our innovation pipeline.
"Unfortunately, the significant increase in cost inflation has outpaced our ability to offset higher costs in the near-term through price increases, cost reductions and other measures. However, we expect adjusted operating profit and adjusted earnings per share will improve sequentially in the fourth quarter as our price increases gain traction, assuming no further material increases in input costs from current levels.”
P&G expands in Utah, adds converting
Procter & Gamble has started construction on the new 70,000 ton/yr tissue and towel mill to be built at Box Elder County, Utah, according to local newspaper Deseret News. The machine, which was announced in Tissue World magazine April/May (page 7), should start up in early 2010. It is similar to another that started up at P&G's Green Bay, Wisconsin mill last year.
The company has also awarded purchase orders to the Lucca, Italy-based Fabio Perini SpA for TIME® rewinders and non-stop unwinds. Other components including tail sealers, log accumulators, log saws, and core machines complete the supply.
Quantities ordered and installation locations were not specified. The Perini machines will be used to convert Procter & Gamble's Charmin bathroom tissue and Bounty household towel products, according to the supplier.
Global marketing
Procter & Gamble named Marc S Pritchard to replace James R Stengel as global marketing officer, effective 1 August. Pritchard, 48, currently serves as president of strategy, productivity and growth for Procter & Gamble. Stengel, 53, is retiring effective 31 October. He will continue to work on special projects and help with the transition until leaving the company.
America's largest engraver in Spartanburg
Interflex Laser Engravers announces the addition of its Jumbo Atlas Laser Engraving Machine. This Laser is the largest format cylindrical engraver in North America dedicated to engraving embossing rolls for the tissue, towel, film, and foil industries. The addition of this new machine coupled with the extensive knowledge in pattern development will help Interflex better service the customer need for new pattern design, trial rolls, short term production rolls, and tooling for steel production rolls.
Largest format cylindrical engraver available: diameter 2.5 cm-1 m, maximum engravable face length 6 m, maximum overall roll length 7 m, maximum weight capacity 7 tons.
George P Murphy named chairman of Atlas Paper
George P Murphy has been appointed chairman of the board of advisors of Atlas Paper Mills LLC, a supplier of paper towels and tissues, primarily for industrial and commercial markets throughout the United States and the Caribbean.
Murphy served as president and CEO of Technical Concepts LLC, a manufacturer of a u t o m a t i c washroom fixtures and dispenses, from 1997 to 2005. Prior to that, he held several top management and sales positions with divisions of Kimberly-Clark Corporation and Scott Paper Company.
New Forte surface rewinder at PCMC
More than 150 tissue customers from around the world attended Paper Converting Machine Company's (PCMC) technology conference recently, when the company featured its new Forte converting line in Green Bay, Wisconsin.
The Forte line was showcased in a sixstation rotation that provided attendees with an opportunity to observe and learn about the key differentiating features of each unit operation, including: the MTorres UTS unwind, NT6501 embosser, Forte surface rewinder, high-speed Rotoseal and accumulator, Prolog log saw, and the TDS core machine.
President and CEO of Cascades Tissue Group, Suzanne Blanchet, commented, "PCMC now has a tissue-towel rewinder that will respond to market need. We were impressed to see the technology of the Forte rewinder and the auxiliary equipment. PCMC has the team to support this state-of-the-art equipment."
PCMC will host an Open House 16-17 October in Lucca, Italy, to further demonstrate the Forte line. For more information, visit www.forteiscoming.com.
Futura service centre planned for Atlanta
Futura has underlined its long-term commitment to the North American tissue market by setting up a service centre in Atlanta, the company has announced. The new centre, which will be operational by the middle of 2009, will also serve Mexico.
With several successful converting and offline installations completed in the USA, this is a market which has proved highly receptive to Futura's innovative technology and approach to converting, with emphasis on durable solutions with low total cost of ownership.
Futura North America Inc, 3003 Summit Blvd. 15th Floor, Atlanta, GA 30319. Phone: +1 404 460 5579, fax +1 404 4605578. Email hellnerc@futuraconverting.com
Ashland to acquire Hercules
Ashland is to acquire all of the outstanding shares of Hercules for $18.60 per share in cash and 0.093 of a share of Ashland common stock for each share of Hercules common stock. The total transaction value is approximately $3.3 billion, or $23.01 per Hercules share based on Ashland's 10 July closing stock price and including $0.7 billion of net assumed debt. The transaction, which will create a major, global specialty chemicals company, is expected to close by the end of calendar 2008.
With sales in more than 100 countries, Ashland is a manufacturer of speciality chemicals, a leading distributor of chemicals and plastics, and a provider of automotive lubricants, car-care products and quick-lube services. Hercules is a leader in specialty additives and ingredients that modify the physical properties of water-based systems and is one of the world's leading suppliers of specialty chemicals to the pulp and paper industry.
COLOMBIA
PRODUCTOS FAMILIA-SCA ORDERS VOITH PM
Productos Familia - SCA from Colombia has chosen Voith Paper to supply a complete new tissue machine for its mill in the city of Cajicá, near Bogotá, Colombia. Start-up is scheduled for November 2009.
The Voith Paper scope includes: basic and detailed engineering required to install the Voith tissue machine VTM3 type with hood, mist and dust removal as well as approach flow, automation system, erection supervision, commissioning and start-up assistance plus training.
After this project is implemented, SCA Productos Familia will be able to increase tissue exports and meet local market demand, thus consolidating itself as one of the local market leaders.
According to Juán Carlos Gallón, engineering and planning manager from Productos Familia - SCA, the success of PM6 supplied by Voith Paper in 2005 and the excellent relationship between SCA Productos Familia and Voith Paper were fundamental for the decision on the current PM7 project.
BRAZIL
FACEPA CHOOSES VOITH FOR REBUILD OF PM4
FACEPA, a 50-year old tissue producer located in Belem, Pará, Brazil, has selected Voith Paper to improve the quality of its tissue paper and increase the production of its 2.6m wide PM4. Start-up is scheduled for the first quarter of 2009.
To achieve those goals, FACEPA contracted Voith Paper to rebuild its PM4 former, which was also supplied by Voith Paper in 1991. The project included the supply of a new headbox (MasterJet II T), a new Crescent former replacing an old fourdrinier former, erection and start-up services as well as all the necessary engineering required for the project. The total investment will be approximately $2.5 million.
After the project is implemented, FACEPA will be able to increase the speed of PM4 from George P Murphy, 950 m/min to 1200 m/min, resulting in 27% production capacity increase. To allow for future development, all new equipment to be installed in the project will be designed to achieve speeds of up to 1400 m/min.
PERU
K-C PERU MAKES RECORD TOILET PAPER ROLL
Kimberly-Clark Peru has won a Guinness World Record for manufacturing the largest toilet paper roll in the world. The award was presented on 7 June in Lima.
Weighing 1340 kg, 1.70 m in diameter and 1.59 m tall, the roll of toilet paper was manufactured in the renovated paper plant of Kimberly-Clark Peru, recently inaugurated by the President of the Republic, Alan García Pérez. The weight of the Guinness roll is equal to the amount of toilet paper a person would use during 100 years. Its surface of 56,000 m2 would be enough to completely wrap the National Stadium, according to K-C.
The manufacture of this world-record roll demanded the effort and expertise of electrical and mechanical maintenance workers in the Puente Piedra plant.
In the first stage and over 12 hours, a group of specialized technicians set the adequate dimensions so the redraw machine could adjust to the measures that would surpass the record. Subsequently, a modulus was installed to add the embossing and characteristics of a conventional roll.
After hours of electrical maintenance and verification of the final details, the engines and motor seating were ready to wind and emboss the paper at a high speed. The manufacturing of the gigantic roll took eight and a half hours. With an investment of $30 million, the paper plant of Kimberly-Clark Peru is one of the most modern in the world. The company has doubled its production, which means that it is not only able to supply 100% of the market in Peru, but is also able to export to neighboring countries such as Bolivia, Chile and Ecuador.
According to the company, the plant makes more than 2 million rolls/day of toilet paper. This is double the circumference of the Earth. It would reach the Moon in little less than one week or cover the distance to the Sun in 10 years.
The record-breaking roll was made from 100% recycled fibre.
MEXICO
SCA TO INVEST $240 MILLION IN NEW MILL
SCA is investing in a new $240 million tissue plant in Mexico. When it starts up in 2010 the plant's first phase will make 60,000 tons/yr of dry crepe tissue. The project also comprises a recycled fibre plant, a converting hall with three lines for toilet paper as well as a distribution centre
"This is a strategically important investment. The plant, which will be located near the key markets in and around Mexico City, will be integrated and highly efficient," says SCA's president and CEO Jan Johansson. "It will provide us the opportunity to enhance product quality and thereby improve our profitability and our offering to consumers."
Mexico has a stable economy, with a rapidly growing middle-class, low inflation and robust economic growth. Mexico is one of the paper and hygiene group SCA's identified growth markets. Currently, SCA's sales of hygiene products in Mexico and Central America total $458 million, of which about two thirds is attributable to tissue. The tissue market in Mexico is well consolidated and SCA is currently second, with a market share of 18%. Producer brands, including SCA's, are totally dominant on the Mexican convenience goods market.
"Market growth in Mexico has been 4-5% annually during the past five years and our assessment is that the market will grow approximately the same in the immediate years ahead," says Jan Johansson. Nearly 30 years ago, SCA formed a joint-venture company for hygiene products in Mexico. Jointly with the local company Copamex, a successful business was developed in personal care hygiene products. In 2004, SCA bought out Copamex from the joint-venture company and at the same time had the opportunity to acquire 50% of Copamex's tissue operations, which shortly thereafter became a 100% acquisition.
