K-C reports 2Q results

Kimberly-Clark (K-C) has said its second quarter results reflect “a challenging environment” with rising competition, in particular from private label, as well as higher operational and raw material costs.

It reported a net sales increase for the quarter up 1% to $4.6bn compared with the same period a year ago, however gross profit decreased 12% to $1.4bn and operating profit was down 17% to $674m.

Results were impacted by higher input costs in pulp and other raw materials as well as lower net selling prices and volumes.

In North America, organic sales decreased 2% in consumer products and increased 2% in K-C Professional. Outside North America, organic sales rose 1% in developing and emerging markets and also in developed markets.

Its consumer tissue segment reported sales increase of 1% to $1.5bn for the quarter while operating profit decreased 16% to $207m after being impacted by input cost inflation and lower volumes.

Thomas J. Falk, chairman and chief executive, said: “Our second quarter results reflect a challenging environment, particularly with commodity inflation.

“Nonetheless, we continue to manage our company with financial discipline as we generated $150m of cost savings, reduced discretionary spending and returned approximately $575m to shareholders through dividends and share repurchases.”

He added the company will maintain its organic sales growth and will reduce its earnings outlook due to “significantly higher commodity costs and the weakening of most foreign currencies”.

“While the near-term environment has become more difficult, we continue to execute our long-term strategies to grow our brands and deliver cost savings while we implement our restructuring that will make K-C an even stronger company,” he said.

Last week a report by Reuters claimed that K-C was exploring the potential divestment of its European tissue business to private equity in order to help with costs and low volumes.

It is not yet known if any potential divestment would also include the European licenses for its brands sold in Europe.
A spokesman for K-C declined to comment.

The Texas-headquartered company is running two concurrent cost-cutting programmes.

FORCE (Focused on Reducing Costs Everywhere) has been ongoing for several years and is said to have yielded $110m of cost savings in the quarter.

An additional restructuring programme announced in January aims to close or sell 10 of the company’s 91 factories worldwide and cut around 13% of its workforce (5,000 jobs).

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