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K-C reports “challenging environment” in Q4 results; introduces ‘Strategy 2022’

Kimberly-Clark (K-C) has said net sales for the fourth quarter of 2018 decreased 1% to $4.6bn compared to the same period a year ago.

Fourth quarter operating profit was $639m in 2018 compared to $828m in 2017 and was impacted by restructuring charges and higher input costs, driven by $115m in pulp and $65m in other raw materials.

The tissue giant said changes in foreign currency exchange rates had also reduced sales.

Full-year 2018 sales increased 1% to $18.5bn; net sales in 2019 are expected to decrease between 1-2%, including a 3-4% negative impact from changes in foreign currency exchange rates.

For the full year 2018 results, the Consumer Tissue division reported net sales of $6.0bn, an increase of 1% compared to a year ago.

Fourth quarter sales for the sector were even year-on-year at $1.5bn while changes in currency rates reduced sales by 3%. Net selling prices increased 5%, while volumes decreased 2%.

Fourth quarter operating profit of $207m decreased 21% and was impacted by input cost inflation, lower volumes, higher marketing, research and general spending and other manufacturing cost increases.

Sales in North America for the sector increased 2% compared to a 4% decline the same time a year earlier. Net selling prices rose 6%, reflecting price increases and lower promotion activity. Volumes fell 3%.

Sales in developing and emerging markets decreased 3% and currency rates were unfavourable by 7%, mostly in Latin America. Sales in developed markets outside North America decreased 2%.

Chief executive Michael Hsu said: “In 2018, we returned to delivering organic sales growth and we continued to launch innovations, pursue our growth priorities and invest in our brands.

“Overall, it was a challenging macro environment and our margins declined, reflecting significant commodity inflation and currency volatility.

“Nonetheless, I’m encouraged that in response to these headwinds we achieved higher selling prices in the second half of the year.”

He added the company expects the environment in 2019 to “remain challenging, although somewhat better than in 2018”.

K-C will introduce its ‘Strategy 2022’ plan to sharpen its focus on growing its brand portfolio.

It will focus on launching differentiated product innovations and driving category development.

Focus areas will include driving ongoing supply chain productivity improvements through the FORCE programme, along with its 2018 Global Restructuring Programme.

Hsu added: “K-C Strategy 2022 is our plan to deliver balanced and sustainable growth by growing our portfolio of iconic brands, leveraging our strong cost and financial discipline and allocating capital in value-creating ways.

“We will build upon our strong foundation, sharpen our focus on the consumer and further improve our capabilities to create even more competitive advantage going forward.

“We’re also establishing medium-term financial objectives associated with K-C Strategy 2022 that are appropriate and realistic in the current environment.

“Longer-term, we continue to have significant optimism in the potential of our categories.”

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