Kimberly-Clark to exit diapers biz in Western, Central Europe
October 26, 2012 - United States Of America
Kimberly-Clark Corporation reported third quarter 2012 results, increased its guidance for 2012 adjusted earnings per share and initiated strategic changes in its Western and Central European businesses.
Executive Summary
• Third quarter 2012 net sales of $5.2 billion declined 3 percent compared to the year-ago period, including an unfavorable foreign currency impact of 5 percent. Organic sales rose 3 percent, highlighted by a 9 percent increase in K-C International. Organic sales exclude the impact of changes in foreign currency rates and lost sales as a result of pulp and tissue restructuring actions.
• Diluted net income per share for the third quarter of 2012 was $1.30 versus $1.09 in 2011.
• Third quarter adjusted earnings per share were $1.34 in 2012 compared to $1.26 in 2011. The improvement was driven by organic sales growth, cost savings and lower commodity costs, partially offset by increased marketing, research and general spending, unfavorable foreign currency exchange rates and a higher effective tax rate. Adjusted earnings per share in both periods exclude costs for pulp and tissue restructuring actions.
• Cash provided by operations in the third quarter of 2012 was $844 million, up 13 percent compared to the prior year.
• Adjusted earnings per share in 2012 are anticipated to be $5.15 to $5.25 versus the company's previous target of $5.05 to $5.20. Adjusted earnings per share exclude costs for pulp and tissue restructuring actions and the European strategic changes announced.
• The company has decided to exit the diaper category in Western and Central Europe, with the exception of the Italian market, and to divest or exit some lower-margin businesses, mostly in the consumer tissue segment. The company will also streamline its European manufacturing footprint and administrative organization to align its cost structure with these strategic decisions. Restructuring costs for these actions will be incurred through 2014 and are expected to total $250 to $350 million after tax. The businesses that will be exited or divested generate annual net sales of approximately $500 million and negligible operating profit.
Chairman and Chief Executive Officer Thomas J. Falk said, "We continued to execute well in the third quarter. We increased organic sales 3 percent, led by outstanding performance in K-C International. We achieved significantly higher adjusted gross and operating profit margins, including benefits from $100 million of cost savings from our ongoing FORCE program and restructuring actions. We also launched several product innovations and supported our brands with a $25 million increase in strategic marketing. Finally, adjusted earnings per share increased by 6 percent and cash flow improved nicely. Looking forward, we're raising our full-year 2012 adjusted earnings per share estimate for the second consecutive quarter. That reflects continued momentum with targeted growth initiatives and cost savings programs, and a slightly better commodity cost outlook."
Falk added, "The strategic changes we will be making in Europe should allow us to better focus on our best market positions and growth opportunities, improve our underlying profitability and enable more sustainable returns going forward in this part of the world. These moves are further evidence of the portfolio management approach we use to run our company and the financial discipline embedded in our Global Business Plan."
Executive Summary
• Third quarter 2012 net sales of $5.2 billion declined 3 percent compared to the year-ago period, including an unfavorable foreign currency impact of 5 percent. Organic sales rose 3 percent, highlighted by a 9 percent increase in K-C International. Organic sales exclude the impact of changes in foreign currency rates and lost sales as a result of pulp and tissue restructuring actions.
• Diluted net income per share for the third quarter of 2012 was $1.30 versus $1.09 in 2011.
• Third quarter adjusted earnings per share were $1.34 in 2012 compared to $1.26 in 2011. The improvement was driven by organic sales growth, cost savings and lower commodity costs, partially offset by increased marketing, research and general spending, unfavorable foreign currency exchange rates and a higher effective tax rate. Adjusted earnings per share in both periods exclude costs for pulp and tissue restructuring actions.
• Cash provided by operations in the third quarter of 2012 was $844 million, up 13 percent compared to the prior year.
• Adjusted earnings per share in 2012 are anticipated to be $5.15 to $5.25 versus the company's previous target of $5.05 to $5.20. Adjusted earnings per share exclude costs for pulp and tissue restructuring actions and the European strategic changes announced.
• The company has decided to exit the diaper category in Western and Central Europe, with the exception of the Italian market, and to divest or exit some lower-margin businesses, mostly in the consumer tissue segment. The company will also streamline its European manufacturing footprint and administrative organization to align its cost structure with these strategic decisions. Restructuring costs for these actions will be incurred through 2014 and are expected to total $250 to $350 million after tax. The businesses that will be exited or divested generate annual net sales of approximately $500 million and negligible operating profit.
Chairman and Chief Executive Officer Thomas J. Falk said, "We continued to execute well in the third quarter. We increased organic sales 3 percent, led by outstanding performance in K-C International. We achieved significantly higher adjusted gross and operating profit margins, including benefits from $100 million of cost savings from our ongoing FORCE program and restructuring actions. We also launched several product innovations and supported our brands with a $25 million increase in strategic marketing. Finally, adjusted earnings per share increased by 6 percent and cash flow improved nicely. Looking forward, we're raising our full-year 2012 adjusted earnings per share estimate for the second consecutive quarter. That reflects continued momentum with targeted growth initiatives and cost savings programs, and a slightly better commodity cost outlook."
Falk added, "The strategic changes we will be making in Europe should allow us to better focus on our best market positions and growth opportunities, improve our underlying profitability and enable more sustainable returns going forward in this part of the world. These moves are further evidence of the portfolio management approach we use to run our company and the financial discipline embedded in our Global Business Plan."