Consumer products giant
) posted strong second quarter 2013 adjusted earnings of $1.41
per share. Earnings beat the Zacks Consensus Estimate of $1.39 by
1.4% and the year-ago result of $1.30 by 8.5%. Earnings were
boosted by organic sales growth, cost savings, improved other
income and lower share count, which made up for increased input
costs and higher taxes.
Quarter in Detail
The company reported flat year-over-year sales at $5.27
billion in the second quarter. The results, however, slightly
lagged the Zacks Consensus Estimate of $5.32 billion. Currency
fluctuations reduced sales by 1% which offset the positive impact
from sales volume and higher selling prices owing to targeted
growth initiatives and product innovations. The exit of the
diaper segment in Western and Central Europe and lost sales in
conjunction with pulp and tissue restructuring actions eroded 1%
of the company's sales in the quarter.
Excluding currency impact and lost sales due to European
strategic changes, organic sales grew 3% from the prior-year
quarter, driven by volume growth and strong pricing.
Adjusted operating profit (excluding costs for the pulp and
tissue restructuring and European strategic changes) grew 6% to
$818 million in the second quarter. This reflects increase in
organic sales and $80 million of cost savings from
Kimberly-Clark's FORCE (Focused On Reducing Costs Everywhere)
program. Adjusted operating margin also improved 80 basis points
in the second quarter 2013.
Personal Care Products:
The segment includes products like disposable diapers, training/
youth/swim pants, baby wipes, feminine and incontinence care
Sales declined 1% on a year-over-year basis to $2.4 billion in
the quarter due to lower sales volume and unfavorable currencies.
Only the K-C International region witnessed positive sales
growth. Sales in North America and Europe declined in the
quarter. Organic sales volume increased 3%.
Segment operating profit increased 6% on a year-over-year
basis to $432 million in the quarter due to organic sales growth
and cost savings, which offset the higher input costs and
unfavorable currency impact.
The segment includes bathroom tissue, paper towels, napkins and
related products for household use.
Sales increased 2% to $1.6 billion in the second quarter on
the back of 3% growth in organic sales volumes and 1% increase in
net selling prices, which were able to offset the negative impact
of currencies. Sales in Europe declined, while regions of K-C
International and North America witnessed improvement in sales
driven by product innovation, improved pricing and strong
Segment operating profit was flat year over year as organic
sales growth and higher production volumes were offset by higher
input costs and other expenses.
K-C Professional (KCP) & Other:
The segment consists of facial and bathroom tissue, paper towels,
napkins, wipers and a range of safety products.
Sales were even with the prior-year quarter at $0.8 billion in
second quarter 2013 due to reduced sales volumes and unfavorable
currency rates offsetting the impact of higher net selling
prices. Sales in K-C International region improved, while regions
of North America and Europe witnessed decline in sales.
However, cost savings and improved selling prices led to an
increase of 17% in segment operating profit to $161 million.
The segment consists of disposable health care products.
Sales declined 2% from the prior-year quarter to $0.4 billion
in second quarter 2013, due to unfavorable currency rates and
lower sales volume. Surgical and infection prevention volumes
were down low-single digits, while medical device volumes were
slightly up year over year.
Operating profit was $54 million, down 4% year over year, due
to higher manufacturing costs and increased marketing, research
and general expenses.
The company has dissolved the diaper segment of Western and
Central Europe, except the Italian market, as per the
announcement in Oct 2012. The company has also streamlined its
manufacturing facilities in Europe, which resulted in
restructuring costs of $21 million after tax in the second
quarter of 2013. In conjunction with European strategic changes,
Kimberly Clark expects to incur restructuring costs in the range
of $300 to $350 million after-tax, up from its previous range of
$250 million to $300 million through 2014.
Guidance for Full Year 2013
Kimberly-Clark reiterated its adjusted earnings guidance for
2013 in a range of $5.60 to $5.75, which marks a 7% to 10%
increase from the prior-year quarter. The Zacks Consensus
Estimate for 2013 is $5.72 per share.
The company now expects to repurchase shares worth $1.2
billion through 2013, which is at the higher end of the prior
expected range of $1.0 to $1.2 billion.
However, the company expects currency to negatively impact
sales by 1% to 2%, higher than the previous assumption of a
negative impact on sales in the range of 0% to 1%. Moreover,
currency rates are anticipated to negatively impact operating
profit growth versus prior expectations.
Kimberly-Clark holds a Zacks Rank #3 (Hold).
Other stocks in the consumer staples sector that are
B&G Foods Inc
Flower Foods Inc
). While B&G holds a Zacks Rank #1 (Strong Buy), Flower Foods
and Newell carry a Zacks Rank #2 (Buy).
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KIMBERLY CLARK (KMB): Free Stock Analysis
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