Kimberly-Clark Corporation
(
KMB
) delivered better-than-expected fourth quarter 2012 adjusted
earnings (excluding charges) of $1.37 per share, beating the
Zacks Consensus Estimate by a penny. Adjusted earnings also
surpassed the prior-year quarter's earnings of $1.28 per share by
7.0%.
Bottom-line growth was boosted by organic sales growth, cost
savings and a reduced commodity costs, partially offset by
increased marketing and higher interest expenses.
Quarter in Detail
The company reported net sales of $5.3 billion in fourth
quarter, up 3% from the prior-year quarter. The results also
exceeded the Zacks Consensus Estimate of $5.2 billion. However,
currency fluctuations and the exit of non-strategic products each
eroded company's sales by 1% in the quarter.
Excluding currency impact and lost sales, organic sales grew
5% from the prior-year quarter, driven by volume growth, improved
pricing and strong performance internationally.
Adjusted operating profit (excluding costs for the pulp and
tissue restructuring and European strategic changes) grew 5% to
$798 million in the fourth quarter. This reflects increase in
organic sales and cost savings from Kimberly-Clark's FORCE
(Focused On Reducing Costs Everywhere) program.
Segment Details
Personal Care Products:
The segment includes products like disposable diapers, training/
youth/swim pants; baby wipes; feminine and incontinence care
products.
Sales grew 8% on a year-over-year basis to $2.4 billion in the
quarter on the back of increase in sales volumes and rise in net
selling prices, which offset the negative impact from currency
fluctuations. The segment witnessed positive sales growth in all
the regions of North America, K-C International and Europe.
Segment's operating profit increased 23% on a year-over-year
basis to $419 million in the quarter due to organic sales growth,
higher production volumes and cost savings, partially offset by
rise in marketing spending and higher manufacturing costs.
Consumer Tissue:
The segment includes bathroom tissue, paper towels, napkins and
related products for household use.
Sales declined 2% to $1.7 billion in the fourth quarter. Lost
sales in conjunction with pulp and tissue restructuring actions,
as well as currency fluctuations and decline in product mix
overshadowed the higher net selling prices and improved organic
sales volumes. Except K-C International, regions of North America
and Europe witnessed decline in sales.
Segment operating profit also plummeted 4% to $235 million in
the quarter due to higher marketing, research and general
expenses, offsetting the benefits from cost savings and organic
sales increase.
K-C Professional (KCP) & Other
: The segment consists of facial and bathroom tissue, paper
towels, napkins, wipers and a range of safety products.
Sales increased 1% to $0.8 billion in fourth quarter 2012,
driven by organic sales growth and improved pricing. However,
currency fluctuations and the exit of non-strategic products
eroded sales. Except K-C International, regions of North America
and Europe witnessed decline in sales.
Segment operating profit increased 9% to $138 million, driven
by organic sales growth, input cost deflation and cost savings,
partially offset by higher manufacturing costs.
Health Care:
The segment consists of disposable health care products.
Sales declined 2% from the prior-year quarter to $0.4 billion
in fourth quarter 2012, resulting from unfavorable currency
rates, lower sales volume and decline in net selling prices.
Operating profit was $61 million, up 2% year over year, driven
by input cost deflation and lower marketing expenses, mostly
offset by increased manufacturing costs and the negative impact
of lower organic sales.
Fiscal 2012 Results
The company delivered better-than-expected fiscal 2012
adjusted earnings (excluding charges) of $5.25 per share, beating
the Zacks Consensus Estimate by 2 cents. The result was at the
highest end of the guidance range of $5.15 to $5.25 per share.
Adjusted earnings also surpassed the prior-year quarter's
earnings by 9.4%.
The company's sales increased 1% to $21.06 billion, beating
the Zacks Consensus Estimate of $20.96 billion. However, currency
fluctuations and the exit of non-strategic products each eroded
company's sales.
Excluding currency impact and lost sales, organic sales grew
5% from the prior-year quarter, driven by sales volume, improved
pricing and product mix.
Adjusted operating profit increased 8% to $3.1 billion in
fiscal 2012, benefiting from organic sales growth, FORCE cost
savings and input cost deflation. These benefits were partially
offset by increased marketing spending.
Strategic Update
In Oct 2012, the company announced plans to dissolve the
diaper segment of Western and Central Europe, except the Italian
market. The company also plans to streamline its manufacturing
facilities in Europe.
The company incurred restructuring costs of $242 million after
tax in the fourth quarter due to European strategic changes.
Through 2014, the company expects restructuring costs of $250 to
$350 million after tax.
Other Financial Details
During the fourth quarter, the company repurchased
approximately 3.8 million shares for $320 million, while the
share repurchases in fiscal 2012 totaled 16.4 million shares for
$1.3 billion.
Guidance for Fiscal 2013
Following an upbeat fiscal 2012 results, Kimberly-Clark
expects its adjusted earnings in a range of $5.50 to $5.65, up 5%
to 8% from fiscal 2012.
The company expects net sales to increase in the range of
0%-3%. Organic sales are expected to grow 3% to 5%, with higher
organic volumes, higher net selling prices and improved product
mix. However, lost sales as a result of European strategic
changes and pulp and tissue restructuring actions are expected to
reduce sales volumes by 2%, while currency rates are expected to
decrease sales by 0% to 1%.
Adjusted operating profit is expected to grow in the range of
3% to 6%, driven by cost savings from the company's FORCE
program, which is expected in the range of $250 to $300
million.
The company expects to repurchase shares for a total of $1.0
to $1.2 billion in fiscal 2012.
Kimberly-Clark holds a Zacks Rank #3 (Hold). Other stocks in
the consumer staples sector that are better-positioned are
B&G Foods Inc
(
BGS
),
Ingredion Inc
(
INGR
) and
Flower Foods Inc
(
FLO
), all of which carry a Zacks Rank #1 (Strong Buy).
B&G FOODS CL-A (BGS): Free Stock Analysis
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FLOWERS FOODS (FLO): Free Stock Analysis
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INGREDION INC (INGR): Free Stock Analysis
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KIMBERLY CLARK (KMB): Free Stock Analysis
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