Kimberly-Clark Corporation (KMB)

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Kimberly-Clark Corporation (KMB)

Sanford C. Bernstein's 29th Annual Strategic Decisions Conference (Transcript)

May 30, 2013 10:00 AM ET

Executives

Tom Falk - Chairman and Chief Executive Officer

Analyst

Ali Dibadj - Sanford Bernstein

Presentation

Ali Dibadj - Sanford Bernstein

All right, so let’s get going. Good morning, I am Ali Dibadj, Bernstein's U.S. household and personal products, and U.S. beverages analyst. Thank you all for joining us for the Kimberly-Clark presentation and we are very pleased to have Tom Falk, the Chairman and CEO of Kimberly-Clark with us and Kimberly has had a fantastic...

Tom Falk

Good morning, everyone.

Ali Dibadj - Sanford Bernstein

Kimberly has had a fantastic run over the past little while. It's done a great job getting through the emerging markets recently. Done a great job fighting competitors, coming up with innovation, dealing with the top consumer, dealing with top competitors and being steadfastly focused on giving money back to shareholders and there also has been a really fantastic stock run and what we want to get through today a little bit more in this fireside chat format, no deck please, let your questions on the cards passing through the isles...

Tom Falk

No flair either Ali apparently but...

Ali Dibadj - Sanford Bernstein

Well, I think we should have a fake fire at some point here, at some point, but to look at the types of questions you want to get at a little bit is what else can we expect from Kimberly-Clark going forward in the context of still the consumer being a little bit weak, competition changing a little bit, we will get to that, commodities being volatile etcetera and to start off a little bit, may be to get some background about the company to start, which is up to you broad question, why don’t just you know give us a sense of your product line-up, give us a sense of how you compete with the top competition that's out there as a company broadly.

Tom Falk

Yes, sure Ali. We are a 140-year old company. Celebrated our 140th birthday last year and we are about 21 billion in sales. We sell in about 175 countries. If you look in 2003 about 22% of our sales were in what we would call emerging markets, so everything except Europe and North America. Last year 37% of our sales were in emerging markets, so seen a big shift in our portfolio in that direction.

About three quarters of our portfolio are in consumer products, a little over half of that they are in personal care products and the balance are in B2B or healthcare, in our K-C professional portfolio.

Ali Dibadj - Sanford Bernstein

When you mentioned emerging markets, can you talk a little bit more about that? Last year you got into 80 new cities into China, you were pushing there eCommerce in emerging Asia, broadly in Asia broadly -- talk a little bit about your scale in emerging markets at this point, how much more runway you think you have and if you can touch on the competitive environment as well there.

Tom Falk

Yes, surely and emerging markets is a exciting place, so we look at Latin America broadly where we have the most scale and we don’t talk a lot about K-C in Mexico, but we -- starting with Mexico and moving South, we've got really strong market shares and are probably the most developed portfolio in that market. Even in that market where you know and Latin America we are seeing the highest single digit growth yet, so good consumer penetration particularly in personal care.

In Asia, we've got -- it's a pretty diverse market. So we've got very well developed businesses in Korea and Australia and you couldn’t debate whether those are really emerging markets or whether they've emerged, but they are in our definition at least but still seeing, you know, over the last couple of years in Korea, seeing high single digit topline growth and in strong innovation there. They are expanding into more categories and driving innovation.

China has been an explosive growth market for us. You know, our diaper business in China last year was up 45% something like that, similar kind of growth in the first quarter. So there are -- it's a combination of expanding into more cities, it's expanding our product range so that we are covering more of the category and you are seeing still consumption growing in those markets are their GDP per capital improves, mom is able to be in the category more often and more frequently.

Ali Dibadj - Sanford Bernstein

So as you think about Kimberly-Clark, we obviously think about the categories and product that you operate in emerging markets certainly the trend, the third big thing that we often hear about is how shareholder friendly you are, can you talk a little bit about how you view uses of cash, return it to shareholders and if you can -- little bit about what's going on in the marketplace for the past couple days arguably a little bit long in that few weeks from a shareholder perspective you know, either they are going to be as committed to be paying a high dividend or have high payout ratio as they've had recently?

Tom Falk

Yes, I mean Ali it's an important point. We never try to forget that the shareholders own the company and so it's their cash and we believe that shareholders should have first call on the cash that we generate in excess of what we need to run the business, so we generate about $3 billion a year in operating cash flow. We spend about $1 billion on capital spending give or take and so that leaves you know, about $2 billion left, dividend is about $1 billion.

Read the rest of this transcript for free on seekingalpha.com