This summary is based on the fourth quarter fiscal 2008 earnings call conducted by Kimberly Clark Corp. (KMB) on 26 January, 2009.
Management:
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Chairman and Chief Executive Officer: Thomas J. Falk
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Chief Financial Officer, Senior Vice President: Mark A. Buthman
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Vice President and Controller: Randy J. Vest
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Vice President, Investor Relations: Mike Masseth
Key Investors Issues
- Sales decreased by about 3% to $4.6 billion.
- Net income was $419 million or $1.01 a share, down 8% from $456 million or $1.07 a share in the prior year on weaker revenues.
Fourth Quarter Highlights
Overall sales decreased by about 3% to $4.6 billion including a currency drag of 8% from $4.8 billion in the prior year as organic growth was solid at nearly 5%.
- That was driven by the focus on improving net realized revenue which led to a seven-point gain in net selling prices and an additional point of improved product mix.
- Total sales volumes were down about 3% and were impacted by a generally weak economic environment, particularly in North America and Europe, and continued emphasis on price realization.
- A portion of volume weakness experienced was related to customers and consumers reducing warehouse and pantry inventories.
Operating profit fell 10% to $629 million with an operating margin of 13.7% as profitability was impacted by cost inflation of more than $135 million and negative currency translation effects of about $60 million.
- Strategic marketing investments increased by over $25 million in the quarter.
- Margins were also impacted by 80 to 90 basis points from planned production down time the firm took in order to improve the inventory position.
Total savings were $34 million and ongoing force program generated savings of $20 million in the quarter; that is despite higher spending at some of the facilities.
- Net income was $419 million or $1.01 a share, down 8% from $456 million or $1.07 a share in the prior year on weaker revenues.
- Cash provided by operations was $678 million down 1% from the year ago period due to lower earnings, a reduced level of accrued expenses, and a $50 million contribution to the US defined benefit pension plan, mostly offset by lower tax payments in the quarter.
– The firm bought 1.3 million shares of KMB stock at a cost of about $75 million during the quarter, bringing year-to-date repurchases to $625 million.
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In personal care sales were down more than 2% including a nine-point currency headwind.
- Organic growth of more than 6% was driven by higher net selling prices of nearly 6% and somewhat better product mix.
- In North America personal care sales fell about 2% as net selling prices rose nearly six points due to benefits from price increases taken in the first and third quarters of 2008, partially offset by increased promotional activity.
- Overall, volumes were down about 7%, primarily due to results in diapers and training pants including the impact of customer inventory adjustments, consumer trade-down in diapers, and some category weakness in pants.
In Europe, personal care organic sales were off 3% and overall volumes were even with the prior year; however, net selling prices were down over 2% due to the continued competitive promotional environment.
- In the developing and emerging markets, although personal care sales were off 1%, organic growth was a strong 15%.
- Price and mix contributed more than ten points of growth and volumes were up 5%.
- Volume highlights included mid-teens growth in the fast growing [bricket] countries, double-digit growth in Australia and Vietnam and mid-single digit growth in Latin America overall.
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Consumer tissue sales were down about 3% including an eight-point drag from currency.
- Net selling prices were up approximately 11% with solid increases from around the world.
- Volumes fell about 6% and were impacted by the continued focus on revenue realization, some category weakness, and consumer trade down.
- In North America net sales increased 3% as higher net selling prices of almost 13% were mostly offset by lower volumes of about 10%.
On the pricing front the firm had strong realization from the increases taken earlier in the year.
- Regarding volumes, branded volumes were down across all categories and this reflects the focus on revenue realization, category weakness and some consumer trade down, particularly in towels.
- In Europe, consumer tissue organic sales were up modestly and net selling prices rose 4% due to increases in several markets, and product mix contributed another point of growth.
- Volumes fell by 5% in response to the price increases and category weakness, particularly in the UK.
- In the developing and emerging markets consumer tissue organic sales rose 15% driven by a 13 point gain in net selling prices and two points of improved mix.
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K-C Professional and other sales decreased more than 8% including an over seven-point impact from currency.
- The focus on revenue realization led to a 5% increase in net selling prices; however, sales volumes were down by more than 5%.
- KCP is feeling the effects of the economic slow down, in particular in North America and Europe for sales volumes were down high single digits.
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Healthcare sales were up approximately 1% and organic growth of over 3% was driven by higher volumes of 5% while product mix was off more than 1%.
- Higher margin medical device business had a strong quarter delivering double-digit volume growth and surgical supplies volumes rose 3%, led by double-digit growth in exam gloves.
Fiscal 2009 Outlook:
- Adjusted earnings per share in 2009 are expected to be similar to 2008, in a range of $4.00 to $4.20 per share.
Key questions and answers from the fourth quarter earnings call conducted by Kimberly-Clark Corp. (KMB) on 26 January, 2009.
