This summary is based on the first quarter fiscal 2007 earnings call conducted by Kimberly-Clark Corp. (KMB) on April 23, 2007.
Management:
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Chairman and CEO: Tom Falk
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Senior Vice President and Chief Financial Officer: Mark Buthman
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Vice-president and controller: Randy Vest
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Vice President-Investor Relations: Michael Masseth
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Head of Corporate: Tina Berry
Key Investors Issues
- Sales were up 8% to $4.4 billion.
- Earnings increased 11% to $450 million or 98 cents a share.
- The firm bought back $2.2 million shares at a cost of $150 million.
First Quarter Highlights
Sales were up nearly 8% to $4.4 billion from $4.1 billion in the prior year, following a number of targeted growth initiatives in Personal Care, K-C Professional and across the developing merging markets and continued reinvestment into the business.
- Strategic marketing spending rose at a faster raise than sales in support of the growth plans.
- Earnings were up 64% from $275 million or 60 cents a share in 2006 to $450 million or 98 cents a share.
- Operating profit was $616 million, up 47% from $420 million in the prior year despite inflation of $80 million including $60 million from higher fiber costs.
- The firm also increased marketing spending by nearly $20 million, investing faster than sales growth and right in line with plans in order to support growth in businesses such as the developing and merging markets, North Atlantic Huggies diapers and Kleenex facial tissues.
Total savings of more than $60 million were delivered as the ongoing FORCE program achieved savings of $29 million in terms of the strategic cost production plan in line with the full year target of $75 to $100 million.
- Cash provided by operations was $525 million, up from $519 million in the prior year.
- The firm invested $282 million in capital expenditure, including a sizeable amount for the new tissue machine in North America which starts up later this year.
- The firm bought back $2.2 million shares at a cost of $150 million and is on track to meet the full year target to repurchase $600 to $800 million of stock.
Segment Highlights:
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In Personal Care sales were up 11% driven primarily by strong buy in growth by more than 8%.
- In North America performance was terrific with volumes up 8% driven by the continued momentum of the baby and child care brands.
- Diapers and baby wipes delivered double-digit growth paced by Pull-Ups training paints, fueling profitable growth and market share expansion.
- in Europe, sales volumes for Personal Care rose 1% as gains in diapers were mostly offset by lower volumes in other areas.
The Huggies diaper business continues to improve in core markets with volumes up 9% behind strong gains from the Supreme upgrades in the new Huggies Little Walkers diaper-pant.
- Latin-American team continues to shine with volumes up strong double-digit in infant care and feminine care.
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Consumer tissues sales rose 6% as higher net selling prices and favorable currency rates each benefited sales by 3 points and improved product mix of 2% which was offset by lower volumes.
- Growth in North America was driven by a 4% benefit from higher selling prices along a favorable mix though overall sales volumes were down slightly.
Kleenex facial tissues rose at a low single single digit rate with oval packaging and was offset by softer results in bathroom tissue and paper towels.
- Higher selling prices boosted the top line by 3 points in total while volumes were off about 7% due to shredding some low market tissue business as the firm exited certain facilities as part of the strategic cost reduction plan.
- Pulp pressure continues to affect margins though the firm continued to realize benefits from selling price increases and cost savings activities.
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In K-C Professional & Other sales increased 7%, including 3 points of benefit from currency as volumes advanced 3% due to a favorable product mix.
- Good progress is being made on growth initiatives as global safety and scientific sales rose at a double-digit rate and global wipers increased at a single digit rate.
- The segment posted solid profit growth although margins were down due to fiber cost increases.
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Health care reported a marginal increase in sales driven by favorable products mix and currency exchange rates though volumes were down 1%.
- Sales volumes overall were down slightly as a result of the decision to exit the latex exam glove business.
- The firm needs additional manufacturing capacity to satisfy the growing demand for Nitryl exam gloves as customers and users are transitioning to these higher margin offerings faster than expected.
Fiscal 2007 Outlook:
- Adjusted earnings per share are expected to be in the range of $4.10 to $4.20 per share, up 5 to 8% versus $3.90 per share in 2006.
- Second quarter EPS will be in the range of $1.02 to $1.03 per share.
Key questions and answers from the first quarter earnings call conducted by Kimberly-Clark Corp. on April 23, 2007.
