This summary is based on the fourth quarter fiscal 2006 earnings call conducted by Kimberly-Clark. (KMB) on January 25, 2007.
Management:
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Chairman and Chief Executive Officer: Tom Falk
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Senior Vice President and Chief Financial Officer: Mark Buthman
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Vice President of Investor Relations: Michael Masseth
Key Investors Issues
- Sales rose 7.4% to $4.3 billion from $4 billion in the prior year.
- Net income per share was $1.05 compared with 79 cents in 2006.
- The company repurchased 4.3 million shares of its common stock at a cost of $286 million.
Year-to-date Highlights:
- Sales of $16.7 billion were up more than 5% from $15.9 billion in the prior year, as a result of a 2% rise in sales volumes, along with improvements in net selling prices, product mix and currency exchange rates.
- Operating profit of $2,102 million included charges of $484 million for strategic cost reductions.
- Earnings per share went up 3% to $3.90 in 2006 from $3.78 in 2005.
Fourth Quarter Highlights
Sales rose 7.4% to $4.3 billion, on strong performance of Health Care and Personal Care business segments, with gains of 11% and 9%, respectively, along with growth in developing and emerging markets.
- Net income increased 30% to to $483 million or $1.05 compared with $371 million or 79 cents in driven by higher sales, the continued success in reducing costs and excellent results at K-C de Mexico, all of which helped overcome inflationary cost increases.
- Operating profit was $673 million, up more than 6% compared to a year ago with an operating margin of 15.6% despite absorbing cost inflation of $90 million from higher pulp and other raw material costs.
In terms of overall company cost savings, the firm delivered total savings of $90 million as savings from the ongoing FORCE program delivered benefits of $53 million.
- Cash provided by operations was $813 million compared to $676 million in the prior year due to higher cash earnings and a special dividend of $123 million from K-C de Mexico following the sale of its paper business.
- The firm bought 4.3 million shares stock at a cost of $206 million bringing full year repurchases to $750 million, in line with the year’s target.
- Capital expenditure amounted to $333 million and $972 million for the full year, was in line with the spending target for the year of between 900 and $1 billion.
Segment Highlight:
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Personal Care sales jumped 9%, driven by an 8% increase in volumes as performance was strong in North America where volumes improved about 6% and market shares increased for many of the brands led by Huggies.
- In diapers, volumes rose 5% behind the improved supreme lineup as market share rose 2 points.
- In Europe, sales for Personal Care were up 4% as Huggies diaper lines in core markets grew 10% paced by gains for supreme upgrades in the new Huggies Little Walkers diaper pants.
- In the developing and emerging markets, Personal Care sales increased 15% as the top line continues to be robust in Latin America, where the multitier product strategies and customer management focus on both the traditional and modern trade are helping drive double digit vine games.
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Tissue sales rose 6% as higher net prices and currency exchange rates, each benefited sales by 3 points.
- Improved product mix of 1% was offset by lower volumes.
- North America sales volumes increased 2%, as performance was led by 5% growth from Cottonelle and Scott bathroom tissue business.
- Kleenex facial tissue volumes continued to improve sequentially and were leveled with a strong period when lines rose at a double digit rate.
New Kleenex Expressions in the oval packaging are off to a good start, improving the product mix and gaining marketshare.
- In Europe, volumes declined 2% following the price increases that went into effect earlier in the year.
- In addition, the firm has been shedding low margin businesses as it exits certain facilities in connection with the strategic cost reduction plan.
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K-C Professional and other sales increased 6%, including benefits from currency exchange rates.
- Sales volumes increased more than 2% with solid growth in North America and Europe as the firm achieves rapid growth in the safety channel in both of these geographies.
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The health care segment top line gained 11% fueled by 8% volume growth and 2 points of benefit from higher net selling prices.
- The volume increase was broad-based across the product portfolio, including continued success of the new Sterling Nitrile exam glove.
- In addition, volumes improved in double digit in Europe as the firm continued to execute its double digit growth plan.
Update on KCM:
