Financial Reports & Markets
Kimberly-Clark forecasts better 2019 outlook after organic sales growth in Q2
By P&PC Staff
By P&PC Staff
July 24, 2019 – Kimberly-Clark Corporation has released its second quarter 2019 results, and is forecasting a more favourable outlook for 2019 than previously reported.
Sales of $4.6 billion in the second quarter of 2019 were even with the year-ago period. Changes in foreign currency exchange rates reduced sales by five per cent and exits in conjunction with the company’s 2018 Global Restructuring Program reduced sales slightly. Organic sales increased five per cent.
Net selling prices rose five per cent and product mix improved one per cent, while volumes fell slightly. In North America, organic sales increased five per cent in consumer products and two per cent in K-C Professional. Outside North America, organic sales rose nine per cent in developing and emerging markets and one per cent in developed markets.
Second-quarter operating profit was $670 million in 2019 and $674 million in 2018. Results in both periods include charges related to the 2018 Global Restructuring Program. Second-quarter adjusted operating profit was $789 million in 2019 and $774 million in 2018. Results benefited from higher net selling prices, $70 million of cost savings from the company’s FORCE (Focused On Reducing Costs Everywhere) program and $20 million of cost savings from the 2018 Global Restructuring Program.
On the other hand, results were impacted by $80 million of higher input costs, driven by $40 million in pulp inflation and increases in other raw materials and distribution expense. In addition, foreign currency translation effects reduced operating profit by $25 million and transaction effects also negatively impacted the comparison. Other manufacturing costs were also higher year-on-year. Advertising spending increased and general and administrative costs were higher, driven by increased incentive compensation expense.
“We made excellent progress in the second quarter,” says Mike Hsu, chief executive officer of Kimberly-Clark, in a release. “We delivered strong organic sales growth, gross margin improvement and higher earnings per share. In addition, we generated $90 million of cost savings and returned $520 million to shareholders through dividends and share repurchases. We also continued to launch innovations, pursue our growth priorities and increase investments in our brands.”
Hsu continues, “For the full year, we are raising our top- and bottom-line outlook, reflecting strong execution and an improving commodity environment. We’re also increasing our growth investments behind our brands and in capabilities that will position us for longer-term success.”
The company updated the full-year 2019 guidance and outlook to include net sales even to down one per cent year-on-year (prior assumption down one to two per cent), organic sales growth three per cent (previous estimate two per cent), and adjusted earnings per share $6.65 to $6.80 compared to the prior outlook of $6.50 to $6.70.
Consumer tissue segment
Second-quarter sales of $1.5 billion were even year-on-year. Changes in currency rates reduced sales four per cent. Net selling prices increased five per cent and product mix improved slightly, while volumes declined two per cent. Second-quarter operating profit of $221 million increased seven per cent. Results benefited from higher net selling prices and cost savings. The comparison was impacted by input cost inflation, other manufacturing cost increases, unfavourable currencies, lower volumes and higher general and administrative costs.
Sales in North America increased five per cent compared to a four per cent decline in the year-ago period. Net selling prices rose seven per cent while volumes fell two per cent.