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Kimberly-Clark’s first quarter results show organic growth

Kimberly-Clark Corporation recently released results for the first quarter of 2022.

The highlights from quarter one are as follows:

• First-quarter 2022 net sales of $5.1 billion increased seven percent compared to the year-ago period, including organic sales growth of 10 percent.
• Diluted net income per share for the first quarter was $1.55 in 2022 and $1.72 in 2021.
• First-quarter adjusted earnings per share were $1.35 in 2022, down 25 percent compared to $1.80 in 2021.
• The company is now targeting full-year 2022 organic sales growth of 4 to 6 percent, compared to our prior outlook of three to four percent.
• The company expects adjusted earnings per share of $5.60 to $6, in line with its initial expectations for diluted net income per share. The adjusted outlook range excludes the net benefit associated with the acquisition of the controlling interest of Thinx Inc.

“I’m pleased with our team’s continued excellent execution during this volatile and highly inflationary environment.  We delivered double-digit organic sales growth with strong increases across all our segments in the first quarter,” said chairman and CEO Mike Hsu.  “Our growth strategy is working and we’re continuing to invest in our business.  Additionally, we continue to take the necessary actions to mitigate macro headwinds and remain committed to improving our margins over time.”

He further added, “On March 26th of this year, Kimberly-Clark marked its 150th anniversary — a significant milestone for the company.  We’re proud of our heritage of category defining innovation and our strong culture of care that enables our employees and communities to thrive.  Today, we’re building on that foundation with conviction in our purpose of Better Care for a Better World as we continue to provide essential products to billions of consumers around the world.”

First quarter 2022 operating results

Sales of $5.1 billion in the first quarter of 2022 increased seven percent compared to the year-ago period.  Changes in foreign currency exchange rates reduced sales 2 percent.  Organic sales increased 10 percent as net selling prices rose six percent, volumes grew two percent and product mix increased sales two points.  In North America, organic sales increased 13 percent in consumer products and increased five percent in K-C Professional. Outside North America, organic sales rose 10 percent in developing and emerging (D&E) markets and eight percent in developed markets.

First quarter operating profit was $693 million in 2022 and $770 million in 2021.  Results in 2022 include the net benefit of the acquisition of a controlling interest of Thinx and 2021 results include charges related to the 2018 Global Restructuring Program.

First quarter adjusted operating profit was $629 million in 2022 and $804 million in 2021. Results were impacted by $470 million of higher input costs, driven by pulp and polymer-based materials, distribution and energy costs.  Higher marketing, research and general expense as well as the impact of unfavorable foreign currency transaction effects reduced operating profit in the quarter.  Results benefited from organic sales growth, $50 million of cost savings from the company’s FORCE (Focused On Reducing Costs Everywhere) program and lower other manufacturing costs.

The first quarter effective tax rate was 18.2 percent in 2022 and 20.9 percent in 2021.  The first quarter adjusted effective tax rate was 21 percent in 2022 and 20.9 percent in 2021.  Kimberly-Clark’s share of net income of equity companies in the first quarter was $23 million in 2022 and $39 million in 2021.  Equity results were negatively impacted by input cost inflation.

First quarter 2022 business segment results

Consumer tissue segment

First quarter sales of $1.6 billion increased four percent.  Net selling prices increased sales five percent and volumes rose two points.  Changes in foreign currency exchange rates reduced sales two percent and exited businesses in conjunction with the 2018 Global Restructuring Program decreased sales one percent.  First quarter operating profit of $171 million decreased 36 percent.  The comparison was impacted by input cost inflation and higher marketing, research and general spending.  Results benefited from organic sales growth, lower other manufacturing costs and cost savings.

Sales in North America increased nine percent.  Volumes grew six percent and net selling prices improved four percent, while unfavorable product mix decreased sales one point.  The volume growth reflects comparison to the start of COVID-related consumer and retailer inventory destocking in the year-ago period.

Sales in D&E markets increased three percent.  Net selling prices rose approximately seven percent and product mix improved one percent, while volumes were down two percent. Changes in foreign currency exchange rates decreased sales two points.

Sales in developed markets outside North America decreased five percent.  Exited businesses related to the 2018 Global Restructuring program reduced sales four percent and changes in foreign currency exchange rates decreased sales 6 percent.  Volumes were down one percent while net selling prices rose approximately six percent.

Personal care segment

First quarter sales of $2.7 billion increased 11 percent.  Net selling prices increased eight percent, volumes grew three percent and product mix improved three points.  Changes in foreign currency exchange rates decreased sales by approximately two percent.  First quarter operating profit of $475 million decreased one percent.  The comparison was impacted by input cost inflation, higher marketing, research and general spending as well as unfavorable foreign currency effects.  Results benefited from organic sales growth and cost savings.

Sales in North America increased 16 percent.  Net selling prices increased eight percent, product mix improved three points and volumes rose five percent, in part due to the weather-related supply chain disruptions in the year-ago period.  Organic sales were up double-digits in baby and child care, adult care and feminine care.

Sales in D&E markets increased eight percent.  Net selling prices increased sales 9 percent and product mix improved 3 points while volumes declined one percent.  Changes in foreign currency exchange rates decreased sales three percent.  Organic sales growth was strong across all regions and categories.

Sales in developed markets outside North America (Australia, South Korea and Western/Central Europe) increased five percent.  Volumes increased eight percent and net selling prices increased sales 4 percent while changes in foreign currency exchange rates decreased sales seven percent.

2022 outlook and key planning assumptions

The company updated key planning and guidance assumptions for full-year 2022.  The outlook reflects a reasonable set of assumptions subject to change given the high level of volatility in the macro environment.

• Net sales increase two to four percent (prior assumption one to two percent).
  • Organic sales increase four to six percent (prior three to four percent). Versus the previous assumption, net selling prices are expected to be higher.
  • Foreign currency exchange rates unfavorable approximately two percent (no change).
  • Thinx acquisition expected to increase sales slightly.
• Adjusted operating profit down low to mid-single digits percent. Operating profit outlook has been adjusted for the net benefit from the acquisition of controlling interest in Thinx.
  • Higher organic sales expected to benefit operating profit.
  • Key cost inputs expected to increase $1.1 to $1.3 billion (previous estimate $750 to $900 million). Costs are projected to increase or remain elevated for most inputs including polymer-based materials and pulp as well as distribution and energy.
• Adjusted effective tax rate of 22 to 24 percent.
• Adjusted earnings per share of $5.60 to $6.00. This outlook is in line with previous unadjusted earnings per share guidance and excludes the net benefit from the acquisition of controlling interest in Thinx recognized in the first quarter.