Kimberly-Clark (KMB, Financial) is a leading brand recognized in more than 175 countries employing 42,500 employees working at manufacturing facilities in 37 countries. Its flagship brands include Huggies, Kleenex, Kotex, etc.
Details
Fourth quarter 2014 net sales of $4.8 billion decreased 1 percent compared to the year-ago period. Diluted net income per share for the fourth quarter was a loss of $0.22 in 2014, driven by a balance sheet remeasurement charge in Venezuela, and income of $1.40 in 2013. Full-year diluted net income per share was $4.04 in 2014 and $5.53 in 2013. Changes in foreign currency exchange rates reduced sales by 4 percent.
Operating profit was $158 million in the fourth quarter of 2014 and $745 million in 2013. Adjusted operating profit was $769 million in the fourth quarter of 2014 compared to $759 million in the year-ago period. Adjusted results in 2014 exclude the $462 million charge for the balance sheet remeasurement in Venezuela, $133 million of 2014 Organization Restructuring costs, $20 million of restructuring costs for European strategic changes and $4 million of income related to an updated assessment regarding a regulatory dispute in the Middle East. Adjusted results in 2013 exclude $14 million of restructuring costs for European strategic changes.
The year-over-year adjusted operating profit comparison benefited from organic sales growth and $90 million in cost savings from the company's FORCE (Focused On Reducing Costs Everywhere) program. Total marketing, research and general expenses were down versus prior-year levels, including lower administrative and advertising spending. Input costs increased $55 million overall, with $30 million of increased costs for raw materials other than fiber, $15 million of higher fiber costs and $10 million of increased distribution costs. Other manufacturing-related costs also increased versus the year-ago period. Foreign currency translation effects, as a result of the weakening of several currencies relative to the U.S. dollar, reduced operating profit by $30 million. Currency transaction effects also negatively impacted the operating profit comparison. On an adjusted basis, other (income) and expense, net was expense of $7 million in the fourth quarter of 2014 compared to $9 million of income in 2013.
The fourth quarter adjusted effective tax rate, which excludes the effects of the previously mentioned items excluded from adjusted earnings per share, was 30.5 percent in 2014 and 31.9 percent in 2013. Kimberly-Clark's share of net income of equity companies in the fourth quarter was $33 million in 2014 and $48 million in 2013. At Kimberly-Clark de Mexico, S.A.B., results were negatively impacted by input cost increases and a weaker Mexican peso, partially offset by organic sales growth and cost savings.
Cash Flow and Balance Sheet
Cash provided by operations in the fourth quarter of 2014 was $590 million compared to $945 million in 2013. The decrease was driven by higher tax payments and lower cash earnings. Cash provided by operations for the full year was $2,845 million in 2014 and $3,040 million in 2013. The decrease was driven by higher tax payments and transaction costs for the health care spin-off, partially offset by lower payments for restructuring actions. Capital spending for the fourth quarter was $309 million in 2014 and $256 million in 2013. Full-year 2014 spending was $1,039 million, consistent with company expectations for spending toward the low end of the $1.0 to $1.2 billion target range.
Fourth quarter 2014 share repurchases were 7.6 million shares at a cost of $869 million. Full-year 2014 share repurchases totaled 18.0 million shares at a cost of $2.0 billion, including approximately $0.6 billion as a result of a one-time cash payment from Halyard Health in conjunction with the health care spin-off. Total debt and redeemable securities was $7.0 billion at the end of 2014 and $6.3 billion at the end of 2013.
Segment-Wise Performance
Personal Care Segment
Fourth quarter sales of $2.3 billion decreased 1 percent. Currency rates were unfavorable by 5 percent, while net selling prices rose 4 percent. Fourth quarter operating profit of $410 million increased 3 percent. The comparison benefited from organic sales growth and cost savings, partially offset by unfavorable effects from changes in currency rates, input cost inflation and higher manufacturing-related costs.
Sales in North America decreased 2 percent. Volumes were down 2 percent and currency was unfavorable 1 percent, while net selling prices were up slightly. Huggies baby wipes volumes rose double-digits, including benefits from market share gains. Adult care volumes were similar to year-ago levels and feminine care volumes were down low-single digits. Child care volumes were off high-single digits, driven by lower Pull-Ups training pants volumes. Huggies diaper volumes were off 10 percent compared to mid-single digit growth in the year-ago period and were impacted by market share declines and competitive promotional activity.
Sales in Europe decreased 9 percent. Currency rates were unfavorable by 5 percent and lower sales in conjunction with European strategic changes reduced sales by 3 percent. Organic volumes were down 1 percent.
Consumer Tissue Segment
Fourth quarter sales of $1.6 billion decreased 3 percent. Currency rates were unfavorable by 3 percent. The combined impact of changes in net selling prices and product mix added 1 point to sales, while volumes fell 1 percent. Fourth quarter operating profit of $280 million increased 2 percent. The comparison benefited from cost savings and lower marketing, research and general expenses, mostly offset by unfavorable currencies, input cost inflation and lower production volumes in 2014.
Sales in North America were off 1 percent. Changes in net selling prices and product mix reduced sales by 3 percent. Volumes increased 2 percent, driven by growth in Kleenex facial tissue.
Sales in K-C International decreased 3 percent, including a 6 point negative impact from currency rates. Net selling prices increased 4 percent and product mix improved 1 percent, while volumes fell 2 percent.
Sales in Europe decreased 8 percent, including a 4 point drag from currency rates. Volumes fell 5 percent compared to mid-single digit growth in the prior year, while changes in net selling prices and product mix benefited sales by 2 percent.
K-C Professional (KCP) Segment
Fourth quarter sales of $0.9 billion increased 1 percent. Volumes rose 5 percent, while changes in currency rates reduced sales 4 percent. Fourth quarter operating profit of $151 million increased 2 percent. The comparison benefited from volume growth and cost savings, mostly offset by input cost inflation and unfavorable currency effects.
Sales in North America increased 1 percent. Volumes increased 4 percent, driven by gains in safety products, wipers and other categories, partially offset by declines in washroom products. Overall changes in net selling prices and product mix reduced sales by 2 percent and currency was slightly unfavorable. Sales in K-C International increased 3 percent despite a 6 point drag from currency rates. Volumes rose 5 percent and changes in net selling prices and product mix added 4 points of growth. The organic growth was driven by increases in Latin America and Asia.
Sales in Europe were down 1 percent, including an 8 point negative impact from currency rates. Sales volumes increased 6 percent, driven by growth in washroom and safety products.
To End
Currency headwinds have been primarily a reason behind the unimpressive fourth quarter results of KMB. Strong dollar and weak demand have also been the reasons. Regions like Brazil, China and South Africa have helped to negate the negative results posted by North America. Slump sales have been a concern. But I would suggest buying this company despite of the recent mixed results. It is already initiating in cost cuts. It is also concentrating all its resources for product innovation. It is also undergoing a restructuring program. It has already decided to spend more on advertising in 2015 to combat its weaknesses and to change the attitude of its customers in favor of this brand.
(Source: Company’s Website)
