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K-C Releases Quarterly Results

April 27, 2006

At Dallas, TX-based Kimberly-Clark, first-quarter profit fell by more than one-third due to higher costs for energy and raw materials, but the company plans to meet 2006 earnings goals despite more inflation in the rest of the year. During the quarter, K-C earned $275 million, down 39% from the $450 million it earned a year earlier. The company said its operating profit—excluding $208 million in charges it blamed on restructuring—was 93 cents per share in the quarter ended March 31.

Quarterly revenue rose 4.2% to $4.07 billion. The company said it had to absorb $90 million in higher costs. About one-third was driven by higher costs for polymer resins, absorbents and other oil-based materials, and another third by energy costs. Fiber, higher taxes and the cost of expensing stock-based compensation also sapped profits.

K-C is in the process of raising prices on feminine care products by an average of 5-6%. Average selling prices for personal care items fell 1% in the first quarter, however, partly because of a price increase that didn't stick. Late last year, rival Procter & Gamble rolled back price increases on diapers, forcing K-C to follow suit.
Analysts say another concern for Kimberly-Clark is the recent announcement by Wal-Mart that it plans to cut inventory in U.S. stores, which could cause the world's largest retailer to buy fewer diapers and paper towels.

Kimberly-Clark said it saw double-digit sales gains during the first quarter in developing countries and sold more diapers and healthcare products in North America and Europe. Executives said a number of new products are selling briskly, including new Pull-Ups training pants and a line of Huggies toiletries.

The company is cutting jobs and said it has notified employees at 18 of the 24 plants scheduled for sale, closure or streamlining.
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