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K-C Mexico To Ramp Up Diaper Investment

September 21, 2006

Kimberly-Clark de Mexico SA, the country's largest producer of consumer paper goods, agreed to sell its industrial products division for $434 million in a plan to focus on its more profitable consumer products business. K-C will receive $384 million in cash once the sale is approved by its shareholders later this month and another $50 million within five years, CFO Jorge Lara said in an interview. The buyers are two investment funds: Eton Park Capital Management LP of the U.S. and Impulso de Desarrollos Estrategicos SA of Mexico.

The company is shedding a unit that makes wood pulp, paper for printing, cigarettes and notebooks in an effort to boost its profit margin by about 2 percentage points, Mr. Lara said. K-C plans to use most of the funds to expand its Huggies diapers and Kleenex tissues divisions. Some of the money may go toward an extraordinary dividend, he said. Kimberly-Clark plans to invest $350 million in its tissue and diaper divisions over the next two years -- an increase from an annual average of about $70 million in the past five years, Mr. Lara said. The unit Kimberly-Clark is selling represents 20 percent of the company's sales and 12 percent of earnings before interest, taxes, amortization, and depreciation.