Profits rose 12% in the July-September 2006 period for absorbent product giant Kimberly-Clark, Dallas, TX, as sales increased, especially in developing markets. Net sales in the third quarter rose 5.2% to $4.2 billion, a new quarterly record. Sales were up in each of the company's four business segments, with particular strength in Health Care, Personal Care and K-C Professional & Other.
In addition to the continued strong performance in developing and emerging markets, highlights for the quarter included solid volume growth for the company's child care, incontinence care and wipes brands in North America and for health care globally.
The company earned $364 million in the quarter compared with $325 million a year earlier. Revenue rose 5.2% to $4.21 billion from $4 billion a year ago, roughly in line with analysts' forecast of $4.2 billion.
For the first nine months of the year, Kimberly-Clark earned $1 billion, down from $1.2 billion in 2005. Sales were up 4.6% to $12.4 billion from $11.9 billion a year ago.
The company was helped by an easing in oil prices but said it saw no reduction in the expense of packaging and polymer resins used in many of its products, and pulp costs rose. K-C expects costs to rise at least $350 million for the year.
Sales of wipes and products for children and incontinent adults improved. Chairman and CEO Thomas Falk said the company "stabilized" its business in feminine care products, including Kotex, "but it's not where we want it to be." He said it would take time to lure customers back to Kimberly-Clark brands.
Mr. Falk added, "We met our commitments again in the third quarter and remain on track with our objectives for the year. I'm encouraged by the continued progress K-C teams are making under our Global Business Plan, particularly in light of the inflationary pressures they've had to overcome. We're focused on the right things—delivering sustainable top- and bottom-line growth, improving ROIC, generating strong cash flow and deploying our cash in shareholder-friendly ways."
Personal care sales in North America increased about 2% compared with the third quarter of 2005. Higher sales volumes accounted for the entire increase, led by upper single-digit volume gains for the company's market-leading Huggies baby wipes, Pull-Ups training pants and Depend and Poise incontinence care products. Infant care volumes were even with a strong year-ago base period, when volumes went up 7%. In feminine care, although Kotex brand sales volumes were down from last year, third quarter shipments were similar to first and second quarter levels.
During the third quarter, the company made further progress implementing the strategic cost reductions that will support the targeted growth investments announced in July 2005. As previously noted, the company plans to reduce costs by streamlining manufacturing and administrative operations primarily in North America and Europe, creating an even more competitive platform for growth and margin improvement.
The company has announced it would close its Lakeview plant, which would eliminate 510 jobs. Its Neenah nonwovens plant, where 165 people still work, will remain open until the end of 2008.
In late June, K-C announced it would cut 150 engineering and research and development positions at its Neenah South plant. Last month, the company said it would cut 350 more jobs in areas of human resources, sourcing and supply management and information technology.