The improvement in adjusted earnings per share versus the year-ago quarter was driven by higher sales, the company's continued success in reducing costs and excellent results at K-C de Mexico, all of which helped overcome inflationary cost increases totaling approximately $90 million.
Chairman and CEO Thomas Falk said, "Our performance in the fourth quarter capped another year of delivering on our commitments. Throughout 2006, K-C teams around the world executed our Global Business Plan well and made rapid progress implementing our strategic cost reduction program. Thanks to their efforts, we improved our competitive position and met our top- and bottom-line growth objectives for the year, even though inflationary pressures were far greater than originally expected. Moreover, we continued to generate significant cash flow, enabling us to fund targeted growth initiatives and return healthy amounts of cash to shareholders. With solid organic sales growth in the fourth quarter and sequentially improved margins, we are entering the new year with good momentum."
The increase in fourth quarter sales was driven by sales volume growth of more than 3%, along with higher net selling prices and favorable product mix, each approximately 1% better than the prior year. In addition, stronger foreign currencies benefited sales by more than 2%.
Sales of personal care products climbed 9% in the fourth quarter, driven primarily by sales volume growth of 8%. Currency effects of about 2% and favorable product mix of 1% also benefited sales, while net selling prices declined approximately 2%.
Personal care sales in North America increased about 5% compared with the fourth quarter of 2005, as a 6% improvement in sales volumes was partially offset by lower prices to match competitive activity and support product initiatives. Sales volumes for Huggies baby wipes were up double-digits and Huggies diapers grew at a high single-digit rate, boosted by innovations to the brand's high-margin, super-premium offerings in both categories.
The company's Pull-Ups training pants and Depend and Poise incontinence care products also experienced good volume gains. Kotex feminine care sales volumes, however, were below the year-ago level. In Europe, personal care sales increased more than 11%, due primarily to currency benefits of about 8% and a 4% increase in sales volumes. Net selling prices were down somewhat compared with the prior year. Diaper volumes in the region were up 8%, on the strength of a 10% improvement in sales volumes of Huggies diapers in the company's four core European markets—the U.K., France, Italy and Spain.
In developing and emerging markets, personal care sales rose about 15%, with higher sales volumes, up 12%, accounting for most of the increase. Sales grew at a double-digit rate in all four D&E regions—North Asia, South Asia, Latin America and Middle East/Africa/Eastern Europe.
Sales of K-C Professional & other products were 6.4% above the year-ago quarter. Sales volumes increased about 2% and net selling prices rose approximately 1%, while favorable currency effects added 3% to sales. K-C Professional generated solid increases in sales of its differentiated apparel, glove and wiper products for the workplace and safety markets in North America and Europe. In addition, sales grew double digits in Asia and Latin America.
Sales of health care products went up a robust 11.4% in the fourth quarter, driven primarily by continued strong volume growth of 8% and increased selling prices of 2%. Highlights of the volume growth included double-digit gains for face masks, medical devices and sterile wrap in North America and in Europe's largest category, surgical products. Overall sales continued to benefit from the company's highly successful new Sterling Nitrile exam glove.