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K-C Reports Huge Profit Spike

May 2, 2007

Personal care product giant Kimberly-Clark, Dallas, TX, has reported a whopping 64% increase in first-quarter profit, helped by cost cutting and strength in emerging markets. K-C, which has struggled in recent quarters with rising commodity costs, reported that pulp prices are still pressuring its margins.

Net sales rose nearly 8% to $4.4 billion. Net income rose to $452 million, up from the $275 million earned in the first three months of 2006. Chairman and chief executive Thomas Falk said the consumer tissue and K-C Professional businesses have been hit hardest because they use a lot of pulp and a lot of waste paper.
"In order to offset some of the higher costs for these raw materials, we've implemented some additional price increases." For the second quarter, the company forecast adjusted earnings will be similar to the first quarter.

The increase in first-quarter sales was driven by sales volume growth of more than 3%, along with improved net selling prices and product mix. Sales of personal care products rose 10.6% in the quarter. Personal-care sales in North America increased about 8%, driven entirely by higher sales volumes, as net selling prices were essentially unchanged. Sales volumes for Huggies diapers and baby wipes grew at a double-digit rate, helped by improvements made to the brand's high-margin, super-premium offerings in both categories.

Sales momentum for the company's market-leading Pull-Ups training pants was also strong. Kotex feminine care sales volumes were down on a year-over-year basis, but they were about flat with 2006 levels. In Europe, personal care sales rose more than 12%, with currency effects accounting for the entire increase. Sales volumes were up 1%, as strong gains for diapers were mostly offset by lower sales volumes in other areas. Net selling prices were down approximately 1%.

Huggies Newborn and Natural Fit diapers and Huggies Little Walkers diaper pants drove a 9% volume growth for Huggies diapers in core European markets of the U.K., France, Italy and Spain. In developing and emerging markets, personal care sales climbed about 16%. Sales growth was particularly strong across Latin America, as well as in China and Russia, the company said.

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