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Profits Down For K-C

October 29, 2008

Company faces “most challenging cost hurdle” ever.

Kimberly-Clark’s third-quarter profit fell 9% from a year ago as surging commodity costs and increased generic competition offset price increases. The Dallas-based company also cut its full-year profit picture for the second time this year, sending its shares down more than 7%. For the quarter ended September 30, K-C earned $413 million.

Quarterly sales rose 8% to $5 billion, helped by solid growth throughout Latin America, South Korea, Turkey and Russia. Sales also rose in all four company units, boosted by price increases for Depend, Huggies and Pull-Ups training pants. However, operating profit fell in three of the units. Kimberly-Clark paid more for fuel and softwood pulp and also stepped up its marketing campaign, while price increases undercut sales volume.

Sales of personal care products were 11.7% higher than in the third quarter of 2007. Sales volumes and net selling prices both increased about 4%, product mix improved more than 1% and currency effects added approximately 3% to sales.

For the first nine months of 2008, sales of $14.8 billion rose 9.7% from $13.5 billion in the prior year. Sales volumes increased about 2%, net selling prices were higher by more than 3% and product mix was favorable by 1%, resulting in organic sales growth of 6%, while favorable currency effects added approximately 4% to sales. Year-to-date operating profit of $1.9 billion included charges of about $54 million for strategic cost reductions. Adjusted operating profit was $1.9 billion, down approximately 3% from $2.0 billion in 2007.

Chairman and CEO Thomas Falk said, "Our third quarter results show that our focus on improving revenue realization is beginning to pay off, with higher prices and better product mix. While this strategy has dampened volume growth more than we anticipated in the near-term, I am confident we are doing the right things to strengthen our competitive position and improve our profitability over the long haul. I am also proud of the accomplishments of K-C teams around the world who are striving to overcome the most challenging cost hurdle the company has ever faced. Finally, I am pleased by the continued strength of our cash flow and our balance sheet, particularly in light of recent developments impacting global financial markets."
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