Personal care product giant Kimberly-Clark reported $4.5 billion in net sales for the first quarter of 2009, a drop of 6.6%. The company said the effect of weaker foreign currency exchange rates more than offset organic sales growth of 3%-plus. The growth in organic sales was reportedly driven by higher net selling prices, which increased approximately 6%.
Overall sales volumes—down nearly 3%—reflect challenging economic conditions in North America and Europe, particularly affecting the company's K-C Professional and Consumer Tissue businesses, as well as the child care category in Personal Care. Meanwhile, sales volumes in developing and emerging markets rose about 2%.
Net income for the quarter amounted to $431 million, a decline of 9.5% from $476 million in the year-ago quarter.
During the quarter, the company delivered continued double-digit organic sales growth in developing and emerging markets, realized improved net selling prices in North America and Europe, and also benefited from lower costs stemming from commodity cost deflation and cost savings initiatives. According to K-C, these positive factors contributed to an increase in gross profit margin of approximately 200 basis points versus the year-ago quarter, more than offsetting higher costs for production curtailment and pension expense.
Operating profit and earnings per share, however, were down compared with the prior year, mainly as a result of unfavorable currency effects and the decline in overall sales volumes. Currency translation and transaction losses reduced earnings in the first quarter by about 30 cents per share compared with the prior year. The increase in pension expense in the first quarter was equivalent to approximately 8 cents per share.
"Business conditions in the first quarter proved to be somewhat more challenging than we predicted earlier this year,” reported chairman and CEO Thomas Falk, “with significant headwinds from weak global economies and volatile currency fluctuations impacting our results.” Mr. Falk added that despite the difficult environment, K-C made progress in several areas during the quarter. The company continued to pursue targeted growth initiatives and build its brands.
“We improved profitability in our Personal Care, Consumer Tissue and Health Care businesses, indicating that our focus on increasing margins is starting to pay off,” continued Mr. Falk. “We delivered continued double-digit organic top-line growth in developing and emerging markets. We also generated strong cash flow, including early benefits from our efforts to improve working capital. While this progress is encouraging, we are not yet where we need to be. We are committed to overcome the challenges facing us and deliver improved bottom-line results."
In the personal care product segment, sales declined 3.4% compared with the first quarter of 2008. Net selling prices increased 6% and sales volumes and product mix both improved 1% while weaker currencies reduced sales by more than 11%. K-C also revealed that personal care sales in North America increased about 2% versus the year-ago quarter, as improvements in net selling prices and product mix of 5% and 1%, respectively, were partially offset by decreases in sales volumes and unfavorable currency effects of 2 percent each.