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K-C Unveils Second Quarter Results



Published September 1, 2010
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Kimberly-Clark reported $4.9 billion in net sales for second quarter of 2010, an increase of 2.8%. Organic sales rose 2%, driven by higher net selling prices of 2%, while sales volumes and product mix were even with year-ago levels. The combined impact of the I-Flow Corporation and Jackson Safety acquisitions completed in 2009 added an additional point of sales growth, while changes in foreign currency rates had no overall impact on sales in the quarter. The growth in organic sales was highlighted by a 6% gain for K-C’s in­ter­national operations in Asia, Latin America, the Middle East, Eastern Europe and Africa.

Chairman and CEO Thomas Falk said, “We delivered solid results in the second quarter despite a continued challenging environment. Organic sales rose 2%, and we delivered strong improvements in operating margin and earnings per share despite significantly higher commodity costs. Moreover, our ongoing cost savings momentum continues to enhance profitability and help fund our growth plans. In addition, several of the innovations we’ve launched this year performed well in the second quarter, and we supported our brands with a considerable increase in strategic marketing spending. Our targeted growth initiatives, particularly in our K-C International business and in higher-margin portions of Health Care and K-C Professional, continued to progress well. Finally, we continued to deploy cash flow in shareholder-friendly ways, repurchasing $350 million of KMB stock in the second quarter and paying an attractive dividend. All-in-all, we made progress in a number of areas in the second quarter, and through six months we’re generally on track with our full-year plan, despite a difficult external environment.”

In the Personal Care Products segment, sales increased 2.8% compared with the 2009 period. Sales volumes rose more than 2% and net selling prices advanced 1%, while changes in currency rates reduced sales approximately 1%.

Personal care sales in North America increased 7% versus the 2009 period. Sales volumes were up 3% and net selling prices rose 2%, driven by a lower level of promotional activity for Huggies diapers. In addition, changes in product mix and currency exchange rates each added one point of growth. Feminine care sales volumes grew at a double-digit rate for the second consecutive quarter as a result of the U by Kotex line extension. Adult care volumes also increased double-digits, with benefits from recent innovation on the Poise and Depend brands and supporting marketing campaigns. In other areas of the business, sales volumes for the company’s child care brands advanced 2%, while volumes for Huggies baby wipes were off 2% and volumes for Huggies diapers were down slightly.

Sales of health care products increased 2.7% in the second quarter. Growth was driven by an 11% benefit from the acquisition of I-Flow Corporation and a one point increase from favorable currency exchange rates. On the other hand, organic sales volumes declined 6% and net selling prices fell 3%. The organic volume comparison was adversely affected by approximately five points due to increased demand in 2009 for face masks as a result of the H1N1 flu virus. In addition, volume performance in 2010 was impacted by unanticipated distributor and end-user inventory reductions. The company believes that most of these reductions are now complete.