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K-C Releases Fourth Quarter 2008 Results



Published February 28, 2009
Related Searches: K-C huggies feminine care diaper
Quarterly sales decreased 3.4% to $4.6 billion, as the effect of weaker foreign currency exchange rates more than offset organ- ic sales growth of approximately 5%. The company reported that growth in organic sales was driven by higher net selling prices, favorable product mix and continued improvement in sales volumes across developing and emerging markets. Overall sales volumes, however, were below prior-year levels due primarily to lower shipments of Huggies diapers and Pull-Ups in North America, as well as the company's con- sumer tissue and K-C Professional products in North America and Europe. Sales volumes for the quarter also trailed planned levels as customer and consumer demand was impacted by deteriorating economic conditions in these geographies.

Chairman and CEO Thomas Falk said, "During the fourth quarter, eco- nomic weakness impacted our cate- gories more than anticipated, particu- larly in North America and Europe. We believe some of the effects are tempo- rary, reflecting customer warehouse and consumer pantry inventory reduc- tions; however, consumer trade-down also affected our sales in several cate- gories. We are fine-tuning our pricing and promotional plans to ensure we remain competitive, particularly in diapers and training pants in North America."

In the fourth quarter, sales of per- sonal care products decreased 2.5% from the fourth quarter of 2007. Net selling prices increased 6%, product mix improved 1% and sales volumes were flat, while currency effects reduced sales by almost 9%.

Personal care sales in North America declined about 2% versus the year-ago quarter, as an improvement in net selling prices of 6% was more than offset by a 7% drop in sales volumes and unfavorable currency effects of 1%. The higher selling prices resulted from increases implemented earlier in 2008 across all categories, net of increased promotional activity prima- rily for Huggies diapers to match com- petitive moves. The decrease in sales volumes was primarily attributable to lower shipments of the company's diaper and child care brands, which were down approximately 10% overall, as customers adjusted inventory levels, child care category sales slowed and some consumers switched to lower-priced product offerings. Meanwhile, sales volumes for Kotex feminine care and Depend and Poise adult care prod- ucts experienced a low single-digit decline.

In Europe, personal care sales fell approximately 16% in the quarter, mainly as a result of a 14% impact from weaker currencies. Sales volumes were even with the year-ago quarter, while net selling prices decreased about 2% in continued competitive market conditions. Sales volumes of Huggies diapers in the company's four core markets of the U.K., France, Italy and Spain were unchanged compared with the fourth quarter of 2007.

In developing and emerging mar- kets, personal care sales slipped about 1%, as continued strong growth in organic sales was more than offset by negative currency effects of almost 17%. Sales volumes increased by more than 5%, while net selling prices improved about 8% and product mix was better by approximately 3%. The growth in organic sales was broad- based, with particular strength in China, Russia, Turkey, Vietnam, Brazil and the Andean region in Latin America.

For the year of 2008, sales of $19.4 billion were up 6.3% from $18.3 billion in the prior year. Sales volumes increased about 1%, net selling prices were higher by more than 4% and product mix was favorable by almost 1%, resulting in organic sales growth of about 6%, while favorable currency effects added less than 1% to sales.