“We are off to a very good start to the year,” says CEO Thomas Falk. “We achieved mid-single digit organic sales growth, led by outstanding performance in K-C International. We also generated a 250 basis point improvement in adjusted gross margin and delivered double-digit growth in adjusted earnings per share. In addition, we launched a number of innovations in the quarter and supported our brands with a $45 million increase in strategic marketing. Finally, we delivered a healthy level of cost savings, improved cash flow and continued to allocate capital in shareholder-friendly ways. All-in-all, I’m encouraged by our progress in the first quarter.”
Operating profit was up 29% to $700 million benefiting from organic sales growth and $60 million in cost savings.
Within the personal care segment, first quarter sales of $2.4 billion increased 8%. Sales volumes rose 6% and net selling prices improved 3% while changes in currency rates reduced sales by 1%. First quarter operating profit of $399 million increased 3%. The improvement included benefits from sales growth and cost savings, partially offset by input cost inflation and increased marketing, research and general expenses.
Sales in North America increased 1%. Net selling prices rose approximately 2%, driven by improved revenue realization for Huggies diapers and product mix was favorable by 1%, while overall sales volumes decreased about 1%. Infant care and child care volumes were down mid- and high-single digits, respectively, primarily reflecting category declines and consumer trade-down in child care. Volumes rose high-single digits in adult care, including benefits from market share growth, new Poise Hourglass Shape Pads and introductory shipments of new Depend Real Fit and Silhouette briefs. Feminine care volumes were up in the low single digits.
Sales in Europe increased 4%, despite an unfavorable currency impact of about 3%. Sales volumes rose 11%, with growth in child care, Huggies diapers and baby wipes, and non-branded offerings. Overall net selling prices fell approximately 5%, primarily due to increased promotional activity in the diaper category.
Sales increased about 17% for K-C International, which included an approximate 2 point drag from changes in currency rates. Sales volumes were up 12%, with double-digit growth in each major region (Asia, Latin America and the Middle East/Eastern Europe/Africa). Volume performance was strong in a number of markets, including Australia, Brazil, China, Israel, Russia, South Africa, South Korea, Venezuela and Vietnam. Overall net selling prices improved about 6% compared to the year-ago period, driven by increases in Latin America.