Operating profit was $796 million in the second quarter of 2013, up 6 percent from $754 million in 2012. Adjusted operating profit was $818 million in the second quarter of 2013, up 6 percent compared to $773 million in the year-ago period. Adjusted results exclude $22 million of restructuring costs for European strategic changes in 2013 and $19 million of costs for pulp and tissue restructuring actions in 2012.
The increase in year-over-year adjusted operating profit included benefits from organic sales growth and $80 million in cost savings from the company’s FORCE (Focused On Reducing Costs Everywhere) program. Input costs were $30 million higher overall versus 2012, with $15 million of higher fiber costs, a $10 million increase in energy and $5 million of higher distribution costs. Foreign currency translation effects, as a result of the weakening of several currencies relative to the U.S. dollar, reduced operating profit by $15 million. Currency transaction effects also negatively impacted the operating profit comparison. Other (income) and expense, net was $8 million of income in 2013 and $18 million of income in 2012. The change was driven by the resolution of a legal matter in the prior year.
“We delivered another solid quarter of results while we continued to execute our Global Business Plan strategies,” said chairman and CEO Thomas J. Falk. “We achieved 3 percent organic sales growth, as excellent results in K-C International more than offset mixed volume performance in the developed markets. We generated $80 million of cost savings, improved adjusted operating profit margin by 80 basis points and delivered an 8 percent increase in adjusted earnings per share. We also launched a number of product innovations and continued to allocate capital in shareholder-friendly ways. At the half way point of the year, I am encouraged by our progress overall.”
Personal care segment second quarter sales of $2.4 billion decreased 1 percent. Lost sales as a result of European strategic changes reduced sales volumes by 3 percent and currency rates were unfavorable by 1 percent, while organic sales volumes rose 3 percent. Second quarter operating profit of $432 million increased 6 percent. The comparison benefited from organic sales growth and cost savings, partially offset by input cost inflation and unfavorable currency rates.
Sales in North America were down 3 percent, with volumes and product mix each off more than 1 percent. Feminine care volumes fell high-single digits compared to strong growth in the year-ago period. Child care volumes decreased mid-single digits, including lower shipments for Huggies Little Swimmers swim pants. Volumes for non-branded personal care offerings were also below year-ago levels. Adult care volumes increased mid-single digits, with benefits from product innovation and market share gains on the Depend brand. Huggies baby wipe volumes were up low-single digits, while Huggies diaper volumes were similar to a soft year-ago performance.
Sales increased 5 percent in K-C International, despite a 3-point negative impact from changes in currency rates. Sales volumes were up 6 percent and net selling prices and product mix each added 1 point of growth. Volumes increased significantly in China, Russia, Vietnam and throughout most of Latin America, including Brazil, but declined in Venezuela.
Sales in Europe decreased 29 percent, including a 36-point negative impact from lost sales in conjunction with European strategic changes and a 1-point drag from currency rates. Organic sales volumes rose 8 percent, driven by growth in non-branded offerings, Huggies baby wipes and child care products.