K-C ‘optimistic’ following flat Q2 net sales
DALLAS — Kimberly-Clark Corporation’s net sales for the second quarter ended June 30 were flat at $5.27 billion compared to the year-ago period.
Sales adjusted to exclude the impact of changes in foreign currency exchange rates and lost sales as a result of European strategic changes and pulp and tissue restructuring actions rose 3.
"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% 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% 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 halfway point of the year, I am encouraged by our progress overall."
The company’s operating profit for the quarter was $796 million, up 6% from $754 million in 2012. Operating profit for the quarter adjusted to 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 was $818 million, up 6% compared to $773 million in the year-ago period.
“Although the macro environment has become more volatile recently, we continue to be optimistic about our prospects to drive profitable growth and to generate attractive returns to shareholders," added Falk.
In October 2012, Kimberly-Clark decided to make strategic changes to its Western and Central European businesses to improve underlying profitability and to focus resources and investments on stronger market positions and growth opportunities that could deliver more sustainable returns. These changes include the exit of the diaper category in Western and Central Europe, with the exception of the Italian market, and the divestiture or exit of some lower-margin businesses in certain markets, mostly in the consumer tissue segment. To align its cost structure with these strategic decisions, Kimberly-Clark is streamlining its European manufacturing footprint and administrative organization.
Restructuring costs for these actions will be incurred through 2014 and are expected to total $300 to $350 million after tax ($350 to $400 million pre-tax), unchanged from the estimate communicated in April 2013. Cash costs are projected to be approximately 50-60% of the total charges, consistent with prior estimates. The impacted businesses generated annual net sales of approximately $0.5 billion and negligible operating profit. Second quarter 2013 restructuring costs were $21 million after tax ($22 million pre-tax), bringing cumulative costs to $284 million after tax ($352 million pre-tax).
In 2011 and 2012, the company executed pulp and tissue restructuring actions to exit its remaining integrated pulp manufacturing operations and improve the underlying profitability and return on invested capital of its consumer tissue and K-C Professional businesses. The restructuring actions were substantially completed by December 31, 2012. Pulp and tissue restructuring charges were excluded from the calculation of the company's earnings and earnings per share, gross and operating profit and the effective tax rate, calculated in accordance with GAAP, for the three and six months ended June 30, 2012.