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Cost cuts boost Kimberly-Clark 3Q net income

DALLAS -- Consumer products company Kimberly-Clark net income rose 20 percent, helped by cost cuts and lower costs for commodities like fiber and other raw materials.

The company, which makes Kleenex tissue and Huggies diapers, also raised its earnings projection for the year and said it was ending some diaper operations in Europe.

Consumer products makers are increasingly looking outside of the U.S. for growth, but have found it can be tricky to match the right product and price with the right market as the European economy falters and China's growth slows.

Net income for the three months ended Sept. 30 totaled $517 million, or $1.30 per share. That compares with $432 million, or $1.09 per share, last year. Excluding costs related to restructuring its pulp and tissue operations, net income totaled $1.34 per share. Analysts expected $1.32 per share, according to FactSet.

Revenue fell 2.5 percent to $5.25 billion from $5.38 billion last year, missing analyst expectations of $5.34 billion. Revenue was hurt by about 5 percentage points the stronger dollar, which reduces the value of overseas sales.

In its personal care segment, which includes brands such as Kotex pads and Huggies, revenue rose 1 percent to $2.4 billion. Revenue from its consumer tissue segment, including Kleenex, fell 6 percent to $1.6 billion, hurt by the stronger dollar and restructuring actions.

Kimberly-Clark, based in Dallas, has decided to stop selling diapers in Western and Central Europe, except Italy. It also plans to streamline its European manufacturing operations. The company expects restructuring will cost $250 million to $350 million through 2014.

"The strategic changes we will be making in Europe should allow us to better focus on our best market positions and growth opportunities, improve our underlying profitability and enable more sustainable returns going forward in this part of the world," said CEO Thomas Falk.

Citi Investment research analyst Wendy Nicholson said she was encouraged that Kimberly-Clark is leaving the diaper business in Europe since that business hasn't been very profitable, but stuck with her "Neutral" rating because she said the stock is fairly valued.

The company also raised its earnings outlook for 2012. It now expects net income, excluding one-time items, will be $5.15 to $5.25 per share, from a prior range of $5.05 to $5.20 per share.

Shares of Kimberly-Clark fell 71 cents to $85.23 during morning trading.

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