"We have to make sure on an ongoing basis we are cost competitive," Tom Falk, Kimberly-Clark's chairman and chief executive officer, told CNBC. "Health care costs are going up, oil and gas costs are going up and we need to make sure we are driving productivity and making sure our costs are competitive on a day in and day out basis."
The company said savings from that program should total $485 million to $510 million for 2005 through 2007, up from a target of $400 million to $500 million set in December 2004.
Bank of America equity research analyst April Scee said there were no big surprises in the announcements, which came before a meeting with analysts and investors in New York. She has a "buy" rating and $73 price target on the shares.
During the meeting, which was also Webcast, new Chief Marketing Officer Tony Palmer said advertising and promotion expenses should rise at a faster rate than sales in 2007.
The company is relying less on television advertising and more on nontraditional venues such as the Internet. In 2007, it plans to spend about 43% of its marketing budget on television, down from 60% in 2004. Nontraditional marketing will make up 25% of spending, up from 10% in 2004, Palmer said.
Falk said that big acquisitions were still not an important part of the company's strategy and that Kimberly-Clark would continue to look at smaller opportunities in areas such as professional and health care products.
While Kimberly-Clark is best known for consumer products such as diapers, it also makes items like surgical gowns and gloves and respiratory products used in hospitals as well as wipes and other disposable products used in commercial settings.
Brighter First-Quarter View
Kimberly-Clark is in the midst of a restructuring announced in July 2005 that includes cutting 6,000 jobs as it works to improve its diaper and health-care businesses and expand in emerging markets.
The company, which has been under pressure from higher costs for materials such as pulp, had previously forecast first-quarter earnings of 99 cents to $1.01 per share, which excludes charges for strategic cost reductions. Now, it expects earnings to meet or exceed the high end of that range.
Analysts on average were expecting $1.01 a share, excluding special items, according to Reuters Estimates.
The company also backed its full-year profit forecast of $4.10 to $4.20 a share. The analysts' average estimate is $4.19.
Dallas-based Kimberly-Clark also still expects sales to rise 3% to 5% this year.
"Barring an unforeseen rise in costs, Kimberly's (2007) guidance appears conservative," Bear Stearns analyst Justin Hott said in a research note issued before the meeting began.
Hott has a "peer perform" rating on the shares.
The company also expects to incur incremental costs, primarily in the first six months of 2007, as it moves certain administrative processes to third-party providers. That move was previously announced.
Shares of Kimberly-Clark slipped earlier. The stock, which is near a six-year high of $70.28 hit in late February, trades at about 15.2 times next year's expected earnings, while larger rival Procter & Gamble trades at about 18.4 times its expected 2008 profit, according to Reuters data.