Kimberly-Clark Ups Profit 64%, Reiterates Forecast For Year
Kimberly-Clark said that first-quarter profit jumped 64%, driven by growth in developing and emerging markets, and stood by its full-year profit view despite topping Wall Street's expectations as it faces higher fiber costs.
Profit was $452 million, or 98 cents a share, up from $275.1 million, or 60 cents a share, a year earlier.
Excluding items related to cost cutting plans and a restructuring announced in 2005, Kimberly-Clark earned $1.03 a share, up from 93 cents a share a year earlier.
The adjusted earnings topped analysts' average forecast of $1.01 a share, according to Thomson Financial. In March, Kimberly-Clark said such earnings should meet or top the high
end of a previous forecast of 99 cents to $1.01 a share.
During the quarter, the company spent $150 to repurchase about 2.2 million shares and the board approved an 8.2% dividend increase.
Chairman and Chief Executive Thomas Falk was asked during a conference call when Kimberly-Clark might think about doing something more aggressive with its balance sheet.
He said the company and board look at such things periodically. While looking at being more aggressive with the balance sheet "certainly" is a future opportunity, Falk had no announcements on any such plans today.
The board is set to meet later this week in conjunction with the company's annual shareholder meeting.
Sales Up, Forecast Maintained
Sales rose 7.8% to $4.39 billion, driven by developing and emerging markets, personal care products in North America and price increases. Sales rose about 5% excluding the impact of stronger foreign currencies.
Sales of personal care products rose 10.6% to $1.8 billion, driven by Huggies, but the company sold fewer Kotex feminine care products in North America. Sales of personal care products in developing and emerging markets jumped about 16%.
Sales of consumer tissue products such as Kleenex tissues, Cottonelle toilet paper and Scott paper towels rose 6.4% to $1.59 billion. In developing and emerging markets, consumer
tissue sales rose about 11%.
Kimberly-Clark said it still expects adjusted earnings of $4.10 to $4.20 a share this year. The analysts' average estimate is $4.21.
More expensive fiber is driving a higher level of inflation than Kimberly-Clark assumed coming into the year, but it expects to offset that pressure with strength in its business, Falk said.
"We think the company is being a little overly cautious about pulp costs, but this is probably the right thing," JP Morgan analyst John Faucher, who has a "neutral" rating on the shares, said in a research note.
During the call, Chief Financial Officer Mark Buthman said Kimberly-Clark absorbed $80 million in higher costs during the quarter, including nearly $60 million in higher fiber costs.
Kimberly-Clark is also spending more on marketing, with spending up almost $20 million in the quarter.
For the current second quarter, the Dallas-based company expects to earn $1.01 to $1.03 a share on an adjusted basis. Analysts, on average, call for a profit of $1.02 a share.
The shares hit a six-year high of $71.96 on Friday. The shares trade at about 15.8 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.