Kimberly Clark restructuring puts it on growth path

By Louise Prance

- Last updated on GMT

Related tags: Personal care, Currency

Kimberley-Clark has reported a significant boost in net sales and
income, with particular strength in the personal care sector,
helped by major cost reductions throughout the company.

Net sales for the year rose by 5.2 per cent to $4.2 bn, setting a new quarterly record, with overall net income achieving a noteworthy growth of 12 per cent, leading to an income of $364.2 million.

Sales increased at a double-digit rate in the developing and emerging markets, showing robust top-line growth and contributing to the overall gain in sales.

Diluted net income showed an increase of 16 per cent, rising from 58 cents per share in 2005 to 79 cents in 2006.

Kimberley-Clark produces health, hygiene and personal care brands such as Kotex and Scott and holds the No.1 and No.2 share positions in more than 80 countries. Personal care is the mainstay of the business.

Sales for the company's personal care products division advanced 6.7 per cent in the third quarter to reach $1.71bn, driven by primarily by sales volume growth of 5 per cent, whilst changes in foreign currency exchange rates also adding nearly 2 per cent to sales.

Compared to the third quarter of 2005, sales of personal care products increased around 2 per cent in North America, reflecting the tougher market conditions there.

Elsewhere market conditions were robust for the company, particularly in emerging markets.

Looking specifically at the personal care results it was emerging markets that led the way, with personal care product sales increasing by 15 per cent in North Asia, Latin America, and Middle East/Africa and Eastern Europe, helped by high sales volumes, better product mix and currency benefits.

The company also highlighted a particularly strong performance in Mexico, alongside a lower share count and the fruition of its cost reduction program as all being key factors to the overall improvement.

However, workforce reductions were part of the cost reduction initiative, seeing sale, closure or streamlining at approximately 19 out of the company's original 24 facilities.

As a result the company reported year-to-date savings of nearly $75 million for 2006, with $35 million saved in the third quarter.

Of its future restructuring plans, the company wants to streamline manufacturing and administrative operations primarily in North America and Europe, with the aim of reducing costs further and creating a more competitive platform for growth and margin in the future.

This will form part of plans to deliver at least $100 million of savings by the end of 2006, despite pre-taxes for the year expected to total approximately $500 million.

Considering the sales figures for 2006, the company is optimistic about the outlook with CEO Officer Thomas Falk stating that: "The positive trends in our ongoing results in both the second and third quarters give us confidence that we can achieve further improvement in the fourth quarter."

Looking to the year-end Falk added: "We expect solid top-line growth, driven by continued strength in developing and emerging markets, along with higher net selling prices and product mix improvements. At current exchange rates, foreign currency should also contribute positively."

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