Kimberly-Clark sales down but outlook up on lower costs

By Simon Pitman

- Last updated on GMT

Related tags Revenue Generally accepted accounting principles United states dollar

Personal care giant Kimberly-Clark says net sales fell 6 per cent during its second quarter but says cost savings should boost full year results.

Sales for the period totaled $4.7bn, a figure that was hit by currency translation to the tune of 8 percent on the back of a strong US dollar against international currencies.

Currency translation offset by organic sales gains

The company said that the currency translation offset organic sales gains of 3 percent, driven by higher net selling prices, counteracting an overall sales volume decrease of around 2 percent to reach $2.12bn.

The underlying performance reflects the continued weakness of the global economy, which in turn is hitting consumer spending patterns worldwide.

Although the 8.0 percent decline in global sales of tissues was earmarked as having a significant impact on the results, the personal care business was also hard hit, with sales declining four percent in the US and 14 percent in Europe.

Developing markets save the day for personal care

In contrast sales of personal care products rose by 1 percent in developing markets, underlining the marked difference between the hard hit developed markets and stronger markets such as China and Brazil.

Overall net profits slipped nearly 6 percent, from $417m to $403m, however the company says that as a result of cost savings implemented through its restructuring scheme, the company management hopes it can tackle the slide in the latter half of the year.

Meanwhile gross profit margin increased by approximately 350 basis points, a figure that was achieved thanks to the organic sales growth in developing markets, combined with lower costs from commodity deflation and the savings from restructuring.

“All things considered, we are ahead of our plan for the year and are raising our earnings guidance accordingly,”​ said CEO Thomas Falk.

“We now expect earnings per share in 2009 will be in a range of $4.10 to $4.25 per share, up from our previous estimate of $4.00 to $4.20.”

The company says that this is because earnings for the last six months of the year should be significantly higher because of lower costs, partly attributable to the restructuring.

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