Kimberly-Clark predicts increased marketing spend will be key to growth

By Simon Pitman

- Last updated on GMT

Related tags Investment Economics

Kimberly-Clark has weathered the economic storm relatively well compared to the other big personal care players, prompting the company to paint a rosy long-term forecast.

One of the keys to its success has been increased marketing spend, which will continue to increase at a faster rate than product innovation, targeted growth initiatives or brand equity, the company said during its recent investor meeting to highlight its objectives up to 2015.

The company simultaneously unveiled a three year cost saving plan, which it says targets further cost cuts of between $400m and $500m.

Business forecast

The company’s Investor Day Meeting was held this morning in New York to give both analysts and shareholders a view of how it forecasts the business developing over the course of the next five years.

Referencing the company’s original global business plan, which was launched in 2003, CEO Thomas Falk believes this has served as the basis for the company to operate more successfully during the economic downturn.

“We have strengthened our brands, increased our exposure to faster-growing higher-margin businesses and markets, generated significant cost savings, improved our capital efficiency and returned cash to shareholders,”​ Falk said.

Speaking of the updated business plan, Falk said the company was aiming to drive growth in its brands through continued investment in research and development and other growth initiatives, while remaining ‘financially disciplined’.

International markets have strong growth potential

Falk also pointed out that he expects the company’s international operations in Asia, Latin America, the Middle East, Eastern Europe and Africa to provide continued strong growth for the company.

He particularly highlighted China, Latin America and Russia areas of high-potential due to fast economic growth rates.

Profits and sales for the year ahead are expected to increase above marketed growth rates, although the company did also reiterate that earnings will be impacted by an anticipated loss for the adjustment of local currency following the devaluation of the Venezuelan Bolivar in January this year.

Personal care segment outperformed other divisions

For the full year 2009 the company recorded sales of $19.1bn, a fall of 1.5 percent compared to the €19.4bn recorded in 2008, while net income increased by 11.2 percent to $1.88bn.

However, the company’s personal care segment has faired better than other divisions, a performance that was underlined in the fourth quarter of 2009 when sales grew by 11.5 percent to $2.13bn, which represented a 5 percent increase in sales volumes.

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