Kimberly-Clark sales boosted by recovery and currency translations

By Simon Pitman

- Last updated on GMT

Related tags Organic sales growth Marketing North america

Kimberly-Clark registered sales growth of 7.6 percent for its first quarter, boosted by a steady increase in organic sales and positive currency translations.

Sales for the three month period came in at $4.8bn, compared to $4.5bn in for the same period in 2009. This figure represented organic sales growth of 2 percent, further boosted by a 5 percent gain from foreign currency exchange rates.

However, despite the positive impact of the organic sales growth and currency translations, net income fell by 4.6 percent to $411m, impacted by an increase in marketing spend, and an increase in the effective tax rate.

Strong growth in personal care division

The sales figures were underlined by particularly strong growth in the company’s personal care division, rising 8.1 percent to $2.1bn, compared to a figure of $1.9bn for the corresponding quarter last year.

Like the group sales, those in the personal care division were positively impacted by currency translations of 5 percent, while sales volumes rose 3 percent, selling prices increased by 1 percent and product mix had a positive impact of 1 percent.

In North America, personal care sales grew by 4 percent, boosted by a 2 percent volume increase from the strong performance of brands such as Huggies Baby Wipes, and the extension of the U by Kotex line.

In Europe, personal care sales grew by 6 percent, which accounted for a positive currency exchange impact of 9 percent. Counterbalancing this, net selling prices declined by 2 percent, while product mix negatively impacted the figure by 1 percent.

In Asia, Latin America, the Middle East, Eastern Europe and Africa, personal care sales increased by 15 percent, impacted by positive currency translations of 9 percent and organic sales growth of 6 percent.

Solid start to the year

Company CEO Thomas Falk described the results as ‘a solid start to the year’, underlining the growth in organic sales of 2 percent, while also stressing that cost saving initiatives and company reorganization initiated last year should continue to improve margins and profitability.

In addition, we strengthened our brands by launching a number of innovations in the first quarter and by significantly increasing strategic marketing spend,”​ said Falk.

However, the modest organic sales growth in the first quarter prompted the company to downgrade its expectations for sales growth in 2010 from 5 to 6 percent to 4 to 6 percent.

On the other hand, the outlook for organic sales growth is more positive, with the company increasing its forecast for 2010 from 2 to 3 percent to 3 to 4 percent, while forecasts for volume growth rates remain the same at 2 to 3 percent.

Likewise currency translation rates are not expected to have the same positive impact enjoyed in recent quarters, with the impact expected to be around 0 to 1 percent in 2010, compared to earlier forecasts of 2 percent.

“Given recent input cost changes and expectations for additional near-term increases, particularly with pulp [diapers and tissue products], we are now experiencing significantly higher cost inflation in 2010 than previously estimated,”​ said Falk.

“So, we are aggressively looking for ways to increase revenue realization and focusing on generating incremental cost savings and controlling discretionary spending.”

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