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Kimberly-Clark Announces First Quarter 2016 Results

DALLAS, April 22, 2016 /PRNewswire/ -- Kimberly-Clark Corporation KMB, -2.88% today reported first quarter 2016 results and confirmed its previous guidance for full-year 2016 adjusted earnings per share.

Executive Summary

  • First quarter 2016 net sales of $4.5 billion decreased 5 percent compared to the year-ago period, as changes in foreign currency exchange rates reduced sales 7 percent. Organic sales rose 2 percent, including a 5 percent increase in developing and emerging markets.
  • Diluted net income per share for the first quarter was $1.50 in 2016 and $1.27 in 2015.
  • First quarter adjusted earnings per share were $1.53 in 2016 and $1.42 in 2015. Performance benefited from organic sales growth, cost savings, input cost deflation and a lower adjusted effective tax rate. Comparisons were negatively impacted by unfavorable foreign currency exchange rate effects and increased marketing, research and general spending on a local currency basis. Adjusted earnings per share in both years exclude certain items described later in this news release.

Chairman and Chief Executive Officer Thomas J. Falk said, "We continue to execute our Global Business Plan strategies for long-term success and we are confirming our previous top- and bottom-line outlook for 2016. In the first quarter, organic sales grew more than 2 percent and our adjusted operating profit margin improved by 90 basis points. We achieved $110 million of total cost savings from our FORCE program and 2014 Organization Restructuring and continued to allocate capital in shareholder-friendly ways."

Falk added, "For the full-year, we continue to expect our organic sales to grow 3 to 5 percent. Compared to the first quarter, we expect more benefits from targeted growth initiatives, product innovations and improved net realized revenue. On the bottom-line, we continue to expect adjusted earnings per share to be in a range of $5.95 to $6.15. In summary, we expect to deliver on our commitments again this year."

First Quarter 2016 Operating Results

Sales of $4.5 billion in the first quarter of 2016 were down 5 percent compared to the year-ago period. Changes in foreign currency exchange rates reduced sales 7 percent as a result of the weakening of most currencies relative to the U.S. dollar. Organic sales rose 2 percent due to higher volumes.

First quarter operating profit was $804 million in 2016 and $748 million in 2015. Adjusted operating profit was $818 million in the first quarter of 2016 compared to $815 million in the year-ago period. Adjusted results in 2016 exclude $14 million of 2014 Organization Restructuring costs. Adjusted results in 2015 exclude a $45 million charge for a balance sheet remeasurement in Venezuela, $13 million of 2014 Organization Restructuring costs and $9 million of charges for pension settlements.

The year-over-year adjusted operating profit comparison benefited from organic sales growth, $95 million in cost savings from the company's FORCE (Focused On Reducing Costs Everywhere) program and $15 million of savings from the 2014 Organization Restructuring. Input costs decreased $30 million, including $25 million of lower costs for raw materials other than fiber and $5 million of lower fiber costs. Translation effects due to changes in foreign currency exchange rates lowered operating profit by $50 million and transaction effects also negatively impacted the comparison. Total marketing, research and general expenses increased on a local currency basis, driven by higher selling, administrative and research costs. On an adjusted basis, other (income) and expense, net was expense of $10 million in 2016 and $13 million in 2015. Results in both periods were driven by foreign currency transaction losses.

The first quarter effective tax rate was 28.3 percent in 2016 and 33.8 percent in 2015. The first quarter adjusted effective tax rate, which excludes the effects of the previously mentioned items excluded from adjusted earnings per share, was 28.3 percent in 2016, down from 32.3 percent in 2015 as a result of benefits from certain tax planning initiatives. The company continues to expect that the full-year 2016 adjusted effective tax rate will be between 30.5 percent and 32.5 percent.

Kimberly-Clark's share of net income of equity companies in the first quarter was $35 million in 2016 and $36 million in 2015. At Kimberly-Clark de Mexico, results benefited from organic sales growth, lower input costs and cost savings, but were negatively impacted by a weaker Mexican peso.

Cash Flow and Balance Sheet

Cash provided by operations in the first quarter of 2016 was $553 million versus $20 million in 2015. The increase was driven by lower pension contributions and tax payments. First quarter defined benefit pension plan contributions were $30 million in 2016 and $435 million in 2015.

Capital spending for the first quarter was $220 million in 2016 and $284 million in 2015. First quarter 2016 share repurchases were 1.1 million shares at a cost of $150 million. Total debt was $7.9 billion at March 31, 2016 and $7.8 billion at the end of 2015.

First Quarter 2016 Business Segment Results

Personal Care Segment

First quarter sales of $2.2 billion decreased 4 percent. Changes in currency rates reduced sales 9 percent. Volumes increased 3 percent and product mix was favorable by 1 percent. First quarter operating profit of $449 million decreased 1 percent. The comparison was impacted by unfavorable currency effects and increased marketing, research and general spending on a local currency basis, mostly offset by organic sales growth, cost savings and lower input costs.

Sales in North America increased 3 percent. Volumes improved 5 percent, while the combined impact of changes in net selling prices and product mix reduced sales 1 percent. Currency was unfavorable 1 percent. Adult care volumes increased double-digits, with benefits from category growth, innovations and market share gains. Baby wipes and child care volumes each rose mid-single digits, including benefits from innovations. Feminine care volumes advanced low-single digits and diaper volumes were even with year-ago levels.

Sales in developing and emerging markets decreased 11 percent, including an approximate 18 point drag from unfavorable currency rates. Changes in volumes, net selling prices and product mix each improved sales 2 percent. The volume growth included gains in China and portions of Latin America. Volumes were down in Brazil, as comparisons were impacted by difficult economic conditions and strong growth in the base period. The higher net selling prices were driven by Latin America and Eastern Europe in response to weaker currency rates and local cost inflation. Net selling prices declined in China due to increased promotion activity.

Sales in developed markets outside North America (Australia, South Korea and Western/Central Europe) decreased 7 percent, including a 9 point drag from unfavorable currency rates. Volumes rose 2 percent, driven by Australia. Product mix improved 2 percent, while net selling prices were off 2 percent.

Consumer Tissue Segment

First quarter sales of $1.5 billion decreased 5 percent. Currency rates were unfavorable by 5 percent. Net selling prices were up 1 percent, while changes in product mix reduced sales 1 percent. First quarter operating profit of $280 million decreased 4 percent. The comparison was impacted by unfavorable currencies, partially offset by cost savings.

Sales in North America increased 1 percent. Volumes were up 3 percent, while product mix was unfavorable 2 percent. Volumes improved in all product categories, led by paper towels.

Sales in developing and emerging markets decreased 14 percent, including a 14 point negative impact from currency rates. Net selling prices rose about 5 percent, while volumes fell 4 percent. The changes in net selling prices and volumes mostly occurred in Latin America.

Sales in developed markets outside North America fell 9 percent. Currency rates were unfavorable 7 percent. Volumes fell 2 percent, primarily in Western/Central Europe. Net selling prices declined 1 percent, while product mix improved 1 percent.

K-C Professional (KCP) Segment

First quarter sales of $0.8 billion decreased 4 percent. Changes in currency rates reduced sales 5 percent. Volumes and net selling prices each increased 1 percent, while product mix/other was unfavorable 1 percent. The decline in product mix/other included an approximate 2 percent impact from lower sales of nonwovens to Halyard Health, Inc. First quarter operating profit of $150 million increased 12 percent. The comparison benefited from organic sales growth and cost savings, partially offset by unfavorable currency effects.

Sales in North America increased 3 percent. Volumes improved 3 percent, driven by growth in washroom products and wipers. The combined impact of changes in net selling prices and product mix added 1 point to sales, while currency was unfavorable 1 percent.

Sales in developing and emerging markets decreased 11 percent, including a 15 point drag from currency rates. Net selling prices rose 5 percent and product mix improved 3 percent, while volumes were off 4 percent.

Sales in developed...


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