Kimberly-Clark results hit by cost pressures

By Simon Pitman

- Last updated on GMT

Related tags Personal care United states dollar Revenue

Kimberly-Clark has reported that its first quarter profits fell by
2.5 percent after being hit by higher cost pressures, despite a
strong increase in sales.

The personal care giant said that its profits were hard hit by a weakening US consumer environment and a significant hike in the price of commodities. Net income slipped from $452m in the corresponding period of 2007 to reach $440.9m, a figure that was in marked contrast to the sales results. The company said that profits were mainly affected by the fact that it absorbed approximately $160m in higher costs during the quarter, combined with an increased marketing spend of $22m. However cost savings of approximately $28m from the company's cost reduction plan helped to stem some of the effects of price rises. Sales rise 9.7 percent ​ Turnover for the period was up 9.7 percent to reach $4.81bn, a figure that also beat analysts' expectations, with average forecasts put at $4.75bn. Although sales registered particularly strong gains in Europe and developing markets - particularly from personal care activities, the company pointed out that half the revenue gains came from particularly favorable currency gains brought about by a weak US dollar. Overall sales of personal care products rose by 13.8 percent to reach $2.05bn, driven by an 8 percent rise in European sales and a 26 percent rise in developing and emerging markets. "Our personal care business continued to perform at a high level,"​ said CEO Thomas Falk. Personal care leads the way ​ While Falk applauded the top-line growth he also pointed out that bottom line growth for the personal care segment expanded at an even faster rate, stressing that double-digit gains had been achieved in every one of its geographic regions. Personal care sales in the US were up 8 percent, but one of the company's weakest areas was sales of tissue-based products, including brands such as Kleenex and Huggies, where the figure was stagnant. Overall sales for consumer tissue products rose by 7.1 percent to reach $1.70bn. Looking to the future, Falk did refer to 'unrelenting inflationary pressures' that are likely to affect second quarter and full year 2008 margins. However he also pointed to the fact that cost savings and favorable currency exchange rates were likely to have a counterbalancing effect on rising costs to some degree.

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