Kimberly-Clark profits rocket despite sales fall

By Simon Pitman

- Last updated on GMT

Related tags: Personal care sales, Percent negative impact, North america

Kimberly-Clark's third quarter sales continue to slide, but restructuring and lower commodity prices help net profits rise by 41 per cent.

Net sales in the quarter fell by 1.7 percent to $4.9bn, which the company said was largely down to currency translations offsetting organic sales growth of 3 percent, while sales volumes remained flat compared to the previous year.

The company’s mainstay, personal care sales, declined by 0.7 percent compared to the same period in 2008, down from $2.15bn to $2.13bn.

Net income during the quarter rose from $413m in the corresponding period last year to $582m, a figure that was achieved through double digit organic sales growth in developing markets, alongside significant cost savings and lower commodity prices.

Results beat expectations

The results were ahead of market analysts’ expectations and the company’s own forecasts, prompting management to be more optimistic about its full year results, in turn prompting share prices to rise by more than five percent yesterday, closing at $63.00.

“We realized sizable benefits from improved net realized revenue, and our strategy of driving efficiency in every aspect of our operation led to another quarter of significant cost reductions as well as overhead efficiencies,”​ said Kimberly-Clark CEO Thomas Falk.

The company pointed out that the personal care sales were attributable to a 5 percent hike in net selling prices combined with a 1 percent increase in volumes, which in turn was counterbalanced by a 6 percent hit from foreign currency and a further 1 percent from unfavorable product mix.

Europe and North America slump while developing markets boom

On a regional basis personal care sales fell by nearly 1 percent in North America, while sales were even harder hit in Europe, declining 9 percent on the back of a 12 percent hit from unfavorable currency exchange.

Sales were strongest once again in the developing markets, where an increase of 2 percent was registered, but this gain was also wiped out by an 11 percent negative impact from currency exchange.

The company said that its European and North American professional and consumer tissue sales continued to be negatively impacted by the global economic downturn, while heath care products rose by nearly 16 percent, driven by global demand for face masks caused by the recent flu epidemic.

Results continue to improve

In the first nine months of the year the company said that sales fell by 4.6 percent to $14.1bn, largely impacted by currency translation which had a negative impact of 8 percent.

Net income during the nine month period rose by 9.5 percent, up from $1.27bn in 2008 to $1.39bn for the current period.

In view of the improved performance, the company said that it was upping its forecast for the full year, stating that it expects net sales to decline by 2 percent, as opposed to its original forecast which had estimated a decline margin of between 4 and 6 percent.

Related topics: Business & Financial

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