Kimberly-Clark 2Q profit declines 3 percent
DALLAS — Kimberly-Clark Corp. said Thursday its profit slipped 3 percent in the second quarter, but the maker of Huggies diapers and Kleenex tissue lifted its 2009 outlook because it expects a smaller hit from the strong dollar.
Investors were cheered by the outlook and sent shares of Kimberly-Clark up $2.75, or 5.1 percent, to $57.21 in afternoon trading.
Higher prices for its products as well as lower energy and commodity costs helped drive earnings above expectations.
“If you look in the U.S. in particular, starting in the personal care categories, particularly in diapers, which is where most of the pricing action typically happens, it looks like the price increases that we’ve taken that others have followed are mostly holding,” Falk said on a conference call with analysts.
Kimberly-Clark earned $403 million, or 97 cents per share, down from $417 million, or 99 cents per share, a year ago. Currency weighed down earnings by about 25 cents per share.
Revenue declined nearly 6 percent to $4.73 billion from $5 billion a year ago, with sales of consumer tissue products slipping 8 percent.
Selling prices rose about 6 percent in its personal care products unit, but sales still declined 2 percent.
Analysts expected earnings of 94 cents per share and revenue of $4.62 billion.
Chief Executive Thomas J. Falk said stronger gross margin, higher prices and lower costs helped offset a drag from currency and higher pension expenses.
Edward Jones analyst Jack Russo said the company shouldn’t have to raise prices following last year’s hike because commodity costs aren’t as high. “It was a good quarter. The company is certainly seeing the benefit of lower commodity costs,” he said.
Still, Russo said private label products have emerged as competitors because consumers are watching what they spend money on and are trading down to cheaper products.
Looking ahead, Dallas-based Kimberly-Clark raised its profit and sales outlook for 2009 because of favorable currency rates and cost savings.
The company expects earnings between $4.10 and $4.25 per share, up from a prior projection of earnings between $4 and $4.20. This includes a 15-cent charge to streamline operations. Last month, Kimberly-Clark revealed plans to cut 1,600 jobs, or 3 percent of its global work force.
Revenue will decline between 4 percent and 6 percent, better than previous guidance of a decline between 6 percent and 8 percent. Based on year-ago sales of $19.42 billion, that implies sales between $18.26 billion and $18.64 billion.
Analysts expect profit of $4.12 and sales of $18.5 billion for the year.
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