Kimberly-Clark 4Q 2018 Results: Net Sales down 1 percent from Year ago to $4.6 Billion

Kimberly-Clark Corporation has reported year-end 2018 results, provided its 2019 outlook and introduced its K-C Strategy 2022 strategic plan. Fourth quarter 2018 net sales of $4.6 billion decreased 1 percent compared with the year-ago period. Changes in foreign currency exchange rates reduced sales by 4 percent while organic sales increased 3 percent. Full-year 2018 net sales of $18.5 billion rose 1 percent, including organic sales growth of 1 percent.

Net sales in 2019 are expected to decrease between 1 and 2 percent, including a 3 to 4 percent negative impact from changes in foreign currency exchange rates. Organic sales are expected to increase 2 percent. The company's Board of Directors has approved a 3 percent increase in the quarterly dividend for 2019, which is the 47th consecutive annual increase in the dividend.

CEO Mike Hsu said, "In 2018, we returned to delivering organic sales growth and we continued to launch innovations, pursue our growth priorities and invest in our brands. Overall, it was a challenging macro environment and our margins declined, reflecting significant commodity inflation and currency volatility. Nonetheless, I'm encouraged that in response to these headwinds we achieved higher selling prices in the second half of the year."

Hsu continued, "We expect the environment in 2019 will remain challenging, although somewhat better than in 2018. In this environment, our teams will continue to execute our strategies for long-term success. We are targeting to deliver a solid operating plan, with higher organic sales growth compared to 2018 and improved margins despite expectations for significant headwinds from commodities and currencies. We also expect to return substantial cash to shareholders."

Hsu concluded, "K-C Strategy 2022 is our plan to deliver balanced and sustainable growth by growing our portfolio of iconic brands, leveraging our strong cost and financial discipline and allocating capital in value-creating ways. We will build upon our strong foundation, sharpen our focus on the consumer and further improve our capabilities to create even more competitive advantage going forward. We're also establishing medium-term financial objectives associated with K-C Strategy 2022 that are appropriate and realistic in the current environment. Longer-term, we continue to have significant optimism in the potential of our categories. We are confident in our prospects and our ability to create shareholder value through successful execution of our strategies."

For the full year 2018, sales of $18.5 billion increased 1 percent compared to the year-ago period. Organic sales rose more than 1 percent, as product mix, volumes and net selling prices were all up slightly. Changes in foreign currency exchange rates reduced sales approximately 1 percent. In North America, organic sales increased 3 percent in K-C Professional and 1 percent in consumer products. Outside North America, organic sales increased 2 percent in developing and emerging markets and 1 percent in developed markets.

Operating profit was $2,229 million in 2018, including charges related to the 2018 Global Restructuring Program, and $3,358 million in 2017. Adjusted operating profit was $3,138 million in 2018 and $3,382 million in 2017. The comparison was impacted by $795 million of higher input costs, along with unfavorable currency effects.

Kimberly-Clark is introducing K-C Strategy 2022 as the company looks ahead to its 150-year anniversary in 2022. The plan's objectives are to deliver balanced and sustainable growth and to create shareholder value in what is assumed to be a continued challenging environment. The plan is focused on growing Kimberly-Clark's iconic brand portfolio, leveraging the company's strong cost and financial discipline and allocating capital in value-creating ways. Key highlights:

The company will target to grow sales in-line with, or slightly ahead of, category growth rates. Kimberly-Clark's three growth pillars are to elevate core businesses, accelerate growth in D&E markets and drive digital marketing and e-commerce. The company expects to achieve these pillars by launching differentiated product innovations, driving category development and leveraging commercial capabilities in sales and marketing.
The company will generate savings in order to fund growth initiatives and improve margins. Focus areas will include driving ongoing supply chain productivity improvements through the FORCE program, executing the 2018 Global Restructuring Program, rigorously controlling discretionary spending to sustain the company's top-tier overhead cost structure and driving further improvement in working capital.
The company will allocate capital in value-creating ways, enabled by strong cash generation. Kimberly-Clark expects to spend capital at an annual rate of 4 to 5 percent of net sales after completing the 2018 Global Restructuring Program. In addition, the company plans to return significant amounts of cash to shareholders through dividends and share repurchases.

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