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Kimberly-Clark 2Q 2021 Results: Net Sales Up 2 Percent From Year Ago to $4.7 billion
Executive Summary
Chairman and chief executive officer Mike Hsu said, "Our second quarter reflects continued pandemic-driven volatility. We are facing significantly higher input costs and a reversal in consumer tissue volumes from record growth in the year ago period as consumers and retailers in North America continued to reduce home and retail inventory. While we look forward to a return to a more normalized environment, we have moved decisively to take pricing actions to mitigate inflationary headwinds and continue to prudently manage costs. We remain confident in our strategy and in our fundamental brand performance. Our personal care business is performing well, and we continue to improve our market positions in key markets and realize robust growth across Developing and Emerging Markets." Hsu continued, "We will continue to execute K-C Strategy 2022. While our updated outlook reflects a more challenging near-term environment, we are taking appropriate actions and remain confident in our strategies to create long-term shareholder value." Second Quarter 2021 Operating Results Sales of $4.7 billion in the second quarter of 2021 increased 2 percent versus the prior year. Changes in foreign currency exchange rates increased sales 3 percent and the net impact of the Softex Indonesia acquisition and exited businesses in conjunction with the 2018 Global Restructuring Program increased sales 2 percent. Organic sales decreased 3 percent as volumes declined 4 percent while the combined impact of changes in net selling prices and product mix increased sales approximately 1 percent. In North America, organic sales decreased 11 percent in consumer products and 4 percent in K-C Professional. Volumes in North America, particularly consumer tissue, were negatively impacted by consumer and retailer destocking following the stock up that occurred in prior periods related to the global outbreak of COVID-19. Outside North America, organic sales were up 9 percent in developing and emerging (D&E) markets and up 1 percent in developed markets. Second quarter operating profit was $613 million in 2021 and $925 million in 2020. Results in both periods include charges related to the 2018 Global Restructuring Program. Second quarter adjusted operating profit was $676 million in 2021 and $1,012 million in 2020. Results were impacted by lower sales volumes and $345 million of higher input costs, driven by pulp, other materials and distribution costs. Other manufacturing costs were higher, including inefficiencies from lower production volumes. Results benefited from higher net selling prices, $115 million of cost savings from the company's FORCE (Focused On Reducing Costs Everywhere) program, $30 million of cost savings from the 2018 Global Restructuring Program and lower marketing, research and general expense. The second quarter effective tax rate was 22.8 percent in 2021 and 23.2 percent in 2020. The second quarter adjusted effective tax rate was 22.5 percent in 2021 and 22.7 percent in 2020. Kimberly-Clark's share of net income of equity companies in the second quarter was $28 million in 2021 and $35 million in 2020. Cash Flow and Balance Sheet Cash provided by operations in the second quarter was $565 million in 2021 and an all-time record of $1,579 million in 2020. The decrease was driven by higher working capital, lower earnings and higher tax payments. Capital spending for the second quarter was $201 million in 2021 and $284 million in 2020. Second quarter 2021 share repurchases were 1.2 million shares at a cost of $161 million. The company now plans for full-year repurchases of $400 to $450 million, below the original target range of $650 to $750 million. Total debt was $9.1 billion at June 30, 2021 and $8.4 billion at the end of 2020. Second Quarter 2021 Business Segment Results: Consumer Tissue Segment Second quarter sales of $1.4 billion decreased 13 percent. Volumes declined 15 percent while changes in currency rates increased sales about 3 percent. The volume decline was driven by reduced shipments in North America, reflecting category softness as retailers reduce inventory and consumers reduce at home usage and pantry levels following the stock up that occurred in prior periods related to the global outbreak of COVID-19. Second quarter operating profit of $196 million decreased 54 percent. The comparison was impacted by lower organic sales, higher input costs and other manufacturing cost increases, including inefficiencies from lower production volumes. Results benefited from cost savings, lower advertising spending and favorable currency effects. Sales in North America decreased 26 percent. Volumes fell 27 percent and product mix was down 2 percent, while net selling prices improved 2 percent. Sales in D&E markets increased 9 percent including a 3 point favorable impact from changes in currency rates. Volumes rose 3 percent and product mix improved 1 percent, while net selling prices were down 2 percent. The Softex Indonesia acquisition increased sales 4 percent. Sales in developed markets outside North America increased 1 percent, including a 10 percent benefit from changes in currency rates. Net selling prices were down 6 percent, compared to very low promotion levels in the year-ago period, and volumes were down 1 percent. Exited businesses related to the 2018 Global Restructuring program reduced sales 2 percent. K-C Professional (KCP) Segment Second quarter sales of $0.8 billion increased 6 percent. Net selling prices increased approximately 5 percent, product mix improved 1 percent and changes in currency rates increased sales 3 percent. Volumes declined 4 percent. Second quarter operating profit of $110 million decreased 29 percent. The comparison was impacted by lower volumes and higher input costs. Results benefited from increased net selling prices and cost savings. Sales in North America decreased 3 percent. Volumes were down 11 percent, while net selling prices rose approximately 6 percent and product mix improved 2 percent. Sales were down mid-teens in washroom products and wipers while sales increased double-digits in safety and other products, mostly due to higher net selling prices and favorable product mix. Sales in D&E markets increased 31 percent including a 3 point benefit from changes in currency rates. Volumes rose 24 percent, compared to a soft year-ago period, while net selling prices increased 5 percent. Sales in developed markets outside North America were up 13 percent including an 11 percent benefit from changes in currency rates. Net selling prices increased 5 percent while volumes decreased approximately 2 percent. Year-To-Date Results For the first six months of 2021, sales of $9.5 billion decreased 2 percent. Organic sales decreased 5 percent, as volumes declined 7 percent and net selling prices and product mix each improved 1 percent. Changes in foreign currency exchange rates increased sales by approximately 2 percent and the net impact of the Softex Indonesia acquisition and business exits in conjunction with the 2018 Global Restructuring Program increased sales 2 percent. Year-to-date operating profit was $1,383 million in 2021 and $1,829 million in 2020. Results in both periods include charges related to the 2018 Global Restructuring Program. Year-to-date adjusted operating profit was $1,480 million in 2021 and $2,009 million in 2020. Results were impacted by lower sales volumes, higher input costs and elevated other manufacturing costs. Results benefited from higher net selling prices, $180 million of FORCE savings and $70 million of cost savings from the 2018 Global Restructuring Program. Through six months, diluted net income per share was $2.92 in 2021 and $3.92 in 2020. Year-to-date adjusted earnings per share were $3.27 in 2021 and $4.34 in 2020. 2018 Global Restructuring Program In January 2018, Kimberly-Clark initiated the 2018 Global Restructuring Program in order to reduce the company's structural cost base and enhance the company's flexibility to invest in its brands, growth initiatives and capabilities critical to delivering future growth. As part of the program, Kimberly-Clark expects to exit or divest some low-margin businesses that generate about 1 percent of company net sales. The restructuring is expected to be completed in 2021. Total restructuring charges are anticipated to be $2,000 to $2,100 million pre-tax ($1,490 to $1,570 million after tax). The company expects the program will generate annual pre-tax cost savings of $540 to $560 million by the end of 2021. Through the second quarter of 2021, the company has incurred cumulative restructuring charges of $1,974 million pre-tax ($1,474 million after tax) and generated cumulative savings of $495 million. 2021 Outlook and Key Planning Assumptions The company updated the following key planning and guidance assumptions for full-year 2021:
This news release includes information regarding organic sales growth, which describes the impact of changes in volume, net selling prices and product mix on net sales. Changes in foreign currency exchange rates, acquisitions and exited businesses also impact the year-over-year change in net sales. |
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