Kimberly-Clark 4Q Results: Sales up 3 Percent to $4.96 Billion

Executive Summary

Fourth quarter 2021 net sales of $5.0 billion increased 3 percent compared to the year-ago period, including organic sales growth of 3 percent. Full-year 2021 net sales of $19.4 billion increased 2 percent, with organic sales down 1 percent.
Diluted net income per share for the fourth quarter was $1.06 in 2021 and $1.58 in 2020. Full-year diluted net income per share was $5.35 in 2021 and $6.87 in 2020.
Fourth quarter adjusted earnings per share were $1.30 in 2021, down 23 percent compared to $1.69 in 2020. Adjusted earnings per share exclude certain items described later in this news release.• Full-year adjusted earnings per share were $6.18 in 2021, down 20 percent compared to $7.74 in 2020. The company's previous guidance was for adjusted earnings per share of $6.05 to $6.25
.Net sales in 2022 are expected to increase 1 to 2 percent, including organic sales growth of 3 to 4 percent. Diluted net income per share for 2022 is anticipated to be $5.60 to $6.00.
The company's Board of Directors has approved a 1.8 percent increase in the quarterly dividend, which is the 50th consecutive annual increase in the dividend.

Chairman and chief executive officer Mike Hsu said, "Our teams have been executing well in this challenging macro and operating environment, maintaining cost discipline, balancing pricing initiatives, taking care of our customers, and continuing to build our brands and grow share. We were especially pleased with our topline growth in personal care and D&E over the year."

Hsu continued, "Looking ahead, we will continue to invest in innovation, supporting our brands, and accelerating topline growth. While we expect inflation and supply-chain disruption to persist into 2022, we are committed to recovering margins to pre-pandemic levels over time, and we are optimistic about gradual improvement later in the year.

We remain confident in the potential of our categories in the near and long-term, and in our ability to create meaningful shareholder value while we work to achieve our purpose of better care for a better world. I am grateful for the incredible dedication of our talented teams in 2021, and we are committed to doing all we can to ensure a safe, healthy, and rewarding work environment in the year ahead."

Fourth Quarter 2021 Operating Results

Sales of $5.0 billion in the fourth quarter of 2021 increased 3 percent versus the prior year. Organic sales increased 3 percent as net selling prices rose 2 percent and product mix increased sales 1 percent. In North America, organic sales were even with year-ago in consumer products and increased 2 percent in K-C Professional. Outside North America, organic sales rose 8 percent in developing and emerging (D&E) markets and 2 percent in developed markets.

Fourth quarter operating profit was $521 million in 2021 and $749 million in 2020. Results in both periods include charges related to the 2018 Global Restructuring Program. Results in 2020 also include Softex Indonesia acquisition-related costs and a benefit from the resolution of a business tax matter in Brazil.
Fourth quarter adjusted operating profit was $611 million in 2021 and $767 million in 2020. Results were impacted by $530 million of higher input costs, driven by pulp and polymer-based materials, distribution and energy costs. Results benefited from organic sales growth, $115 million of cost savings from the company's FORCE (Focused On Reducing Costs Everywhere) program, $35 million of cost savings from the 2018 Global Restructuring Program, lower other manufacturing costs and reduced marketing, research and general expense. Foreign currency transaction effects also positively impacted the comparison.

The fourth quarter effective tax rate was 20.9 percent in 2021 and 24.6 percent in 2020. The fourth quarter adjusted effective tax rate was 21.9 percent in 2021 and 22.2 percent in 2020. Kimberly-Clark's share of net income of equity companies in the fourth quarter was $10 million in 2021 and $38 million in 2020. Results were negatively impacted by input cost inflation and 2018 Global Restructuring Program charges.

Cash Flow and Balance Sheet

Cash provided by operations in the fourth quarter was $1,062 million in 2021 and $887 million in 2020. Full-year cash provided by operations was $2,730 million in 2021 compared to a record $3,729 million in 2020. The full-year comparison was impacted by lower earnings and less cash provided by working capital. Capital spending for the fourth quarter was $273 million in 2021 and $323 million in 2020. Full-year spending was $1,007 in 2021 and $1,217 in 2020.

Fourth quarter 2021 share repurchases were 0.1 million shares at a cost of $7 million, bringing full-year repurchases to 3.0 million shares at a cost of $400 million. Total debt was $8.6 billion at the end of 2021 and $8.4 billion at the end of 2020.

Consumer Tissue Segment

Fourth quarter sales of $1.6 billion decreased 10 percent. The net impact of the Softex Indonesia acquisition and exited businesses in conjunction with the 2018 Global Restructuring Program decreased sales 1 percent. Volumes declined 7 percent and net selling prices decreased approximately 1 percent. The volume comparison reflects elevated shipments in North America in the year-ago period to support higher consumer and customer demand related to COVID-19. Fourth quarter operating profit of $201 million decreased 40 percent. The comparison was impacted by lower organic sales and higher input costs. Results benefited from cost savings and reduced marketing, research and general spending.
Sales in North America decreased 14 percent. Volumes fell 10 percent in the quarter. Net selling prices declined 4 percent as 2021 pricing actions were more than offset with lower promotion expense in the base period.

Sales in D&E markets increased 3 percent. Net selling prices rose 4 percent, product mix improved 1 percent while volumes were down 3 percent. The Softex Indonesia acquisition increased sales 1 percent.
Sales in developed markets outside North America decreased 6 percent. Exited businesses related to the 2018 Global Restructuring program reduced sales approximately 5 percent while changes in foreign currency exchange rates decreased sales 1 percent. Volumes were down 2 percent while net selling prices rose 1 percent.

K-C Professional (KCP) Segmen

Fourth quarter sales of $0.8 billion increased 2 percent. Net selling prices rose 4 percent while volumes declined 2 points. Fourth quarter operating profit of $72 million decreased 31 percent. The comparison was impacted by higher input costs. Results benefited from organic sales growth, lower other manufacturing costs, cost savings, and reduced marketing, research and general spending.

Sales in North America increased 2 percent. Net selling prices rose 5 percent while volumes declined 3 percent. Sales were up double-digits in washroom products, driven by volume growth as the business continued to recover from pandemic lows.Sales in D&E markets increased 5 percent versus a soft year-ago. Volumes rose approximately 6 percent, net selling prices increased slightly while changes in foreign currency exchange rates decreased sales 1 percent.

Sales in developed markets outside North America were down 1 percent. Net selling prices increased 5 percent while volumes decreased approximately 5 percent. Foreign currency exchange rates were unfavorable 1 percent.

Full Year 2021 Results

Sales of $19.4 billion increased 2 percent. Organic sales decreased 1 percent as volumes declined 4 percent while net selling prices increased 2 percent and product mix improved 1 percent. Changes in foreign currency exchange rates increased sales by 1 percent and the net impact of the Softex Indonesia acquisition and business exits in conjunction with the 2018 Global Restructuring Program increased sales approximately 1 percent.

Operating profit was $2,561 million in 2021 and $3,244 million in 2020. Results in both periods include charges related to the 2018 Global Restructuring Program. Results in 2020 also included Softex Indonesia acquisition-related costs and a benefit from the resolution of a business tax matter in Brazil.

Adjusted operating profit was $2,836 million in 2021 and $3,582 million in 2020. Results were impacted by lower sales volumes, $1,490 million of higher input costs and elevated other manufacturing costs. Results benefited from higher net selling prices, $410 million of FORCE savings, $140 million of cost savings from the 2018 Global Restructuring Program and reduced marketing, research and general spending.

2022 Outlook and Key Planning Assumptions

The company's 2022 outlook assumes no significant additional impact from potential supply chain disruptions as a result of COVID-19. In addition, key planning and guidance assumptions are as follows:

Net sales increase 1 to 2 percent.
- Organic sales increase 3 to 4 percent.
- Foreign currency exchange rates unfavorable approximately 2 percent.
Operating profit down low to mid-single digits percent compared to adjusted operating profit in 2021.
- Key cost inputs expected to increase $750 to $900 million. Costs are projected to increase or remain elevated for most inputs including purchased raw materials as well as for distribution and energy.
- Foreign currency translation effects expected to reduce operating profit by 1 to 2 percent and transaction effects are also anticipated to negatively impact the comparison.o Cost savings associated with FORCE program of $300 to $350 million.
- Marketing, research and general spending expected to be up year-on-year driven by general inflation, variable incentive expense and investments in the business.
Nonoperating expense expected to increase somewhat compared to adjusted nonoperating expense in 2021.
Interest expense expected to increase slightly.
Effective tax rate of 22 to 24 percent.
Net income from equity companies up somewhat year-on-year.• Earnings per share of $5.60 to $6.00.
Capital spending of $1,000 to $1,100 million.
Dividend increase of 1.8 percent (approved by the Board of Directors and as mentioned previously in this release). The quarterly dividend will increase to $1.16 per share, up from $1.14 per share in 2021. The first dividend will be payable on April 4, 2022 to stockholders of record on March 4, 2022.
Share repurchases of approximately $100 million.

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