Kimberly-Clark 1Q 2022 Results: Net Sales up 7 Percent from Year Ago to $5.1 billion

Kimberly-Clark Corporation has reported first quarter 2022 results.

Executive Summary

First quarter 2022 net sales of $5.1 billion increased 7 percent compared to the year-ago period, including organic sales growth of 10 percent.
Diluted net income per share for the first quarter was $1.55 in 2022 and $1.72 in 2021.
First quarter adjusted earnings per share were $1.35 in 2022, down 25 percent compared to $1.80 in 2021. Adjusted earnings per share exclude certain items described later in this news release.
The company is now targeting full-year 2022 organic sales growth of 4 to 6 percent, compared to our prior outlook of 3 to 4 percent.
The company expects adjusted earnings per share of $5.60 to $6.00, in line with its initial expectations for diluted net income per share. The adjusted outlook range excludes the net benefit associated with the acquisition of the controlling interest of Thinx Inc.

"I'm pleased with our team's continued excellent execution during this volatile and highly inflationary environment. We delivered double-digit organic sales growth with strong increases across all our segments in the first quarter," said chairman and CEO Mike Hsu. "Our growth strategy is working and we're continuing to invest in our business. Additionally, we continue to take the necessary actions to mitigate macro headwinds and remain committed to improving our margins over time."

Hsu continued, "On March 26th of this year, Kimberly-Clark marked its 150th anniversary — a significant milestone for the company. We're proud of our heritage of category defining innovation and our strong culture of care that enables our employees and communities to thrive. Today, we're building on that foundation with conviction in our purpose of Better Care for a Better World as we continue to provide essential products to billions of consumers around the world."

First Quarter 2022 Operating Results

Sales of $5.1 billion in the first quarter of 2022 increased 7 percent compared to the year-ago period. Changes in foreign currency exchange rates reduced sales 2 percent. Organic sales increased 10 percent as net selling prices rose 6 percent, volumes grew 2 percent and product mix increased sales 2 points. In North America, organic sales increased 13 percent in consumer products and increased 5 percent in K-C Professional. Outside North America, organic sales rose 10 percent in developing and emerging (D&E) markets and 8 percent in developed markets.

First quarter operating profit was $693 million in 2022 and $770 million in 2021. Results in 2022 include the net benefit of the acquisition of a controlling interest of Thinx and 2021 results include charges related to the 2018 Global Restructuring Program.

First quarter adjusted operating profit was $629 million in 2022 and $804 million in 2021. Results were impacted by $470 million of higher input costs, driven by pulp and polymer-based materials, distribution and energy costs. Higher marketing, research and general expense as well as the impact of unfavorable foreign currency transaction effects reduced operating profit in the quarter. Results benefited from organic sales growth, $50 million of cost savings from the company's FORCE (Focused On Reducing Costs Everywhere) program and lower other manufacturing costs.

The first quarter effective tax rate was 18.2 percent in 2022 and 20.9 percent in 2021. The first quarter adjusted effective tax rate was 21.0 percent in 2022 and 20.9 percent in 2021. Kimberly-Clark's share of net income of equity companies in the first quarter was $23 million in 2022 and $39 million in 2021. Equity results were negatively impacted by input cost inflation.

Cash Flow and Balance Sheet

Cash provided by operations in the first quarter was $204 million in 2022 and $321 million in 2021. The decline was driven by lower operating profit. Capital spending for the first quarter was $253 million in 2022 and $298 million in 2021. First quarter 2022 share repurchases were 0.2 million shares at a cost of $27 million. Total debt was $9.1 billion at March 31, 2022 and $8.6 billion at the end of 2021.

First Quarter 2022 Business Segment Results
Personal Care Segment

First quarter sales of $2.7 billion increased 11 percent. Net selling prices increased 8 percent, volumes grew 3 percent and product mix improved 3 points. Changes in foreign currency exchange rates decreased sales by approximately 2 percent. First quarter operating profit of $475 million decreased 1 percent. The comparison was impacted by input cost inflation, higher marketing, research and general spending as well as unfavorable foreign currency effects. Results benefited from organic sales growth and cost savings.

Sales in North America increased 16 percent. Net selling prices increased 8 percent, product mix improved 3 points and volumes rose 5 percent, in part due to the weather-related supply chain disruptions in the year-ago period. Organic sales were up double-digits in baby & child care, adult care and feminine care.

Sales in D&E markets increased 8 percent. Net selling prices increased sales 9 percent and product mix improved 3 points while volumes declined 1 percent. Changes in foreign currency exchange rates decreased sales 3 percent. Organic sales growth was strong across all regions and categories.

Sales in developed markets outside North America (Australia, South Korea and Western/Central Europe) increased 5 percent. Volumes increased 8 percent and net selling prices increased sales 4 percent while changes in foreign currency exchange rates decreased sales 7 percent.

Consumer Tissue Segment

First quarter sales of $1.6 billion increased 4 percent. Net selling prices increased sales 5 percent and volumes rose 2 points. Changes in foreign currency exchange rates reduced sales 2 percent and exited businesses in conjunction with the 2018 Global Restructuring Program decreased sales 1 percent. First quarter operating profit of $171 million decreased 36 percent. The comparison was impacted by input cost inflation and higher marketing, research and general spending. Results benefited from organic sales growth, lower other manufacturing costs and cost savings.

Sales in North America increased 9 percent. Volumes grew 6 percent and net selling prices improved 4 percent, while unfavorable product mix decreased sales 1 point. The volume growth reflects comparison to the start of COVID-related consumer and retailer inventory destocking in the year-ago period.

Sales in D&E markets increased 3 percent. Net selling prices rose approximately 7 percent and product mix improved 1 percent, while volumes were down 2 percent. Changes in foreign currency exchange rates decreased sales 2 points.

Sales in developed markets outside North America decreased 5 percent. Exited businesses related to the 2018 Global Restructuring program reduced sales 4 percent and changes in foreign currency exchange rates decreased sales 6 percent. Volumes were down 1 percent while net selling prices rose approximately 6 percent.

K-C Professional (KCP) Segment

First quarter sales of $0.8 billion increased 4 percent. Net selling prices rose 4 percent and product mix increased sales approximately 1 point. Changes in foreign currency exchange rates decreased sales 2 percent. First quarter operating profit of $90 million decreased 29 percent. The comparison was impacted by input cost inflation and higher marketing, research and general spending. Results benefited from organic sales growth, lower other manufacturing costs and cost savings.

Sales in North America increased 5 percent. Net selling prices rose 4 percent and product mix increased sales 1 percent. Washroom products sales were up strong double-digits while sales of wipers and safety products slowed versus a strong year-ago.

Sales in D&E markets increased 4 percent. Net selling prices increased 3 percent, volumes grew 2 percent and product mix increased sales 2 percent. Changes in foreign currency exchange rates decreased sales 3 percent.

Sales in developed markets outside North America were even with the year-ago period. Net selling prices increased 5 percent and product mix improved sales 3 percent while volumes decreased 1 percent. Changes in foreign currency exchange rates reduced sales 7 percent.

Acquisition of Majority and Controlling Share of Thinx Inc.

During the first quarter the company completed the acquisition of a majority and controlling share of Thinx Inc., an industry leader in the reusable period and incontinence underwear category, for total consideration of $181 million consisting of cash of $53 million, the fair value of our previously held equity investment of $127 million, and certain share-based award costs of $1 million. The initial minority investment in Thinx was in 2019.

The consolidated results of operations for Thinx are reported in our Personal Care business segment and is expected to provide a modest benefit to full year net sales in 2022.

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