Kimberly-Clark Third Quarter 2022 Results

Executive Summary

Third quarter 2022 net sales of $5.1 billion increased 1 percent compared to the year-ago period, including organic sales growth of 5 percent.
Diluted net income per share for the third quarter was $1.38 in 2022 and $1.39 in 2021.
Third quarter adjusted earnings per share were $1.40 in 2022, down 14 percent compared to $1.62 in 2021. Adjusted earnings per share exclude certain items described later in this news release.
Diluted net income per share for 2022 is expected to be $5.67 to $6.10.
The company continues to target full-year 2022 organic sales growth of 5 to 7 percent and expects adjusted earnings per share at the lower end of $5.60 to $6.00 range

"Our third quarter results reflect strong execution by our teams around the world in the face of a challenging macro environment," said Chairman and CEO Mike Hsu. "We delivered organic sales growth across all our segments and continued to provide our consumers with value-inspired innovation."

Hsu continued, "We continue to execute our plan to restore margins over time and are seeing progress with sequential margin improvement this quarter. As we navigate persistent input cost inflation, we're focused on driving our growth strategy, serving consumers, customers and communities while living our purpose of Better Care for a Better World."

Third Quarter 2022 Operating Results
Sales of $5.1 billion in the third quarter of 2022 increased 1 percent compared to the year-ago period. Organic sales increased 5 percent as net selling prices rose 9 percent and product mix increased sales 1 percent while volumes declined 5 percent. Changes in foreign currency exchange rates reduced sales 4 percent. In North America, organic sales decreased 2 percent in consumer products and increased 5 percent in K-C Professional. Outside North America, organic sales rose 11 percent in both developing and emerging (D&E) and developed markets.

Third quarter operating profit was $655 million in 2022 and $657 million in 2021. Excluding the charges related to the 2018 Global Restructuring Program, 2021 adjusted operating profit was $745 million.

Results were impacted by $360 million of higher input costs. Lower volumes, higher marketing, research and general expense as well as unfavorable foreign currency effects reduced operating profit in the quarter. Results benefited from higher net selling prices and $80 million of cost savings from the company's FORCE (Focused On Reducing Costs Everywhere) program.

The third quarter effective tax rate was 22.4 percent in 2022 and 21.6 percent in 2021. The third quarter adjusted effective tax rate was 22.3 percent in 2022 and 20.9 percent in 2021. Kimberly-Clark's share of net income of equity companies in the third quarter was $29 million in 2022 and $21 million in 2021.

Cash Flow and Balance Sheet
Cash provided by operations in the third quarter was $798 million in 2022 and $782 million in 2021. Capital spending for the third quarter was $209 million in 2022 and $235 million in 2021. Third quarter share repurchases were 192 thousand shares at a cost of $25 million. Total debt was $8.6 billion as of September 30, 2022, unchanged from the end of 2021.

Third Quarter 2022 Business Segment Results
Personal Care Segment
Third quarter sales of $2.6 billion decreased 1 percent. Changes in foreign currency exchange rates reduced sales by 4 percent and the acquisition of the controlling interest in Thinx increased sales 1 point. Net selling prices increased 8 percent and product mix improved 1 point while volumes declined 7 percent. Third quarter operating profit of $423 million decreased 15 percent. The comparison was impacted by input cost inflation, lower volumes and associated fixed cost under absorption, higher marketing, research and general spending as well as unfavorable foreign currency effects. Results benefited from higher net selling prices and cost savings.

Sales in North America decreased 5 percent. Volumes declined 10 percent while net selling prices increased 4 percent and the Thinx acquisition increased sales approximately 2 points. The volume comparison reflects elevated shipments in the year-ago period to restore retailer inventory levels following supply disruptions. The planned exit of a private label contract earlier this year as well as some reductions in retailer inventory levels late in the quarter also impacted the comparison.

Sales in D&E markets increased 5 percent. Net selling prices increased sales 15 percent and product mix improved 3 percent while volumes declined 6 percent. Changes in foreign currency exchange rates decreased sales 6 percent. Organic sales growth was strong across Latin America and the Asia Pacific region.

Sales in developed markets outside North America (Australia, South Korea and Western/Central Europe) decreased 4 percent. Changes in foreign currency exchange rates reduced sales 12 percent. Net selling prices increased sales 5 percent and volumes grew 3 percent.

Consumer Tissue Segment
Third quarter sales of $1.6 billion increased 2 percent. Net selling prices increased sales 9 percent while volumes declined approximately 3 percent. Changes in foreign currency exchange rates reduced sales 4 percent. Third quarter operating profit of $218 million decreased 2 percent. The comparison was impacted by input cost inflation, higher marketing, research and general spending and unfavorable foreign currency effects. Results benefited from organic sales growth, cost savings and lower other manufacturing costs.

Sales in North America increased 5 percent. Net selling prices rose 7 percent while volumes declined 2 percent. Higher net selling prices were achieved across all sub-segments while volume decline was primarily in bathroom tissue.

Sales in D&E markets increased 3 percent. Net selling prices rose 12 percent and product mix improved 1 point, while volumes were down 6 percent. Changes in foreign currency exchange rates decreased sales 5 percent.

Sales in developed markets outside North America decreased 2 percent. Changes in foreign currency exchange rates decreased sales 13 percent. Net selling prices rose approximately 12 percent while volumes declined 1 point.

K-C Professional (KCP) Segment
Third quarter sales of $0.8 billion increased 5 percent. Net selling prices rose approximately 14 percent and product mix increased sales 1 point while volumes declined 5 percent. Changes in foreign currency exchange rates decreased sales 4 percent. Third quarter operating profit of $119 million increased 24 percent. Results benefited from higher net selling prices and cost savings. The comparison was impacted by input cost inflation, lower volumes and unfavorable foreign currency effects.

Sales in North America increased 5 percent. Net selling prices rose 14 percent, product mix increased sales approximately 1 point while volumes declined 9 percent. Washroom products sales were up double-digits while sales of safety products decreased versus a strong year-ago.

Sales in D&E markets increased 7 percent. Net selling prices increased 8 percent, volumes grew 2 percent and product mix increased sales approximately 2 points. Changes in foreign currency exchange rates decreased sales 6 percent.

Sales in developed markets outside North America increased 5 percent. Net selling prices increased 19 percent and product mix improved sales 1 point. Changes in foreign currency exchange rates reduced sales 15 percent.

Year-To-Date Results
For the first nine months of 2022, sales of $15.2 billion increased 5 percent. Organic sales increased 8 percent, as net selling prices rose 8 percent, product mix increased sales 1 point and volumes declined 1 percent. Changes in foreign currency exchange rates decreased sales by 3 percent.

Year-to-date operating profit was $1,969 million in 2022 and $2,040 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.

Year-to-date adjusted operating profit was $1,905 million in 2022 and $2,225 million in 2021. Results were impacted by over $1.2 billion of higher input costs, higher marketing, research and general spending and unfavorable foreign currency effects. Results benefited from organic sales growth, $175 million of FORCE savings and lower other manufacturing costs.

Through nine months, diluted net income per share was $4.22 in 2022 and $4.31 in 2021. Year-to-date adjusted earnings per share were $4.09 in 2022 and $4.89 in 2021.

2022 Outlook and Key Planning Assumptions
The company updated key planning and guidance assumptions for full-year 2022. The outlook reflects assumptions subject to change given the high level of volatility in the macro environment.

Net sales increase 2 to 4 percent with organic sales growth of 5 to 7 percent (no change).
Foreign currency exchange rates unfavorable 3 to 4 percent on net sales (previous estimate 3 percent) with mid-to high-single digit impact on operating profit (previously mid-single digit).
Adjusted effective tax rate 22 to 23 percent (previous estimate 22 to 24 percent).
Adjusted earnings per share outlook remains at the lower end of $5.60 to $6.00 range (no change).
Capital spending $0.9 to $1.0 billion (previous range $1.0 to $1.1 billion).

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