Kimberly-Clark Announces Second Quarter 2023 Results

Kimberly-Clark Corporation has reported second quarter 2023 results. Comparisons are made versus the prior year period, unless otherwise noted.

"We delivered another quarter of strong organic sales growth and gross margin expansion," said Chairman and CEO Mike Hsu. "Our growth strategy is working, and given the strength of our first-half results, we're raising our full-year outlook."

Hsu added, "Continued improvement in gross margin positions us well to invest in superior brand value propositions, including innovation and digital leadership, which will help grow our market shares over time and deliver balanced and sustainable growth for long-term shareholder value."

Quarter Highlights

Delivered net sales of $5.1 billion, up 1 percent, with organic sales growth of 5 percent.

Gross margin was 33.7 percent, up 350 basis points; adjusted gross margin was 34.0 percent, up 380 basis points versus the prior year, driven by favorable net revenue realization and productivity, offsetting inflation.

Diluted earnings per share were $0.30, primarily driven by $1.36 per share in non-cash charges for the impairment of intangible assets; on an adjusted basis, earnings per share were $1.65.

Raised 2023 outlook for organic growth to 3 percent - 5 percent, and for adjusted earnings per share growth of 10 percent - 14 percent, with adjusted operating margin up 150 basis points at the midpoint versus last year.

Strategic Highlights

Completed the sale of its Brazil tissue assets in June.

Launched Huggies' new marketing campaign, Baby Butts, celebrating Huggies' unique design protection for babies on the move.

Received top honors at the Cannes Lion festival for two brand campaigns in Latin America: The Story of Lea Campos by Intimus, which honors one of the first female football referees in Brazil and #NormalicemosLoNormal by Kotex, which fights menstrual stigma.

Published Global 2022 Sustainability Report, which highlights the company's progress toward its 2030 ambitions, with the goal of improving the lives of 1 billion people in underserved and vulnerable communities while driving product innovation, human capital initiatives and reducing its environmental footprint.

Recognized in Australia as one of the 2023 Most Sustainable Companies for the successful launch of The Nappy Loop, the first recycling program of its kind.

Recognized by U.S. News and World Report for being one of the Best Places to Work in the U.S.

Second Quarter 2023 Results

Second-quarter sales of $5.1 billion increased 1 percent, with organic sales up 5 percent, driven by a 9 percent increase in price and favorable product mix from ongoing revenue growth management programs, offset by a 3 percent decrease in volume. Changes in foreign currency exchange rates decreased sales by approximately 4 percent.

In North America, organic sales increased 6 percent over last year, including increases of 1 percent in Personal Care, 7 percent in Consumer Tissue and 17 percent in K-C Professional.

Outside North America, organic sales were up 6 percent in developing and emerging (D&E) markets and 4 percent in developed markets (Australia, South Korea and Western/Central Europe).

Gross margin improved by 350 bps to 33.7 percent and adjusted gross margin improved by 380 basis points to 34.0 percent, with higher net revenue realization and cost savings offsetting higher input costs of $30 million.

Second-quarter operating profit was $113 million compared to $621 million last year, resulting in an operating margin of 2.2 percent. Higher gross margin and the net benefit related to the sale of the Brazil tissue and KC-Professional business were offset by non-cash impairment charges on intangible assets primarily related to the company's Indonesia business, and higher marketing, research and general expenses.

On an adjusted basis, operating profit increased by 17 percent, driven by higher gross profit including $80 million in FORCE (Focus on Reducing Costs Everywhere) savings, offset by planned marketing, research and general expenses. Inflation increased input costs by $30 million this quarter. Unfavorable currency effects impacted operating profit by $100 million during the quarter. Adjusted operating margin of 14.2 percent increased 190 basis points over last year.

Net interest expense was $67 million, in line with prior year.

Second-quarter effective tax rate was driven by a net benefit from income taxes of $32 million. On an adjusted basis, the effective rate in the second quarter was 20.5 percent, below 22.0 percent prior year, due to benefits of certain tax planning initiatives.

Net income of equity companies was $50 million compared to $29 million last year driven by Kimberly-Clark de Mexico.

Diluted EPS decreased 77 percent to $0.30 on a reported basis, largely driven by non-cash charges related to impairment of intangible assets. On an adjusted basis, EPS increased 23 percent to $1.65, driven primarily by the 17 percent increase in adjusted operating profit, in addition to gains in equity income and lower income taxes than the same period last year.

Year-To-Date Results

For the first six months of the year, sales of $10.3 billion increased 2 percent, with organic sales up 5 percent, driven by a 10 percent increase in price and favorable product mix from ongoing revenue growth management programs offset by a 4 percent decrease in volume. Changes in foreign currency exchange rates decreased sales by approximately 4 percent.

Gross margin improved by 350 basis points to 33.5 percent, and adjusted gross margin improved by 360 basis points to 33.6 percent with higher net revenue realization and cost savings offsetting higher input costs of $190 million.

Year-to-date operating profit was $900 million in 2023 and $1.3 billion in 2022. Results included non-cash impairment charges on intangible assets primarily related to the company's business in Indonesia, higher marketing, research and general expenses, offset by the net benefit from the Brazil divestiture in the second quarter 2023.

Year-to-date adjusted operating profit was $1.5 billion in 2023 and $1.3 billion in 2022. The increase in organic sales and FORCE savings was partially offset by higher input costs, marketing, research and general expenses, and unfavorable impact from foreign currency.

Through the last six months, diluted earnings per share were $1.97 in 2023 compared to $2.84 last year. Year-to-date adjusted earnings per share were $3.32 compared to $2.69 last year.

Back to Tissue360 Newsletter