Summary of Kimberly-Clark (KMB) Conference Call - May 13, 2025 Company Overview - **Company**: Kimberly-Clark Corporation (KMB) - **Industry**: Consumer Packaged Goods (CPG) - **Key Management**: - Mike Hsu, Chairman and CEO - Nelson Urndetta, CFO - Chris Jakubik, Head of Investor Relations Core Points and Arguments 1. **Company Evolution**: Kimberly-Clark has evolved from being perceived as a "pulp proxy" to focusing on volume mix growth, aided by a reorganization in the previous year [2][4][6] 2. **Growth Strategy**: The company aims to shift from a growth-challenged state (1-2% organic growth) to a more robust growth trajectory (4% organic growth) through innovation and market expansion [7][11] 3. **Innovation Focus**: Emphasis on pioneering innovation and better marketing to enhance product storytelling and consumer engagement [15][16] 4. **Cost Management**: The company has set a goal to achieve over $3 billion in cost savings through improved efficiency and standardization across markets [17][36] 5. **Market Dynamics**: The consumer market remains challenging, with category growth decelerating to 1.5-2%, influenced by tariff impacts and changing consumer behaviors [47][66] 6. **Tariff Impact**: The company anticipates a $300 million impact from tariffs, primarily due to production choices made in response to cost efficiency [76][87] 7. **Product Mix Shift**: A significant shift from value-tier products to premium offerings, with 85% of the North American diaper business now in the premium category [65][66] 8. **Supply Chain Improvements**: Establishment of a global supply chain organization to enhance efficiency and lower costs [38][43] Additional Important Insights 1. **Consumer Behavior**: In developed markets, there is a bifurcation in consumer spending, with higher-income households continuing to spend while budget-constrained consumers seek value [55][58] 2. **Advertising Strategy**: The company has doubled its advertising spend since 2018 to better communicate product benefits, moving away from reliance on promotions [126][127] 3. **Innovation Pipeline**: The innovation pipeline is more back-half loaded for the year, with significant product launches expected in the latter half [118][123] 4. **Risk Management**: Transition to a proactive risk management approach, including programmatic hedging for costs related to resins, energy, and currencies [32][33] 5. **Long-term Goals**: The company aims to achieve gross margins of at least 40% and operating profit margins of 18-20% by the end of the decade [68][70] This summary encapsulates the key points discussed during the conference call, highlighting the strategic direction, challenges, and opportunities for Kimberly-Clark in the current market environment.

Core Insights - Kimberly-Clark Corporation has promoted Russ Torres to President and Chief Operating Officer, effective immediately [1][2] - Torres will oversee day-to-day operations, Global Supply Chain, R&D, Global Growth, and Digital Technology Solutions [2] - Kurt Laufer will serve as Interim President, North America while a search for a permanent successor is conducted [2] Company Leadership and Experience - Torres has been President of North America since October 2024, previously serving as Group President and President of K-C Professional [3] - He has over 25 years of experience in the consumer product goods industry, with leadership roles at Newell Brands, Bain & Company, and Mondelez International [3] Business Strategy and Growth - Under Torres' leadership, Kimberly-Clark's North America business achieved mid-single digit compound annual growth [4] - The company is focused on its "Powering Care" strategy to enhance operational execution and drive growth and profitability [4] - Torres expressed optimism about unlocking potential at Kimberly-Clark and continuing to build on the strength of its brands [4] Company Overview - Kimberly-Clark operates in over 175 countries, with brands like Huggies, Kleenex, and Scott holding top market positions in approximately 70 countries [5] - The company emphasizes sustainable practices and has been recognized as one of the World's Most Ethical Companies for seven consecutive years [5]

Core Points - Kimberly-Clark Corporation will establish an $800 million advanced manufacturing facility in Trumbull County, Ohio, creating 491 new high-quality jobs [1][4][11] - This facility will be Kimberly-Clark's first investment in Ohio and is part of a strategic expansion to enhance its operations in the American market [3][4] - The project received a 10-year Job Creation Tax Credit from the Ohio Tax Credit Authority, which was approved earlier this week [2] Company Overview - Kimberly-Clark is a leading manufacturer of personal care and hygiene products, with a portfolio that includes brands such as Huggies, Kleenex, and Scott, and operates in over 175 countries [6] - The new facility will span over one million square feet and is expected to serve approximately 117 million consumers in the Midwest and Northeast [4][6] Economic Impact - The investment is anticipated to have a long-term economic impact on the region, not only by creating direct jobs but also by attracting ancillary businesses and boosting local housing and economy [11][12] - The project is seen as a catalyst for regional revitalization and reflects Ohio's pro-business climate and commitment to workforce development [7][11] Collaboration and Support - The successful establishment of the facility is attributed to close collaboration among local, regional, and state partners, including JobsOhio and the Ohio Department of Development [8][10] - The site received $17.2 million from the All Ohio Future Fund to assist in site readiness and infrastructure development [5]

Financial Data and Key Metrics Changes - 2024 was a breakthrough year for Kimberly-Clark, with full-year results exceeding long-term growth algorithms, supported by consistent execution across the organization [4][18] - The company returned $2,600,000,000 to shareholders through dividends and share repurchases [4][18] Business Line Data and Key Metrics Changes - The organization was successfully restructured into three segments: North America, International Personal Care, and International Family Care and Professional [4][18] - Strong progress was made against three strategic priorities: accelerating pioneering innovation, optimizing margin structure, and wiring the organization for growth [4][18] Market Data and Key Metrics Changes - The company is focused on delivering strong end market execution, productivity, and cost management in an increasingly dynamic operating environment [5][19] Company Strategy and Development Direction - The "Powering Care" transformation strategy aims to provide better care for a better world and deliver balanced and sustainable growth for the long term [3][17] - The addition of Joe Romanelli to the Board is expected to leverage his global leadership experience and healthcare expertise [5][20] Management's Comments on Operating Environment and Future Outlook - Management expressed pride in the team's embrace of the innovation-led growth agenda and transformation, highlighting excitement about future opportunities [5][19] - The Board of Directors is committed to overseeing the transformation and enhancing shareholder value [5][19] Other Important Information - The meeting included the election of 13 directors, ratification of independent auditors, and approval of executive compensation, all of which were approved by stockholders [11][25] Q&A Session Summary Question: Were there any questions submitted during the meeting? - There were no questions submitted on the portal during the meeting [12][26]

Group 1 - The article provides an update on Kimberly-Clark (NYSE: KMB) following a previous upgrade to a hold rating, indicating that near-term weaknesses have been priced in [1] - The investment approach is fundamentally based, focusing on long-term durability and affordability rather than just low multiples [1] - The company is characterized by steady long-term growth, a lack of cyclicality, and a robust balance sheet, which are key factors in investment decisions [1] Group 2 - There is an acknowledgment of the risks involved in investing in successful companies, particularly the potential to overpay, highlighting the importance of valuation [1] - The article suggests that in certain situations, the potential for growth may outweigh immediate price concerns, indicating a broader perspective on investment opportunities [1]

Core Insights - Kimberly-Clark Corporation reported weaker-than-expected first-quarter sales, with quarterly adjusted earnings per share at $1.93, surpassing the analyst consensus estimate of $1.89, while quarterly sales were $4.84 billion, down 6%, missing the expected $4.88 billion [1] - The company anticipates its 2025 Adjusted Operating Profit to be flat to positive on a constant-currency basis, a significant downgrade from the previous expectation of high single-digit growth [2] - Analysts have adjusted their price targets for Kimberly-Clark following the earnings announcement, reflecting a cautious outlook [3][7] Financial Performance - Quarterly adjusted earnings per share were $1.93, beating the consensus estimate of $1.89 [1] - Quarterly sales totaled $4.84 billion, a 6% decline compared to the previous year, missing the expected $4.88 billion [1] - The company expects a 200 basis point impact on reported net sales from currency translation, an improvement from the earlier estimate of 300 basis points [2] Strategic Outlook - The CEO indicated that the current environment will lead to greater costs across the global supply chain than initially expected [1] - The divestment of the PPE business and exit from the U.S. private label diaper segment is projected to negatively impact sales by an additional 240 basis points [2] Analyst Ratings - Evercore ISI Group maintained an Outperform rating but lowered the price target from $168 to $155 [7] - Piper Sandler also maintained an Overweight rating, reducing the price target from $158 to $156 [7] - RBC Capital kept an Outperform rating while lowering the price target from $165 to $162 [7]

Core Insights - Kimberly-Clark is recognized as a Dividend King, indicating strong cash flows that support reliable dividends and consistent growth in shareholder value [1] - The stock price has experienced fluctuations, with recent downswings followed by anticipated upswings, suggesting a sustainable uptrend [2][3] - The company is well-positioned in the personal care products industry, which is essential and regularly needed, contributing to solid cash flows [5] Financial Performance - In Q1, revenue decreased by 6% to $4.8 billion, slightly below consensus estimates, primarily due to divestitures, while organic contraction was only 1.6% [6] - The adjusted gross margin contracted by 20 basis points, but operating margin was less affected than analysts forecasted, aided by efficiency efforts [7] - Earnings declined by 4%, with free cash flow expected to be nearly $2 billion, indicating financial health [8][9] Capital Returns - Kimberly-Clark has a dividend yield of 3.66%, with an annual dividend of $5.04 and a 54-year track record of dividend increases [10] - Share repurchases reduced the share count by 1.5% in Q1, contributing to capital returns alongside dividends [10] Analyst Sentiment - Analysts maintain a consensus rating of Hold, with institutions owning approximately 75% of the stock, indicating strong institutional interest [11] - There is a forecasted upside of about 5% for the stock this year, with recent price target increases aligning with consensus [11] Market Trends - The stock is currently range-bound but shows signs of regaining a long-term uptrend, with support levels rising [12] - A retest of the all-time high is anticipated, with potential for new highs by the end of the year [12]

Group 1 - Kimberly-Clark's share price declined nearly 3% following an unwelcome change in guidance despite quarterly results that were not considered awful [1] - The company reported net sales of $4.84 billion for Q1 2025, a 6% decrease from Q1 2024, attributed to currency impacts and divestitures [2] - Non-GAAP adjusted net income fell by 4% year over year to $1.93 per share, with all three business segments experiencing declines in net sales [3] Group 2 - Kimberly-Clark cut its full-year guidance, now expecting adjusted earnings per share to be flat to slightly positive, with an anticipated $300 million in additional costs due to international trade disputes [4] - Previously, the company had expected profitability to rise by at least a mid-single-digit percentage rate [4] - The current trade situation is perceived as an excuse for the company's underperformance, indicating a need for more than just a stable trade environment to stimulate growth [5]

Core Insights - Kimberly-Clark Corporation reported first-quarter 2025 results with sales missing estimates but adjusted earnings per share exceeding expectations, both metrics showing a year-over-year decline [1][3][12] Financial Performance - Adjusted earnings were $1.93 per share, beating the Zacks Consensus Estimate of $1.89, but down 4% year over year due to reduced operating profit and net income from equity companies [3] - Sales totaled $4,840 million, a 6% decline from $5,149 million in the same period last year, and below the Zacks Consensus Estimate of $4,864 million [3] - Unfavorable foreign currency exchange rates negatively impacted sales by approximately 2.4%, alongside a 2% reduction from divestitures and business exits [3] Segment Performance - North America segment net sales were $2,666 million, down 3.9%, with organic sales decreasing 0.6% primarily due to unfavorable pricing [5] - International Personal Care segment net sales were $1,383 million, an 8.9% decline, with organic sales down 2.8% due to price investments [7] - International Family Care & Professional segment reported net sales of $791 million, a 7.7% decline, with organic sales decreasing 2.3% [9] Operational Metrics - Adjusted gross margin was 36.9%, reflecting a 20-basis point decrease [4] - Adjusted operating profit fell 6% to $844 million, impacted by currency translation [4] Financial Health - The company ended the quarter with cash and cash equivalents of $563 million, long-term debt of $6,481 million, and total stockholders' equity of $1,224 million [11] - Cash provided by operations was $327 million, with capital spending of $204 million, and $466 million returned to shareholders through dividends and share buybacks [11] Future Outlook - For 2025, Kimberly-Clark expects organic sales growth to exceed the market average, currently projected between 1.5% and 2% [12] - Net sales are anticipated to face a negative impact of approximately 200 basis points from currency translation and 240 basis points from divestitures [13] - Adjusted operating profit is now expected to be flat to positive on a constant-currency basis, with similar negative impacts from divestitures and currency rates [14]

Financial Performance - Net sales for the three months ended March 31, 2025, were $4.84 billion, a decline of 6.0% compared to $5.15 billion in 2024, primarily due to unfavorable currency impacts and divestitures[72]. - Gross profit decreased to $1.73 billion, down 9.3% year-over-year, with a gross margin of 35.8%, reflecting a 130 basis point decrease[72][76]. - Operating profit for the same period was $769 million, a decrease of 9.8%, with adjusted operating profit at $844 million, down 6.0% from $898 million in 2024[72][77]. - Net income attributable to Kimberly-Clark Corporation was $567 million, a decrease of 12.4%, with diluted earnings per share at $1.70, down 11.0% from $1.91[72][82]. - Organic sales decreased by 1.6%, driven by lower pricing, while volume and mix remained flat compared to the prior year[75]. - Adjusted earnings per share for the three months ended March 31, 2025, was $1.93, compared to $2.01 in the prior year[111]. Segment Performance - North America segment net sales were $2.67 billion, a decrease of 3.9%, with operating profit increasing by 1.3% to $676 million[87]. - Net sales for International Personal Care decreased by 8.9% to $1.4 billion, primarily due to unfavorable currency impacts of 6.0% and lower organic sales[89]. - Operating profit for International Personal Care fell by 19.8% to $194 million, mainly due to unfavorable pricing net of cost inflation and currency impacts[90]. - Net sales for International Family Care & Professional decreased by 7.7% to $791 million, driven by divestitures, unfavorable currency impacts, and lower organic sales[91]. - Operating profit for International Family Care & Professional decreased by 3.6% to $106 million, influenced by unfavorable pricing and currency impacts[92]. Cost and Savings Initiatives - The 2024 Transformation Initiative is expected to yield total pre-tax savings of $3.0 billion, with total costs anticipated to be approximately $1.5 billion pre-tax[69]. - Incremental costs due to new U.S. tariffs are estimated at approximately $300 million in 2025, primarily affecting the North America segment[66]. Cash Flow and Capital Expenditures - Cash provided by operations was $327 million, down from $438 million in the prior year, due to lower operating profit and unfavorable changes in working capital[93]. - Cash used for investing was $119 million, a decrease from $181 million in the prior year, with capital spending at $204 million compared to $194 million previously[94]. - The company anticipates full-year capital spending to be approximately $1.0 to $1.2 billion, including spending from the 2024 Transformation Initiative[94]. Taxation - The effective tax rate for the first quarter of 2025 was 23.8%, compared to 23.6% in 2024, with an adjusted effective tax rate of 21.4%[81]. - The effective tax rate as adjusted for the three months ended March 31, 2025, was 21.4%, compared to 23.6% in the prior year[112]. Debt Management - Total debt as of March 31, 2025, was $7.2 billion, down from $7.4 billion as of December 31, 2024[97]. Operational Realignment - The company has realigned its operations into three segments: North America, International Personal Care, and International Family Care and Professional, to enhance reporting and management efficiency[67].