Kimberly-Clark(KMB) - 2024 Q3 - Quarterly Results

Executive Summary Kimberly-Clark reported third quarter 2024 results with 1% organic sales growth and reaffirmed its 2024 profit outlook, driven by strong in-market execution, effective cost management, and productivity gains. The company's "Powering Care" strategy is accelerating innovation and simplifying operations - The company's "Powering Care" strategy is accelerating its innovation pipeline and reducing costs to deliver higher-quality consumer solutions, while simplifying its operational structure for faster market responsiveness[1] Third Quarter 2024 Key Highlights | Metric | Q3 2024 | YoY Change | | :-------------------- | :------------ | :--------- | | Net Sales | $5.0 billion | -4% | | Organic Sales Growth | 1% | | | Reported Gross Margin | 36.0% | | | Adjusted Gross Margin | 36.7% | +90 bps | | Diluted EPS | $2.69 | | | Adjusted EPS | $1.83 | +5% | Third Quarter 2024 Results Overview Third quarter net sales decreased 4% to $5.0 billion, primarily due to negative impacts from foreign currency translation and the divestiture of the K-C Professional PPE business. Organic sales grew 1%, driven by price increases, mainly in hyperinflationary economies. Operating profit saw a significant increase due to divestiture gains Third Quarter 2024 Consolidated Financial Performance | Metric | Q3 2024 | Q3 2023 | Change | | :-------------------------------- | :------------ | :------------ | :------ | | Net Sales | $4,952 million | $5,132 million | -4% | | Organic Sales Growth | 1% | | | | Foreign Currency Impact on Sales | -3% | | | | Divestiture Impact on Sales | -1% | | | | Operating Profit | $1,154 million | $774 million | +49% | | Adjusted Operating Profit Growth | 5% | | | | PPE Divestiture Gain (Operating Profit) | $565 million | | | | Diluted EPS | $2.69 | $1.73 | +55% | | Adjusted EPS | $1.83 | $1.74 | +5% | - Organic sales increased 1%, driven by a 1% increase in price, primarily reflecting necessary pricing actions to address higher local costs in hyperinflationary economies, mainly in Argentina[3] - Adjusted operating profit increased by 5% despite an unfavorable impact of 4 percentage points from currency translation, reflecting gross productivity gains and relatively neutral pricing net of cost inflation[5] Year-To-Date Results Overview For the first nine months of 2024, sales decreased 2% to $15.1 billion, while organic sales grew 4% due to price increases, favorable product mix, and volume growth. Adjusted operating profit increased 12%, driven by organic growth and strong productivity savings Year-To-Date 2024 Consolidated Financial Performance | Metric | YTD 2024 | YTD 2023 | Change | | :-------------------------------- | :------------ | :------------ | :------ | | Net Sales | $15,130 million | $15,461 million | -2% | | Organic Sales Growth | 4% | | | | Foreign Currency Impact on Sales | -4% | | | | Divestiture Impact on Sales | -1% | | | | Operating Profit | $2,662 million | $1,674 million | +59% | | Adjusted Operating Profit Growth | 12% | | | | PPE Divestiture Gain (Operating Profit) | $565 million | | | | Transformation Initiative Costs (Operating Profit) | $359 million | | | | Diluted EPS | $6.21 | $3.70 | +68% | | Adjusted EPS | $5.80 | $5.06 | +15% | - Organic sales grew 4%, driven by an approximately 2% increase in price (primarily in hyperinflationary economies), 1% from favorable product mix, and 1% increase in volume[7] - Year-to-date adjusted operating profit increased 12% (excluding an 8 percentage point unfavorable currency impact), driven by organic growth and strong productivity savings, partially offset by input cost inflation and planned increases in marketing, research, and general expenses[8] Business Segment Net Sales Results (Q3 & YTD) This section provides a detailed breakdown of net sales changes by segment and geographic market for both the third quarter and year-to-date periods, highlighting the impact of volume, mix, price, divestitures, and currency translation Q3 2024 Net Sales Change vs. Year Ago (%) by Segment | Segment | Volume | Mix/Other | Net Price | Divestitures and Business Exits | Currency Translation | Total | Organic | | :---------------- | :----- | :-------- | :-------- | :------------------------------ | :------------------- | :---- | :------ | | Personal Care | — | 1 | 3 | — | (6) | (2) | 3 | | Consumer Tissue | — | — | (1) | — | — | (2) | (1) | | K-C Professional | (1) | — | (1) | (7) | (2) | (10) | (1) | | Consolidated | — | — | 1 | (1) | (3) | (4) | 1 | YTD 2024 Net Sales Change vs. Year Ago (%) by Segment | Segment | Volume | Mix/Other | Net Price | Divestitures and Business Exits | Currency Translation | Total | Organic | | :---------------- | :----- | :-------- | :-------- | :------------------------------ | :------------------- | :---- | :------ | | Personal Care | 1 | 1 | 5 | — | (8) | (1) | 7 | | Consumer Tissue | — | — | (1) | (2) | — | (3) | (1) | | K-C Professional | (1) | 1 | — | (4) | (2) | (6) | — | | Consolidated | 1 | 1 | 2 | (1) | (4) | (2) | 4 | Detailed Segment Performance (Q3) This section provides specific details on the third-quarter performance of each major business segment, including sales trends, organic growth drivers, and operating profit changes, highlighting factors like pricing actions, retailer inventory adjustments, and advertising investments Personal Care Segment The Personal Care segment's net sales decreased 2% to $2.6 billion, while organic sales grew 3% driven by pricing and mix gains, with stable volume and market share gains in Baby and Child Care Personal Care Segment Q3 2024 Performance | Metric | Q3 2024 | YoY Change | Organic Sales Growth | Operating Profit | YoY Change | | :------------- | :------------ | :--------- | :------------------- | :--------------- | :--------- | | Net Sales | $2.6 billion | -2% | 3% | $482 million | -4% | - Organic sales increased 3% from a combination of pricing actions in hyperinflationary economies and mix gains, with volume in line with the prior year across all markets[11] - Product innovation and solid commercial execution resulted in Baby and Child Care gaining global weighted market share on a year-to-date basis[11] Consumer Tissue Segment The Consumer Tissue segment reported a 2% net sales decrease to $1.5 billion, with organic sales declining 1% due to retailer inventory reductions and lower pricing in Western Europe Consumer Tissue Segment Q3 2024 Performance | Metric | Q3 2024 | YoY Change | Organic Sales Growth | Operating Profit | YoY Change | | :------------- | :------------ | :--------- | :------------------- | :--------------- | :--------- | | Net Sales | $1.5 billion | -2% | -1% | $265 million | -1% | - Organic sales decline of 1% was driven by retailer inventory reductions in North America and expected lower pricing in Western Europe due to the lapping of temporary pricing related to energy surcharges in the prior year period[12] K-C Professional (KCP) Segment The K-C Professional segment's net sales decreased 10% to $767 million, with organic sales declining 1% primarily due to divestitures, currency impacts, and volume softness K-C Professional Segment Q3 2024 Performance | Metric | Q3 2024 | YoY Change | Organic Sales Growth | Operating Profit | YoY Change | | :------------- | :------------ | :--------- | :------------------- | :--------------- | :--------- | | Net Sales | $767 million | -10% | -1% | $161 million | -4% | - KCP sales decreased 10% due to divestitures and business exits, as well as unfavorable currency impacts[13] - Third quarter operating profit decreased 4% primarily impacted by the divestiture of the PPE business, though underlying operating profit benefited from productivity gains partially offset by volume softness[13] Cash Flow and Balance Sheet Year-to-date cash provided by operations increased to $2.4 billion, driven by stronger operating results. The company returned $2.0 billion to shareholders through dividends and share repurchases, and total debt decreased to $7.5 billion Year-To-Date Cash Flow and Debt Highlights | Metric | YTD 2024 | YTD 2023 | Change | | :---------------------------------------- | :------------ | :------------ | :------------ | | Cash Provided by Operations | $2.4 billion | $2.3 billion | +$0.1 billion | | Capital Spending | $512 million | $549 million | -$37 million | | Returned to Shareholders (Dividends & Repurchases) | $2.0 billion | | | | Total Debt (as of Sep 30, 2024) | $7.5 billion | | | | Total Debt (as of Dec 31, 2023) | | $8.0 billion | -$0.5 billion | 2024 Outlook Kimberly-Clark updated its 2024 outlook, expecting organic net sales growth of 3%-4% (down from mid-single digit) due to retail inventory changes. The company reaffirmed mid-to-high teens percentage growth for adjusted operating profit and adjusted EPS on a constant-currency basis Updated 2024 Outlook | Metric | Updated 2024 Outlook | Previous Outlook | | :---------------------------------------- | :------------------- | :--------------- | | Organic Net Sales Growth | 3%-4% | Mid-single digit | | Reported Net Sales Currency Impact | -400 bps | | | Reported Net Sales Divestiture Impact | -120 bps | | | Adjusted Operating Profit Growth (constant-currency) | Mid-to-high teens | Mid-to-high teens | | Adjusted EPS Growth (constant-currency) | Mid-to-high teens | Mid-to-high teens | | Reported Operating Profit Currency Impact | -650 bps | -700 bps | | Reported EPS Currency Impact | -650 bps | -700 bps | - The updated organic net sales outlook primarily reflects discrete headwinds from changes in retail inventory levels[15] Supplemental Information Supplemental materials and a live Q&A session with investors and analysts were made available on October 22, 2024, accessible through the company's investor relations website - Supplemental materials and a live Q&A session with investors and analysts were available on October 22, 2024, via investor.kimberly-clark.com[17] About Kimberly-Clark Kimberly-Clark is a global consumer products company with brands like Huggies, Kleenex, and Kotex, holding leading market positions in approximately 70 countries. The company emphasizes sustainable practices and has been recognized as one of the World's Most Ethical Companies for five consecutive years - Kimberly-Clark's portfolio of brands, including Huggies, Kleenex, Scott, Kotex, and others, hold No. 1 or No. 2 share positions in approximately 70 countries[18] - The company uses sustainable practices and has been recognized as one of the World's Most Ethical Companies by Ethisphere for the fifth year in a row[18] Forward Looking Statements This section outlines that the news release contains forward-looking statements based on management's expectations, which are subject to various risks and uncertainties, including raw material costs, currency fluctuations, supply chain disruptions, and geopolitical events. The company undertakes no obligation to update these statements - Forward-looking statements are based on management's expectations and beliefs concerning future events, but there is no assurance that these events will occur as anticipated or that results will be as estimated[20] - Factors outside the company's control that could affect estimates include raw material, energy, and other input costs, currency exchange rates, supply chain disruptions, and general economic and political conditions globally[21] - The company undertakes no obligation to publicly update forward-looking statements[20] Non-GAAP Financial Measures Kimberly-Clark uses non-GAAP financial measures such as adjusted earnings, adjusted gross and operating profit, and adjusted effective tax rate to evaluate performance, allocate resources, and set incentive compensation goals. These measures exclude specific items like transformation initiative charges, gains/losses from divestitures, impairment of intangible assets, and pension settlements - Non-GAAP financial measures (Adjusted earnings/EPS, Adjusted gross/operating profit, Adjusted effective tax rate) are used by management and the Board to evaluate historical and prospective financial performance, allocate resources, and measure operational performance[23][26] - These non-GAAP measures exclude items such as 2024 Transformation Initiative charges, gains from the sale of the PPE business, impairment of intangible assets, and pension settlements[23][24] - The company does not provide a forward-looking reconciliation of non-GAAP measures to GAAP due to the inability to predict certain adjustment items without unreasonable effort, noting these items could be material[27] Consolidated Financial Statements This section presents the unaudited consolidated financial statements, including statements of income for the three and nine months ended September 30, 2024, non-GAAP reconciliations, the consolidated balance sheets, consolidated statements of cash flows, and detailed business segment results Consolidated Statements of Income (Three Months Ended September 30) This statement details the company's financial performance for the third quarter, showing net sales, gross profit, operating profit, net income, and diluted EPS Consolidated Statements of Income (Three Months Ended September 30) | Metric | Q3 2024 (Millions) | Q3 2023 (Millions) | Change (%) | | :---------------------------------------- | :----------------- | :----------------- | :--------- | | Net Sales | $4,952 | $5,132 | -4% | | Gross Profit | $1,784 | $1,838 | -3% | | Operating Profit | $1,154 | $774 | +49% | | Net Income Attributable to Kimberly-Clark Corporation | $907 | $587 | +55% | | Diluted EPS | $2.69 | $1.73 | +55% | Consolidated Statements of Income (Nine Months Ended September 30) This statement presents the company's year-to-date financial performance, including net sales, gross profit, operating profit, net income, and diluted EPS for the first nine months Consolidated Statements of Income (Nine Months Ended September 30) | Metric | YTD 2024 (Millions) | YTD 2023 (Millions) | Change (%) | | :---------------------------------------- | :------------------ | :------------------ | :--------- | | Net Sales | $15,130 | $15,461 | -2% | | Gross Profit | $5,505 | $5,295 | +4% | | Operating Profit | $2,662 | $1,674 | +59% | | Net Income Attributable to Kimberly-Clark Corporation | $2,098 | $1,255 | +67% | | Diluted EPS | $6.21 | $3.70 | +68% | Non-GAAP Reconciliations (Three Months Ended September 30, 2024) This section provides a reconciliation of GAAP to non-GAAP financial measures for the third quarter of 2024, adjusting for transformation initiatives, PPE business sale, and intangible asset impairment Non-GAAP Reconciliations (Three Months Ended September 30, 2024) | Metric | As Reported (Millions) | 2024 Transformation Initiative | Sale of PPE Business | Impairment Intangible Assets | As Adjusted Non-GAAP (Millions) | | :---------------------------------------- | :--------------------- | :----------------------------- | :------------------- | :--------------------------- | :------------------------------ | | Cost of products sold | $3,168 | $31 | $— | $— | $3,137 | | Gross Profit | $1,784 | $(31) | $— | $— | $1,815 | | Operating Profit | $1,154 | $(124) | $565 | $(97) | $810 | | Net Income Attributable to Kimberly-Clark Corporation | $907 | $(106) | $453 | $(57) | $617 | | Diluted EPS | $2.69 | $(0.31) | $1.34 | $(0.17) | $1.83 | Non-GAAP Reconciliations (Three Months Ended September 30, 2023) This section provides a reconciliation of GAAP to non-GAAP financial measures for the third quarter of 2023, primarily adjusting for pension settlements Non-GAAP Reconciliations (Three Months Ended September 30, 2023) | Metric | As Reported (Millions) | Pension Settlements | As Adjusted Non-GAAP (Millions) | | :---------------------------------------- | :--------------------- | :------------------ | :------------------------------ | | Nonoperating expense | $(20) | $(4) | $(16) | | Net Income Attributable to Kimberly-Clark Corporation | $587 | $(3) | $590 | | Diluted EPS | $1.73 | $(0.01) | $1.74 | Non-GAAP Reconciliations (Nine Months Ended September 30, 2024) This section provides a reconciliation of GAAP to non-GAAP financial measures for the first nine months of 2024, adjusting for transformation initiatives, PPE business sale, and intangible asset impairment Non-GAAP Reconciliations (Nine Months Ended September 30, 2024) | Metric | As Reported (Millions) | 2024 Transformation Initiative | Sale of PPE Business | Impairment Intangible Assets | As Adjusted Non-GAAP (Millions) | | :---------------------------------------- | :--------------------- | :----------------------------- | :------------------- | :--------------------------- | :------------------------------ | | Cost of products sold | $9,625 | $76 | $— | $— | $9,549 | | Gross Profit | $5,505 | $(76) | $— | $— | $5,581 | | Operating Profit | $2,662 | $(359) | $565 | $(97) | $2,553 | | Net Income Attributable to Kimberly-Clark Corporation | $2,098 | $(257) | $453 | $(57) | $1,959 | | Diluted EPS | $6.21 | $(0.76) | $1.34 | $(0.17) | $5.80 | Non-GAAP Reconciliations (Nine Months Ended September 30, 2023) This section provides a reconciliation of GAAP to non-GAAP financial measures for the first nine months of 2023, adjusting for the sale of Brazil Tissue and K-C Professional Business, intangible asset impairment, and pension settlements Non-GAAP Reconciliations (Nine Months Ended September 30, 2023) | Metric | As Reported (Millions) | Sale of Brazil Tissue and K-C Professional Business | Impairment Intangible Assets | Pension Settlements | As Adjusted Non-GAAP (Millions) | | :---------------------------------------- | :--------------------- | :------------------------------------------ | :--------------------------- | :------------------ | :------------------------------ | | Cost of products sold | $10,166 | $15 | $— | $— | $10,151 | | Gross Profit | $5,295 | $(15) | $— | $— | $5,310 | | Operating Profit | $1,674 | $44 | $(658) | $— | $2,288 | | Net Income Attributable to Kimberly-Clark Corporation | $1,255 | $26 | $(463) | $(23) | $1,715 | | Diluted EPS | $3.70 | $0.08 | $(1.36) | $(0.07) | $5.06 | Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and equity as of September 30, 2024, and December 31, 2023 Consolidated Balance Sheets (Millions) | Metric | Sep 30, 2024 | Dec 31, 2023 | | :-------------------------------- | :----------- | :----------- | | Total Current Assets | $5,847 | $5,703 | | Property, Plant and Equipment, Net | $7,703 | $7,913 | | Goodwill | $2,058 | $2,085 | | Other Intangible Assets, Net | $97 | $197 | | TOTAL ASSETS | $17,165 | $17,344 | | Total Current Liabilities | $7,066 | $6,930 | | Long-Term Debt | $6,882 | $7,417 | | Total Stockholders' Equity | $1,444 | $1,068 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $17,165 | $17,344 | Consolidated Statements of Cash Flows This statement details the company's cash inflows and outflows from operating, investing, and financing activities for the first nine months of 2024 and 2023 Consolidated Statements of Cash Flows (Millions) | Metric | YTD 2024 | YTD 2023 | | :---------------------------------------- | :------- | :------- | | Cash Provided by Operations | $2,417 | $2,327 | | Cash Provided by (Used for) Investing | $94 | $(266) | | Cash Used for Financing | $(2,480) | $(1,620) | | Change in Cash and Cash Equivalents | $18 | $387 | | Cash and Cash Equivalents - End of Period | $1,111 | $814 | Business Segment Results (Net Sales and Operating Profit) This section provides a detailed breakdown of net sales and operating profit by business segment for both the third quarter and year-to-date periods Net Sales by Segment (Millions) | Segment | Q3 2024 | Q3 2023 | Q3 Change (%) | YTD 2024 | YTD 2023 | YTD Change (%) | | :---------------- | :------ | :------ | :------------ | :------- | :------- | :------------- | | Personal Care | $2,635 | $2,700 | -2% | $8,040 | $8,089 | -1% | | Consumer Tissue | $1,539 | $1,567 | -2% | $4,624 | $4,750 | -3% | | K-C Professional | $767 | $854 | -10% | $2,431 | $2,588 | -6% | | TOTAL NET SALES | $4,952 | $5,132 | -4% | $15,130 | $15,461 | -2% | Operating Profit by Segment (Millions) | Segment | Q3 2024 | Q3 2023 | Q3 Change (%) | YTD 2024 | YTD 2023 | YTD Change (%) | | :---------------- | :------ | :------ | :------------ | :------- | :------- | :------------- | | Personal Care | $482 | $502 | -4% | $1,567 | $1,461 | +7% | | Consumer Tissue | $265 | $267 | -1% | $800 | $707 | +13% | | K-C Professional | $161 | $168 | -4% | $535 | $514 | +4% | | TOTAL OPERATING PROFIT | $1,154 | $774 | +49% | $2,662 | $1,674 | +59% |