Kimberly-Clark’s 4th-quarter profit rises 17, benefiting from product price hikes

Higher prices boost Kimberly-Clark 4Q profit

MILWAUKEE — The sluggish retail environment — with shoppers spending sparingly and retailers focusing on top sellers — coupled with fluctuating production costs is forcing Kimberly-Clark Corp. to make cautious predictions for 2010.

The maker of Kleenex, Huggies and Scott paper towels reported Friday that its fourth-quarter profit rose 17 percent, but the results fell short of analyst predictions.

The company said promotions it launched to keep consumers spending cut into profits and it’s likely the trend will continue in 2010, in which the company predicts a “slow and modest economic recovery.”

Overall, Kimberly-Clark has been weathering the recession well, analysts say, by raising prices as far back as 2008 to account for rising costs for key components like pulp. While those hikes helped protect its profit, the company then had to offer promotions on products like Kleenex to stimulate sales, and that in turn hurt profits.

It finished fiscal 2009 with earnings per share of $4.52, an 11 percent rise, but it expects to earn between $4.80 to $5 per share this year. Analysts, meanwhile, are expecting $5.14 a share for fiscal 2010, which ends in December.

Kimberly-Clark’s growth could slow as commodity prices rise, Deutsche Bank-North America analyst Bill Schmitz Jr. said in a note to clients, adding that it remains unclear how shoppers will spend this year.

“Consumer tissue sales and margins remain disappointing as (the) company cedes share and commodities start to rise,” he wrote.

Its overall consumer tissue product revenue — including sales of Scott paper towels — edged up just 0.9 percent to $1.66 billion in the three months that ended Dec. 31.

In North America, those sales fell 6 percent, the net selling price fell 3 percent because of promotions and sales of paper towels tumbled in the double digits because shoppers traded down to less-expensive brands.

But sales of Kleenex tissues rose 7 percent due to a combined boost from the cold and flu season and promotions.

As consumers continue trying to save money, the company must boost its marketing to keep them spending, said Jack Russo, an analyst for Edward Jones.

“It’s hard to distinguish yourself from everybody else, especially at a time when consumers are watching their spending,” he said.

CEO Thomas Falk said Kimberly-Clark plans to come out with new products in the first part of the year to keep shoppers — and retailers — interested.

“I think retailers are continuing to push. They want innovation, they want to make room for innovation, so they’re going to be pushing manufacturers to make sure their product lines are performing,” he told investors on a conference call.

Kimberly-Clark earned $492 million, or $1.17 per share, for the quarter, up from profit of $419 million, or $1.01 per share, a year earlier. The results missed analyst estimates of $1.25 a share, according to Thomson Reuters.

The company, which had said it would cut about 1,600 jobs by 2009’s end, incurred $6 million in severance and related costs during the quarter, which translated to a penny a share. Analyst estimates usually exclude such one-time items.

Quarterly sales rose 8 percent to $4.98 billion, helped by a weaker dollar and higher prices, which beat analysts’ forecast for $4.92 billion.

Sales of personal care products, including Depends and Kotex sanitary pads, rose 11.5 percent to $2.13 billion, with volume for Huggies diapers up 6 percent in North America.

For the year, earnings rose 11 percent to $1.88 billion, or $4.52 per share while sales fell 2 percent to $19.12 billion.

Shares fell 38 cents to $60.73 in afternoon trading Friday.

Kimberly-Clark, which had suspended its share buybacks, said it plans to start repurchasing stock in the first quarter and anticipates $500 million to $600 million in buybacks for the year. It also expects a high single-digit to low double-digit increase in its 2010 dividend.

AP Retail Writer Michelle Chapman contributed to this report from New York.