Kimberly-Clark net income rises in 2nd qtr on higher prices, cost cuts; revenue falls short

Kimberly-Clark 2Q net income rises with prices

DALLAS — Kimberly-Clark Corp., the maker of Kleenex tissues and Huggies diapers, said Friday that higher selling prices and cost cuts helped its second-quarter net income rise 24 percent.

The company said positive reception to new products, such as U by Kotex, which are sleekly packaged sanitary pads, and Huggies diapers that look like jeans, helped personal-care revenue, which rose 3 percent to $2.18 billion.

But tissue revenue was weaker, down 2 percent to $1.53 billion, as consumers traded down to store-brand products, particularly paper towels. That segment was also hurt by all-time high costs for wood pulp, a key tissue ingredient.

“All of the consumer survey information we’ve seen would say consumer confidence is not getting better at this point in time, it’s kind of going sideways,” said Falk. “Moms are still pretty squeezed … the consumer generally is feeling pressure out there, in the U.S. in particular.”

Revenue rose 3 percent to $4.86 billion, but fell short of expectations, and the company lowered its revenue guidance for the year.

Net income for the three months ended July 30 rose to $498 million, or $1.20 per share, from $403 million, or 97 cents per share last year.

Analysts polled by Thomson Reuters, on average, expected net income of $1.13 per share on revenue of $4.95 billion.

Higher selling prices, cost cuts and lower pension and severance costs were partly offset by higher commodity and marketing costs.

Kimberly-Clark said it increased marketing by $40 million to spur growth and sales of new products. Major consumer products makers are tweaking their businesses to deal with the weak retail environment and woo shoppers who are trying to spend less money. But while promotions spur sales, they can also eat into profit.

The company now expects to save $300 million for the full year under its cost-cutting program. Previously it expected to save $200 to $250 million.

Kimberly-Clark, based in Dallas, now expects 3 percent to 5 percent revenue growth, down from between 4 and 6 percent. That implies revenue of $19.69 billion to $20.08 billion. Analysts expect revenue of $19.81 billion.

“Based on plans in place, we expect organic sales volumes in the back half of the year to pick up somewhat from second quarter levels,” said CEO Thomas Falk.

He affirmed earlier guidance that full-year earnings will be at the low end of the company’s $4.80 to $5 per share forecast. Analysts predict $4.78 per share.

Falk also said he expects higher costs for materials such as pulp, oil and resin in 2010 than previously expected. But he said the cost for pulp is expected to fall in the second half of the year, particularly in the fourth quarter.