Kimberly-Clark profits slide due to weak currency and soft sales
Profits for the fourth quarter, ending December 31, 2008, were down from $456m to $419m, attributed to weaker sales, particularly in the North American and European markets, combined with the fact that the US dollar has also lost ground against many global currencies.
The performance was below the company’s guidance and also missed analysts’ expectations.
Sales for the period decreased by 3.4 percent to reach $4.6bn. The company said that organic sales growth of 5 percent was offset by the fact that foreign currency exchange was so weak.
Developing and emerging markets save the day
Sales in developing and emerging markets have remained strong, helping to fend off what might otherwise have been an even more disappointing result for the Dallas-based company.
Gains were also partly attributable to an increased marketing spend, with marketing expenses rising by $25m compared to the same quarter in 2007.
However, breaking the results down according to product category, it appears that the personal care category has faired better in comparison to the diapers category in North America and the tissue category in both North America and Europe, which dragged the performance down, the company stated.
North American and European markets battered
“During the fourth quarter, economic weakness impacted our categories more than anticipated, particularly in North America and Europe,” said CEO Thomas Falk.
“We believe some of the effects are temporary, reflecting customer warehouse and consumer pantry inventory reductions; however, consumer trade-down also affected our sales in several categories.”
Sales of personal care products, which does not include tissue products and diapers, fell by a total of 2.5 percent, which, of the company’s four business categories, was only bettered by its health care division.
European currency takes is toll
However, breaking the figures down, it appears that the European sales were particularly weak, with the total falling 16 percent, mainly due to the weakened state of the Euro and the British pound.
In North America, personal care sales fell 2 percent, with a six percent increase in retail prices being more than offset by a 7 percent drop in sales.
Looking to the year ahead the company now estimates that organic sales growth will occur in the low single digits, however, currency fluctuations are expected to negatively impact net sales, causing them to decline by 7 percent, compared to 2008.
“The collapse of global markets has precipitated significant changes in commodity costs and currency rates and resulted in a high level of volatility and uncertainty in the current business environment,” said Falks.
