Costs hit Kimberly-Clark 3Q profits

By Simon Pitman

- Last updated on GMT

Related tags: Personal care sales, Organic growth, Revenue

Kimberly-Clark s Q3 profits fell 19 percent as higher manufacturing costs ate into the bottom line, despite the fact sales for the period edged up.

The company said it earned $469m in the period, compared to $582m in the corresponding quarter last year, a result that was impacted by increasing material costs, particularly for pulp used in its core Huggies and Kleenex brand.

Costs rose by approximately $265m during the period, which in addition to a number of other difficulties led to an unexpectedly low and disappointing result for the quarter.

Cost inflation hits the bottom line

“The challenging business environment weighed on our bottom-line results more than we previously expected, with relatively soft market demand, cost inflation and slight higher competitive spending,”​ said CEO Thomas Falk.

Sales for the quarter crept up to the $5.0bn mark, an increase of 1.3 percent compared to the same period last year, reflecting an organic sales increase of 1 percent, on volumes that were also up 1 percent and retail prices that were level with last year.

Further to this, the company said that the I-Flow acquisition, which was completed in financial year 2009, added 1 percent to the revenues, while the negative impact of currency translations.

Personal care saves the day

However, it was the company’s personal care operations that helped to buoy the results. Indeed, organic sales growth of 5 percent meant that its personal care division was the best performing within the business.

Group personal care sales increased by 2.4 per cent compared with the same quarter in 2009, while sales volume crept up by 5 percent, but pricing, product mix and currency exchange impacted the result by 1 percent.

In the US personal care sales increased by 4 percent, with volumes up by 5 percent. This was really driven by feminine care sales, which rose by double digit figures, while adult care sales also rose in double-digit figures.

European sales impacted by currency exchange

In Europe, personal care sales fell by 5 percent during the period, mainly impacted by a negative currency impact of 9 percent. Actual sales volumes rose by 6 percent.

For the first nine months of the year sales grew by 3.8 percent to $14.7bn, a result that was positively impacted by a 1 percent currency translation, while net income for the period fell by 3.3 per cent to $1.42bn.

The company expects that for the full year 2010 its net profit will continue to be impacted by rising costs, while it has also cut its expected sales growth from an original projection of 2 to 4 percent, to just 2 percent.

Related topics: Business & Financial

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