By Serena Ng and Angela Chen
Kimberly-Clark Corp. reported a 6% drop in second-quarter sales,
as the consumer-products company continues to struggle with
currency volatility that is likely to remain a major drag on its
results for some time.
The Dallas-based company said weakening foreign currencies
against the U.S. dollar reduced sales by 10%. The hit to profit was
twice as hard, Kimberly-Clark Chief Executive Tom Falk said. Sales
fell to $4.6 billion in the quarter.
"There's not that much we can do about it," Mr. Falk said in an
interview, adding that the company is trying to raise prices in
some countries to make up for the decline. "The good news is as the
dollar has strengthened, commodities have weakened," which has
reduced Kimberly-Clark's oil-related input costs and helped offset
some of the currency hit, he said.
The maker of Huggies diapers, Kleenex tissue and Scott toilet
paper on Thursday reported a $305 million net loss, which was
largely the result of charges it recorded on a pension settlement
deal it reached earlier this year. The company's organic
sales--which exclude acquisitions, divestments and the effect of
currency moves--rose 4%, driven by growth in developing and
emerging markets.
In the U.S., Kimberly-Clark has struggled over the past year to
claw back market share in Huggies diapers, which have lost ground
to Procter & Gamble Co.'s Pampers and Luvs brands. Huggies
several months ago relaunched its mainline Snug and Dry diapers,
lowering prices slightly and adding more features like better
absorbency. The brand has also stepped up efforts to supply
hospitals with diapers so that parents of newborns and premature
babies can be introduced to the brand, Mr. Falk said. So far,
Huggies has improved its market share slightly, he added.
The company's adult-incontinence products, sold under the Depend
and Poise brands, have also been under assault from P&G, which
last year re-entered the incontinence business. Mr. Falk said
Kimberly Clark lost "less than our fair share" of the business to
P&G's Always Discreet line of products.
In the latest quarter, sales at Kimberly Clark's personal-care
segment, which includes both baby and adult diapers, fell 6% to
$2.3 billion, weighed by currency rates and lower sales volumes in
North America. Sales at the consumer-tissue segment, which includes
Cottonelle and Kleenex, fell 8% to $1.5 billion.
The company warned the negative effect of the strong dollar is
now expected to be on the high end of its previous assumption,
which was for a negative impact of 9% to 10%. Despite that,
Kimberly-Clark raised the bottom end of its full-year earnings
forecast range, pointing to higher cost savings and a
stronger-than-expected first half performance.
Shares of the company fell 0.4% to $111.76 in recent trading.
The shares have fallen more than 3% so far this year.
Write to Serena Ng at serena.ng@wsj.com and Angela Chen at
angela.chen@wsj.com
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